Examination of Witnesses (Questions 640-655)|
TUESDAY 4 DECEMBER 2001
640. On the other side of cost reflectiveness
other witnesses argue that if you are a heavy intensive energy
user who is willing to optimise the use of your plant to minimise
stress on the network, should you not get some kind of reward
for your contribution?
(Ann Robinson) Let me put it this way. The industrial
and commercial as a large sector use a lot more energy than domestic
users. They use 70 per cent of all gas and something like 60 per
cent of all electricity; they are huge users. It would be an absolute
total disaster if you produced a system that rewarded people who
behave well at the expense of domestic users. The second thing
I would say is that a lot of the large intensive users do negotiate
their contracts and those contracts do take into account predictability
of use and all of that. I am not saying it is a bad thing. It
might be a good thing to look at some of those things to see whether
there are not even more improved ways of encouraging good behaviour
on the part of industrial and commercial users, but not at the
expense of the domestic sector. If you talk about good behaviour
and the domestic sector, things like predictability . . . The
National Grid know, if Coronation Street or a big match are on
television, that at half time everybody is going to go out and
put the kettle on. They can predict that to an extent. There is
a more fundamental question than this. If you start thinking about
some sort of charging tariff for domestic consumers which depends
on this sort of good behaviour, using energy at certain times
of the day or to a certain extent, then it is cloud cuckoo land
because not many domestic consumers will be interested or wanting
to know about that. What is even worse about that is that you
are then in a situation where you disadvantage elderly people,
disabled people, people who spend a lot of time at home, who cannot
switch off their heating system at certain times of the day, otherwise
they will suffer as a consequence.
641. Though have we not for years had the system
of off-peak heating for optimising the use of the electricity
(Ann Robinson) It all depends on whether you thought
that was a very good way of keeping warm and whether in fact you
did keep warm.
642. On this accessibility in rural areas, have
you made any assessment of the possible scope for new technologies
to be applied to bring rural customers a choice of fuel?
(Ann Robinson) Some new technology will have to be
supplied because, with the best will in the world, it might not
make any kind of sense at all, it just would not make sense, to
try to extend the gas network to everybody everywhere. There are
new things which are being looked at like liquid petroleum gas
and more effective and efficient ways, and CHPs too could have
quite a major role. There are new technologies which will have
to be brought into play if we are actually going to achieve a
good arrangement for people in these remote areas.
Sir Robert Smith: If you get any good ideas
. . . In my constituency all the gas from St Fergus comes rushing
past us but most people cannot access it.
643. In your paper you say that your mission
is to be an independent consumer champion. You have talked primarily
about gas and you have talked about nuclear because of your concerns
about the dependency on imported gas. This morning I asked a question
about the green tariffs which electricity providers are advertising.
A comment was made that they are not really being promoted properly.
With your interest being particularly in poorer consumers, have
you done anything to try to encourage the more environmentally
aware, perhaps the wealthiest customers, to increase take-up on
those tariffs, to encourage investment, so that the benefits of
renewables will be available to those who are poorer users?
(Ann Robinson) No. And I shall tell you why we have
not done that. We have only been in business as energywatch for
about one year. We have been busy building our organisation, our
infrastructure, getting the people in place. We have had to recruit
and train half our staff. We are just getting our systems in place
and we put most emphasis on things like improving the price comparison
information, beginning to build the advice and information in
relation to giving people energy efficiency measures of one sort
or another. We have concentrated particularly on the issue of
fuel poverty. We are looking at things like debt blocking and
to be perfectly honest it is very difficult for us to campaign
or educate on a number of issues at once. What we are doing is
looking at the things which we think are going to help people
to navigate their way around this marketplace, become very conscious
and very aware and very informed consumers, very confident consumers
and particularly what is needed to protect the people who will
still need protecting.
644. So you have not.
(Ann Robinson) We have not. I am not saying that this
is something we shall not do; I am not saying that at all because
we shall want at some stage to be able to tell the consumers so
they can make a real choice about what they get from going for
this tariff or that tariff and that it is not just a matter of
price, there are other things they might want to sign up for.
I said no, because it was a straight answer, but it is not off
the agenda. It is something we shall probably want to return to
when we have got on with some more pressing things.
