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Study: Better-off households use five times more electricity than low-income ones

New research suggests that planned electricity subsidies in Finland would mostly benefit better-off people.

Ilmakuvaa ilomantsin keskustasta.
Image: Ismo Pekkarinen / AOP
Yle News

Households with gross income higher than 100,000 euros use more than five times more electricity than households making less than 10,000 euros, according to data published by the VATT Institute for Economic Research.

Households are defined as people who live and eat together or who otherwise pool their incomes. That means that state support for electricity bills, such as reduced VAT rates, are mostly directed at better-off households.

VATT merged numbers from Fingrid's Datahub service, which has figures on location-specific electricity usage, with Statistics Finland background data on households.

Iivo Vehviläinen, a Senior Researcher at Aalto University, said that the figures confirm the impression that well-off households use more electricity than poorer ones, but added that he was surprised at how big the gap was.

"The support agreed by the government for electricity bills is bigger the more electricity you use," said Vehviläinen. "Based on the data, the vast majority of the support will go to well-off households and incentivise wealthy people to use even more electricity than they do now."

"On the other hand support for low-income people won't necessarily be enough, especially as consumption increases in the winter," said Vehviläinen.

VAT cut criticised

A cut in the rate of VAT levied on electricity bills will be in force until the end of April, bringing the rate down from 24 percent to 10 percent.

The reduction has been criticised since its announcement, partly because of the lack of targeting but also because it could get lost in pricing strategies.

Etla researcher Olli-Pekka Kuusela questioned how the VAT cut would impact customers making new contracts with energy firms.

Earlier this week the SDP proposed a price cap on electricity, prompting much discussion and a cross-party meeting now scheduled for next Monday.

On Friday the leaders of the five governing parties in government were scheduled to meet to discuss possible support for customers faced with large electricity bills.

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