Memorandum submitted by National Energy
Action
THE SOCIAL ACTION PLAN AND THE ENERGY EFFICIENCY
COMMITMENT
INTRODUCTION
National Energy Action (NEA) is a charity working
to ensure that low-income households have access to sufficient
warmth for health and comfort at an affordable cost. NEA develops
and promotes energy efficiency policy and practical initiatives
to tackle the heating and insulation problems of low-income families
and individuals. Working in partnership with central and local
government; with fuel utilities, housing providers and health
agencies; and with regulatory bodies, consumer groups and voluntary
organisations, NEA aims to eradicate fuel poverty through greater
investment in energy efficiency to help those who are disadvantaged
and vulnerable.
NEA welcomes the Public Accounts Committee's
inquiry into the Social Action Plan and the Energy Efficiency
Commitment. The combination of regulatory intervention and the
continued development of corporate social responsibility across
energy supply companies has brought significant improvements and
protection within the supplier/consumer relationship. Many companies
are working hard to develop programmes and projects to provide
for disadvantaged consumers. However NEA's view is that we should
not depict the limited powers of Ofgem and the industry as a major
element in the Government's Fuel Poverty Strategy. It should not
be overlooked that fuel poverty is a consequence of low income,
unaffordable energy prices and poor heating and insulation standards—these
are all issues for Government.
NEA's primary interest in commenting on the
effectiveness of the Energy Efficiency Commitment and the Social
Action Plan is based on their potential, but largely unrealised,
roles in the reduction of fuel poverty. Whilst the Social Action
Plan is intended to monitor company provision for disadvantaged
consumers there is no specific affordable warmth objective or
target associated with Ofgem's guidance to companies; this is
even more true of the Energy Efficiency Commitment which has the
remit of energy savings and, consequently, carbon reduction.
THE SOCIAL
ACTION PLAN
Much of the energy devoted to Social Action
Plan monitoring is simply that—ensuring compliance with
Licence Conditions and social obligations imposed on domestic
energy suppliers. As such the Social Action Plan is primarily
a policing and reporting exercise. However one important supplement
to this reporting activity and one that might have a genuine and
positive role in addressing fuel poverty is in Ofgem's encouragement
of supplier initiatives—of which social tariffs could be
an important element.
NEA is not persuaded that social tariffs have
their origins in utility awareness of their role, and consequent
responsibilities, as suppliers of a service essential to the health
and welfare of vulnerable consumers. However, even if this were
the case, this is too important an issue to be left to random,
piecemeal and voluntary initiatives undertaken by commercial organisations.
As it is, it would be extremely naïve not
to assume that some social tariffs are, in fact, niche marketing
activities and should be seen as such rather than as serious attempts
to address fuel poverty.
The Department of Trade and Industry is expected
to conduct an evaluation of energy industry initiatives to assess
their contribution to fuel poverty reduction. Whilst NEA welcomes
this proposal as a means of identifying best practice with a view
to replication and development, one possible obstacle may be company
reluctance to share information on their initiatives on grounds
of commercial confidentiality which, if this proves to be the
case, will indicate where companies' real priorities lie.
Ultimately, however, NEA sees reliance on utility
action to deliver social objectives as an abdication of Government
responsibility. If there is a need for social tariffs then they
should be available on a consistent and universal basis and this
can only be brought about through Government action. The proper
role of Ofgem, rather than coaxing or exhorting energy suppliers
into "good works", should be to inform and advise Government
on policies and practice to make energy affordable without any
need to depend on the magnanimity of commercial enterprises.
THE ENERGY
EFFICIENCY COMMITMENT
One of the basic failings in current Energy
Efficiency Commitment (EEC) arrangements is the lack of integration
between EEC (as delivered to the priority group[9])
and Warm Front. The consequence is that both schemes are endeavouring
to identify similarl client groups, but with a view to providing
different levels of service. This does not in our view constitute
a coherent strategy for eradicating or alleviating fuel poverty
or for promoting take up of energy efficiency improvements; nor
is fuel poverty reduction an objective of the Energy Efficiency
Commitment although, of course, the programme does make an almost
incidental contribution to the provision of affordable warmth.
There is inevitably some degree of tension between
the environmental and social objectives of EEC. This has been
evident since proposals for energy efficiency programmes, delivered
by fuel suppliers and funded by consumers, were first introduced
in 1994. The capacity to make significant energy and carbon savings
by installing a range of straightforward and relatively cheap
insulation measures has never been in doubt. For a programme that
seeks to maximise environmental benefits the arrangements for
EEC, and its EESoP predecessor, work well. However, NEA is amongst
those organisations that have consistently pointed out that the
poorest consumers, who have the greatest difficulty in meeting
their fuel costs, contribute disproportionately to the cost of
these programmes.