645. I was interested to see that you are proposing
a strategic energy authority in your submission to reconcile the
social, environmental and economic objectives and also get some
coherence from the eventual proposals from the PIU. How would
that work? What would be the remit of the SEA? Play with that
(Ann Robinson) I would not have been so brave as to
suggest a strategic energy authority although obviously we have
been thinking about it. What we said in the evidence was that
we wanted one body; and I do not need to rehearse the arguments
for having one body in front of you, you are pretty well aware
of the number of departments and the conflicts between those three
objectives which have just been mentioned. There are difficulties.
It is important. Let me put it this way. PIU with the advisory
committee now has a lot of key people together but on the advisory
committee we have six government departments. Having got people
together and started marching them up the hill and perhaps with
a lot of effort getting some sort of proper strategic approach
or a strategic brain work, what we do not want is them all falling
off in different directions. It does need one body to see this
strategy through. The difficulty is what that body covers. I do
not have any clever answers for that because you can make very
good arguments for it to include things like housing and transport,
yet housing has connections with other aspects of Government policy
which are quite outwith energy; so has transport for that matter.
There are some really big boundary issues and the biggest issue
on which I do not have an answer at all, but I am sure you are
likely to have a better argument than I have, is that such a body
would have to be independent and would have to have quite a capacity
to do the work. Having said that, you cannot have something in
an area as important as this, where we have said there has to
be a clear government framework and signals operating, without
any political direction. How do we wrap the politics around it?
What would be the Minister or group of Ministers to whom it might
report and does that still allow World War III to break out occasionally?
646. At the moment we have several Ministries
responsible for energy policy. Do you think there is a case for
putting them all under the one umbrella? I realise that in previous
incarnations you have been a civil servant and probably things
you have been in charge of have now gone back to where they were
before. Do you think there is a case for reshuffling the cards
or putting them back, playing different hands?
(Ann Robinson) To be honest, if we do not do it, no
matter how much effort and work goes into the strategic framework,
then the special interests of different people will come into
play. It will be very, very difficult to sustain and develop an
energy policy. I do think that the cards have to be shuffled some
way to bring a number of key things together and it needs to be
a high profile and it needs to be transparent and accountable.
The other thing on this is that whatever comes out of this energy
policy review is going to be based on some assumptions which are
yet unproven which need to be tracked through. We need to have
a clear and transparent way of tracking whether some of those
assumptions are being realised or not. We do not want anyone fudging
it or anyone thinking maybe we ought to package this. We just
need absolute transparency and it is too important to mess around
647. Let us assume that the Government says
they agree and they will set up a strategic energy authority and
they look at your submission and what you think the priority is,
and it is to provide safe, secure and affordable energy. That
is the objective and that is the priority. Of course some of those
things can conflict sometimes, can they not?
(Ann Robinson) Yes, they can.
648. Particularly the issue of security on the
one hand and affordability on the other. It is putting you on
the spot to some extent, but if it comes down to a choice between
those two which do you think has the higher priority?
(Ann Robinson) Security and affordability strangely
enough are in many ways much the same thing. If we do not have
a secure energy supply, but one which goes off or is intermittent,
then industry, consumers, public services will suffer. If they
begin to suffer then they become less competitive. We need to
have that security of energy supply to keep us on track. We also
need for it to be affordable. I choose my words very carefully
here. The important thing about affordability in this context
is what it does to British competitiveness. We know there is a
lot of heavy industry. There are global players and they have
to compete and energy is a huge part of their costs. But there
are some other players who are not quite of that ilk, but nevertheless
energy is an important part of their costs. If our costs go up
too much in relation to other people then we could find that we
are in a position where we are losing jobs and all of that. Affordability
is important in that respect. The other thing which is important
too is, if we see, and it is likely that energy prices are going
to rise between now and 2050, so as we see that happening we need
to address those issues properly and see what that does in relation
to people in fuel poverty and how best to mitigate it. We might
need stronger programmes, more resources, we may need to put a
lot more effort into a number of key things. The one thing I will
say very much about the regulator is that if you look at the fuel
poverty figures, the fuel poverty figures in numbers have gone
down something like 6.5 million in 1996 to four million in the
year 2000. Although energy efficiency has played its part, the
biggest part is what is happening to fuel prices. If fuel prices
start going up again, it does not take a genius to work out what
the impact is. There is a real issue about what we pay for energy,
a big pressing issue in relation to industry and not handicapping
industry in the competitive sense, but also recognising that it
could have a very negative effect on the Government's commitment
to take people out of fuel poverty and look again at what needs
to be done there.
