Energy prices in Belgium are soaring.
The Consumer Association in Belgium called on the government to continue providing financial aid to citizens who need them in the face of increased energy prices in Belgium. Previously, the government implemented COVID relief to be used by citizens for their expenses on electricity. The program will run until March 2022. But with the prices of electricity now, the association believes that it should be extended.
Citizens can possibly experience energy bills increasing by up to 6 times their current prices if COVID relief is not provided, as stated by Test Achats. 900,000 homes, the reported number of beneficiaries of this aid, may suffer from energy poverty if the extension is not granted.
A reduced social tariff has already been implemented at the national level. It has also been adjusted along the way to make it more responsive to the situation brought about by the COVID-19 pandemic.
Since the start of the COVID-19 pandemic, many lockdown measures have been put in place to curb the transmission of the virus. This negatively affected the income of businesses and their respective employees. It also promoted more time spent at home for work and school. This resulted in increased usage of energy and, subsequently, an increase in energy bills.
However, Belgium is slowly reopening its economy. Public health measures that were implemented are being lifted one by one. Test Achats says that the relief provided to families to cope with the strain brought about by the COVID-19 pandemic might be lifted as well.
Ministers of the different federal states are discussing measures to address this issue, as millions of citizens are suffering the consequences of it.
Access to Energy for People in the Lower Socioeconomic Group
Both the federal state and regional governments are responsible for ensuring that low-income individuals and households have access to energy.
Large-scale infrastructures for energy, plans for gas and electricity, adjustments of tariffs and taxes, and the utilization of nuclear energy and off-shore wind are managed by the federal state.
Distribution and transport of gas and electricity within each locality is done by the regional government. They are also tasked with managing energy efficiency and renewable energy.
Regulating energy prices in Belgium and the provision of safety nets to prevent disconnection are the main focus of officials in ensuring that citizens have access to energy.
Ensuring that Energy Prices in Belgium Don’t Overwhelm Households
The reduced social tariff was created and, eventually, implemented so that eligible individuals and households can receive aid in paying for their bills on electricity and gas. This is applicable to the whole of Belgium. As such, every provider or network manager should comply with the regulations.
The federal regulator for energy (CREG) calculates the social tariff twice a year. The calculated amount is based on the lowest commercial energy prices.
The social tariff for electricity is dependent on the profile of the individual. There are different social tariff rates for households that have a single meter, a double meter, or a night meter.
In comparison, there is only one tariff for gas. This is given to eligible individuals and households automatically.
There are also available subsidies given by distribution system operators to households in Flanders. Those belonging to low-income households can receive an energy scan without any cost to them. Discounts are also given when buying energy-saving appliances, such as washing machines and refrigerators. There are subsidies for the installment of a condensing boiler and insulation for private homes that are rented.
Individuals who are interested in making their homes more energy-efficient can also apply for loans with no interest so that they can jumpstart this initiative.
Despite all the benefits and subsidies given to individuals in low-income groups, the actual utilization of these remains low. Those who need social protection the most do not receive it.
The problems that come with split incentives in the private rental market serve as a barrier to the creation of energy-efficient structures. Landlords do not receive any of the financial benefits that come with investing in more energy-efficient homes. This is because they are not the ones residing in the home. On the other hand, tenants are less inclined to invest in such measures since they do not own the property.
Initiatives to Prevent Disconnection of Households
The companies that provide energy to households are under public service obligations to ensure that vulnerable individuals and families do not suffer from disconnections.
Payment plans can be adjusted to make them more suitable for the household. There are also regulations on installing prepayment meters and providing a minimum amount of electricity and gas.
If households are unable to pay for their electricity bills, discussions among the public social welfare centers, distribution system operators, and judicial authorities take place to settle the matter.
In such cases, when households have difficulty paying their electricity bills, public social welfare centers can provide financial assistance by utilizing the federal social energy fund. However, the budget allocated to the fund is still not enough to meet the needs of households.
Based on a report released in 2020, 6 million euros were allocated to the fund at that time. However, this is way below the amount of money needed to support households. The Platform Against Energy Poverty stated that 30 million more euros were needed to provide substantial aid to the 400,000 individuals experiencing energy poverty.
The federal social energy fund is more often used to help households with their debt, rather than creating structural measures that reduce energy poverty. This means that the funds go to providing short-term relief to the beneficiaries. Long-term solutions are put on hold to prioritize urgent concerns. Without structural measures, the problem of energy poverty will constantly recur and households will be left in the same situation they are currently in.
Recent Financial Assistance Given to Affected Households
760 million euros were allotted by the Belgian government last year to help citizens cope with the increased prices for gas and electricity. This was not made available to all citizens. Rather, it was distributed to households that most needed help.
440,000 more households were also included in the social tariff. This is on top of the 500,000 households that already benefit from it. With this, households do not have to worry about what activity to use their electricity for. They can cook and heat their houses without energy bills taking up too much of their income.
The decrease in supply of natural gas from Norway and Russia, the main countries that provide Europe with this resource, was disadvantageous for all countries. There was too much demand but too little supply. This pushed the price of energy up.
Carbon credits also increased in price. With this increase, industries that utilize fossil fuels and therefore emit greenhouse gasses are faced with higher production costs. To offset this cost, the prices of their products also increased. These added expenses then burden the consumers.
A Proposal: Slashing VAT to Address the Issue on Energy Prices in Belgium
Vincent Van Peteghem, the Finance Minister of Belgium, said that lawmakers need to respond quickly so that the soaring energy prices in Belgium will not negatively affect households any more than they should.
Van Peteghem suggested reducing the VAT on energy. He proposed a two-phase plan to do so.
In the short-term, a decrease in the VAT on energy from 21% to 6% will provide relief to households who are increasingly worried about their ability to afford necessities with the income they have.
However, a more long-term solution is also needed to effectively manage the problem and address it at its root.