Whilst the principle of ensuring that these
consumers also benefit from the schemes they help to fund has
been accepted, the arrangements put in place seem to NEA to have
the character of an afterthought. For EEC to serve a genuine social
purpose it must meet the needs of the low-income consumers to
whom assistance is offered rather than the needs of a fuel supply
company endeavouring to meet an energy saving target at the lowest
possible cost. It is for this reason that NEA has on many previous
occasions suggested that EEC should incorporate affordable warmth
targets for measures delivered to priority group consumers. We
see it as unacceptable that the benefits of EEC to some low-income
consumers is limited to receiving a few low-energy lightbulbs.
These concerns are amplified each time the EEC
programme is extended. Although falling fuel prices may have cushioned
the impact of increased EEC costs in the past, this is unlikely
to be true in future. We note that current proposals will mean
that most of the poorest consumers will pay £18 per year
to fund EEC from 2005, and that the average savings will amount
to only £15 for those who benefit from it. Given that fuel
prices are expected to increase in the near future we are increasingly
concerned that the short-term effect of EEC will be to aggravate
fuel poverty rather than alleviate it.
NEA is aware that the concerns outlined above
are shared by others, including some of the fuel suppliers who
are subject to EEC obligations. We have some sympathy with suggestions
that EEC should be separated into two distinct programmes, one
to serve an environmental purpose and the other to address explicitly
social objectives. However the problems of marketing a programme
for "poor people" are likely to be acute. NEA maintains
that the optimum method of meeting both social and environmental
objectives is a single, national energy efficiency programme,
offering a comprehensive package of measures to all households—free
of charge to those on low incomes and incorporating a sliding
scale of householder contribution from those who are better off.
In the absence of such arrangements NEA believes
that adopting affordable warmth targets for EEC priority group
customers is essential. It would ensure that the range of energy
efficiency measures available to those on the lowest incomes was
appropriate to the property they live in. As an incidental benefit
it might also prompt some innovation in exploiting the use of
renewable sources of energy at domestic or community level; provide
incentives for income maximisation by ensuring full take up of
benefit entitlement; and stimulate advice on the selection of
more appropriate tariffs and cheaper payment methods.
DISCONNECTION FROM
GAS AND
ELECTRICITY SUPPLY
The Energy Retail Association (ERA) has published
new proposals that are intended to prevent disconnection of vulnerable
consumers. NEA's response to the ERA consultation and to the subsequent
Trade and Industry Committee inquiry emphasised a number of points
related to the power to disconnect:
— The overwhelming majority of customers
who are actually disconnected are the "can't pays" who
are supposedly protected by Licence Conditions that require sensitive
and sympathetic consideration of their cases.
— Existing legislation precludes disconnection
from domestic water supply primarily on grounds of health and
safety—NEA would propose that removal of the means of heat,
hygiene, light and cooking facilities constitutes an equivalent
health and safety hazard.
— Banning disconnections would encourage
energy suppliers to develop more innovative tariffs and payment
methods that enabled customers to remain on supply.
— No matter how assiduous suppliers
are in trying to identify and protect vulnerable consumers there
will inevitably be errors and oversights that will result in frail,
elderly and other disadvantaged families and individuals being
exposed to the enormous potential harm of disconnection.
— The distinction between vulnerable
and non-vulnerable households is too fine and complex, and too
important, to be left to subjective judgements often made by company
agents whose primary interest is revenue protection and debt recovery.
— The only means by which it can be
guaranteed that injustice and tragedy do not result from disconnection
is to end the right to disconnect.
PREPAYMENT METERS
Despite repeated assertions from the energy
industry that use of prepayment meters is more a matter of lifestyle
than of poverty NEA believes that there is a strong and obvious
link between this payment method and deprivation. Rationing of
supply, surcharges on the unit cost, self-disconnection and the
inconvenience of charging cards and keys are indicative of need
rather than of free choice.
Individual companies are working towards the
elimination of any surcharge (already the case in Northern Ireland).
NEA would wish to see an end to the current practice of charging
people who self-evidently face difficulty in paying for fuel an
additional premium. At worst prepayment charges should be no higher
than those paid by quarterly credit customers.
9 September 2004
9 The EEC priority group covers those households in
receipt of means-tested or disability-related benefits. 50% of
energy savings are required to come from work carried out on behalf
of these households. The priority group is similar to those eligible
for Warm Front-the main distinctions being that EEC operates across
all tenures and does not require that beneficiaries should be
vulnerable on age grounds ie pensioner households or households
with children. Back
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