649. If there is an unnecessary contradiction,
and in a sense you do need to hit both targets, it could be argued
that NETA, for all its faultsit has all sorts of other
problemspushes down prices. Nonetheless, if you are looking
at maintaining security, one thing you do touch on in your paper
for instance is CHP and a good contribution to security of supply
could be to boost CHP, but the consequence of that down the line
could well be an increase in prices. How do you think that dilemma
can be mitigated? Would you see the approach as being in a sense
keeping prices at the point of payment as low as possible because
of the fuel poverty angle, with the cost of having the right kind
of security being paid for through some kind of different mechanism
which is not actually to the direct price? That has all sort of
other implications, has it not?
(Ann Robinson) If you start tampering too much with
some of these demand supply mechanisms then you end up with something
which is artificial and unworkable. What you have to do is go
off with the right kind of mix, the right arrangement. We do not
want gold plated security. Nevertheless there has to be a value
on security. Put all of that together and mitigate the worst effect,
but just coming on to this issue of CHPs, given what we are facing
between now and 2020-2050 when obviously what we have to do is
work very strongly and hard on the demand side of that with energy
efficiency measures and all of that, the net impact is that we
are still going to be importing energy. What begins to matter
then is the issues around how we do it in a way which secures
supply and does it at an affordable price. This is why we have
to weigh the nuclear, the renewables, even coal: all the energy
sources as part of that general package, having put a value on
security and what it will cost if we did not have that in place.
If for example on renewables or CHPI have no reason to
believe this will be the casewe do what we can there but
the minute it looks as though it is not realistic or it is going
to be very costly relative to another form of energy, which means
that our energy overall becomes more costly than our competitors,
then we have to think about a different mix. That is why I said
right at the very beginning that the important thing from energywatch
point of view is that we have a number of these issues absolutely
addressed with as much clarity as possible and where we do not
have the answer say we are going to find the answers or we are
going to track performance or whatever. The kind of trade-offs
you have been mentioning are properly worked through and displayed.
650. You say you have particular regard for
the needs of low income, elderly, disabled, chronically sick and
rural customers. You mention the drop from 6.5 million to four
million. I think personally one of the contributory factors there
must be the Government's winter fuel payment for pensioners must
also have made a significant difference. What do you think of
the content and direction of the Government's fuel policy strategy?
(Ann Robinson) On that last point first, I think the
winter fuel payments are great; I am almost qualifying myself,
but never mind. Seriously, they are very, very important. What
has actually happened is that the number of vulnerable people
has increased as a percentage of the fuel poor. I cannot get the
exact percentages but it has gone up from 70-odd to 82 per cent.
The number of vulnerable people, elderly people, has increased
relative to others within that. On Government's response on fuel
poverty, I must say again that I am delighted that it is a big
commitment; that has to be right. I am delighted that attention
is being paid to energy efficiency through Warm Front and things
like that. What I also have to say is that I am concerned about
the amount of money going in, whether it will be sufficient to
do the job between now and 2010. The second thing I am concerned
about and I am being very critical here, on the fuel poverty strategy,
is that again it suffers from too many different departments being
involved in it with no clear lead nor clear steer. That kind of
strategy does need that. There are so many departments who should
be interested, but because it is energy they are not. The Department
of Health should be a key player, but it is not. Why not? There
is something not quite right about the ability to see that strategy
through in the right sort of way. I mentioned the gas pipelines
so I am not going to mention them again; the importance of including
something like that is a particular bee in our bonnet. Not just
extending the gas pipeline but also making it possible for people
then to have access to the funds to have new heating systems which
they might need. The last point on the fuel poverty strategy which
is hardly addressed at all, but which is something we are really
going to bang on about is that we do think there is a lot more
that companies can do to meet their own social obligations. We
need better methods of payment. We do need them to think about
different ways of explaining to people that they can benefit from
being on the priority services register. A whole range of things
which companies can do. There are some significant developments
taking place and some companies are doing some good things. I
do not see any real hard evidence that the companies are necessarily
doing all they ought to be doing if they are seriously going to
deliver on those social obligations. I ought to mention that the
companies should do a lot more to promote winter fuel payments.
651. You mentioned pre-payment meters in your
opening remarks; 70 per cent of users being in debt. Can you say
a bit more about your thoughts on pre-payment meters and what
you would like to see done in terms of the way that is approached
by suppliers and so on?
(Ann Robinson) We have some examples out there in
the marketplace like the Stay Warm scheme which displays many
of the features which people who are on pre-payment meters need.
What people on pre-payment meters need more than anything else
is to have some sort of security that they can pay for their energy
and also to be able to budget. On pre-payment meters a lot of
people who are the most vulnerableand I speak from experience
here because I used to do social security work so I do know a
little bit about what I am saying hereeven budget on a
day by day basis, not even on a weekly basis. It seems to be wrong
that somehow or other the only way in which we can handle that
is by giving them an expensive form of tariff. We were hearing,
not coming up with all the solutions but hearing, for instance,
about something in Northern Ireland on electricity which is a
keypad sort of thing. I am not sure I have mastered all the technical
details but it does seem to be a vast improvement on pre-payment
meters which have some of the features of allowing people to budget.
There is a possibility of doing quite a bit more in harmony with
the banks and with the universal bank coming along to find other
ways of managing that. There are several things there. All I am
saying is that I just do not see the evidence that companies are
pursuing some of those things in the same way that they are throwing
a lot of money and effort, sometimes undesirably, into marketing.
652. We are considering looking at the Government's
fuel policy strategy as a separate issue a little later on, so
we shall be having you back on that one. The point was put to
us that some utilities, for example BT, already have schemes in
place such as low-user bonuses and high-user penalties in the
domestic market designed to help people who are low users. I am
not sure whether we are encouraging them to use it or not, or
whether we are compensating them financially when they do. Do
you think that more imagination could be employed by the utilities
in their tariff structures?
(Ann Robinson) There could well be. I should be worried
about benefiting low users and discouraging high users, really
worried about that, because of course a lot of the high users
are people who are disabled or elderly people who are in their
homes all day. The rest of us have nice warm offices to go to
which are centrally heated by somebody else. I should be worried
about that because then you severely disadvantage the most vulnerable
653. You are saying at the moment that you help
people when they are shopping around, but will you be beginning
to focus your energies now that you are getting into your stride?
(Ann Robinson) Yes, we shall. One of the things we
do want to do and have not been able to do it quite yetand
if I said we were going to do it tomorrow Lesley would kill me
because she has more than enough on her plate at the momentis
have a look at the variety of schemes which is out there, do a
bit of imaginative thinking ourselves to see what we can do to
begin to lead an approach. The answer is yes, yes, yes.
(Lesley Davies) We recently took over the pricing
comparison fact sheets from Ofgem. They give consumers information
about the deals which are out there in the market. One of the
things we have begun to think about is what information you have
to give consumers if what you want them to do is to save money
and that it is not just about changing supplier, it is perhaps
thinking more about what gives the best value, warmth at best
value and light at best value. That is certainly one direction
we want to go in as well. I thought it would be helpful for you
to be aware of that.
654. I have a question which I was not going
to ask but it came back to me. I remember a regulator saying that
they used to give this sort of information to Which magazine,
which I always considered to be a bastion of middle class complacency.
It never got to the people who read The Sun and the Daily Mirror.
How do you disseminate that information? These folk do not go
to libraries. They perhaps rush in and out of the post offices.
(Ann Robinson) On this, only about five or six per
cent of the whole population has heard about energywatch so we
have a great deal to do to raise our profile and make them aware
that we are here to help them. Secondly, we do get a lot of inquiries
in for price information and all the rest of it, but the people
who need that information most are not going to do that, they
are not going to lift up the phone or have access to the Internet.
This is why we are paying a lot of attention, putting a lot of
effort into communications. We have communications officers in
every one of our offices with the intent of taking the message
out there; local radio, papers. That is why we are developing
what we call our outreach programme, where we take the service
out to the people, to where the people are. We go on a sink estate,
we publicise the fact that we are there, we work with the tenants'
association and get people along. Would you like a better deal?
Bring your bills and we will tell you how to get it, all that
stuff. There is a lot we can do. The frustration is that we want
to do more and more and more, but we have to be realistic about
what we can do. All those programmes are really, really important.
Sir Robert Smith
655. I should know the answer. How are you funded?
(Ann Robinson) Out of the licence fee. We are not
quite so well funded. We have about one third of the level of
funding that Ofgem have; maybe we ought to be funded better.
Chairman: You might only have one quarter of
the staff. On that happy note, thank you very much. We shall be
in touch with you later.