APPENDIX 13
Memorandum by National Energy Action
1. BACKGROUND
1.1 Suppliers of domestic gas and electricity
are required by the energy regulator, Ofgem, to develop policies
and practice on a wide range of issues affecting their customers.
Under the general heading of "Social Obligations" suppliers
must develop and implement Codes of Practice on:
— The most efficient use of energy.
— Methods of paying for fuel and for
dealing with customers in difficulty.
— The use of prepayment meters.
— Services for customers who are of
pensionable age or disabled or chronically sick.
— Services for customers who are blind
or deaf.
1.2 The Code of Practice on paying for fuel
and on dealing with customers in difficulty details procedures
that companies will adopt where domestic consumers are unable
to pay gas or electricity bills. The code sets out the range of
payment options available to assist in budgeting and for debt
recovery. A crucial factor in any arrangement for debt recovery
is the customer's ability to pay.
2. TRENDS IN
DISCONNECTIONS
2.1 Disconnections from energy supply have
fallen significantly from the peaks of the mid-1980s. In 1987
more than 60,000 gas consumers were disconnected; in 1986 more
than 100,000 electricity consumers were disconnected. Since that
period, trends have generally been downwards, although gas disconnections
remain disturbingly high and subject to considerable fluctuation.
Gas suppliers maintain that disconnection is their only option
in some cases since, unlike electricity suppliers, they cannot
install prepayment meters in the absence of the occupier(s) because
this would pose a safety hazard. In recent years, electricity
disconnections have also increased.
DISCONNECTIONS FOR FUEL DEBT—GREAT
BRITAIN
| 1998 | 1999
| 2000 | 2001 |
2002 | 2003 |
| Gas | 29,500 | 22,177
| 16,500 | 26,088 | 21,780
| 15,973 |
| Electricity | 400 | 373
| 300 | 375 | 995
| 1,361 |
| | |
| | | |
2.2 It should be noted that a combination of prepayment
meters and keypad meters introduced by Northern Ireland Electricity
has resulted in there being no disconnections for electricity
debt in Northern Ireland since 1999. Self-disconnection (the temporary
inability to charge prepayment cards and tokens) has also been
addressed through a sophisticated and sensitive policy on emergency
credit.
3. MAIN REASONS
FOR FALLING
DISCONNECTIONS
3.1 The dramatic reduction in disconnections is a combination
of two factors:
— Greater regulatory intervention in disconnection
procedures and practice.
— The significant increase in the installation of
prepayment meters.
3.2 Regulatory intervention originally took the form
of guidance to companies that they were to distinguish those customers
who could not pay their fuel bills from those who deliberately
sought to avoid paying—commonly termed the "can't pay,
won't pay" issue. Suppliers were then required to develop
payment options and debt recovery procedures that were sensitive
to the needs of the "can't pays". Trends in disconnection
rates suggest that this approach has worked to some extent, although
permitting utilities to make such important and sensitive judgements
is clearly fraught with difficulties and dangers.
3.3 The greatly increased use of prepayment meters has
made a major difference to companies' disconnection practices.
Suppliers are guaranteed both payment for current consumption
and recovery of any existing debt through calibration of the prepayment
meter.
NUMBERS OF ENERGY CONSUMERS USING PREPAYMENT METERS—GREAT
BRITAIN (MILLIONS)
| 1991 | 1995
| 1996 | 1997 |
1998 | 1999 | 2000
| 2001 | 2002 |
2003 |
| Gas | 0.7 | 0.9
| 1.0 | 1.1 | 1.4
| 1.6 | 1.8 | 1.8
| 2.0 | 2.0 |
| Electricity | 1.2 | 3.2
| 3.6 | 3.6 | 3.7
| 3.7 | 3.5 | 3.8
| 3.7 | 3.7 |
| | |
| | | |
| | | |
4. VULNERABLE CONSUMERS
AND DISCONNECTION
4.1 Ofgem has previously indicated to energy suppliers
that special provision should be made for certain categories of
vulnerable consumer and that they should adhere to the procedures
set out below in their licence conditions:
"Licensees are required, so far as is practicable, to
avoid disconnection of customers who are of pensionable age or
disabled or chronically sick during winter months. Gas licensees
cannot disconnect pensioner households during this period. The
code should explain these requirements.
Condition 37A Pensioners Not to Have Supply of Gas Cut
Off in Winter
This condition shall apply in the case of any of the licensee's
domestic customers who, to the knowledge or reasonable belief
of the licensee:
Is of pensionable age and lives alone or with other persons
all of whom are also of pensionable age or under 18 years of age.
Is supplied with gas at domestic premises
Is in default of his obligation to pay for gas so supplied
through misfortune or inability to budget to meet bills for gas
supplied on credit terms."
4.2 One obvious criticism of this apparently sympathetic
concession is that it makes no provision for pensioner households
disconnected in any other season of the year to regain supply
as the winter period approaches. Nor is it clear why it is acceptable
to have pensioners occupying a property without heating or lighting
simply because there is also a non-pensioner occupant.
4.3 It can also be argued that any winter moratorium
on disconnection should, at the very least, be extended to families
with children but this is not the real issue. The crucial issue
is the continued powers of energy suppliers to disconnect a household's
energy supply in any circumstances. The equivalent right has been
removed from water companies, primarily on grounds of health and
safety, and a similar argument could certainly be put forward
that access to fuel for warmth, light and cooking is essential
to the health and welfare of families and individuals.
5. NEW DEVELOPMENTS
IN THE
DISCONNECTION DEBATE
5.1 Ofgem and the Energy Retail Association have collaborated
on a recent consultation paper: A strategy to define and prevent
the disconnection of vulnerable customers. The consultation
paper has two objectives; the first is to reach a consensus on
what constitutes a vulnerable household, the second is to devise
improved means of identifying vulnerable households.
5.2 The ERA proposes that a vulnerable customer be defined
in the following manner:
"A vulnerable customer at risk from disconnection will
be unable to safeguard his or her personal welfare or the welfare
of any children in the household, and will be in need of care
and attention by reason of age or infirmity, or suffering from
chronic illness or mental disorder, or substantially handicapped
by being disabled."
5.3 It is proposed that vulnerability be defined in terms
of mental or physical disability or chronic illness or where a
householder is in need of special consideration as a result of
age or infirmity. This link between the mental or physical condition
of the customer is not rational. Clearly other occupants can be
put at risk from disconnection regardless of the circumstances
of the individual responsible for bill payment. This unnecessarily
narrow definition could result in physical, mental or psychological
harm to other vulnerable members of the household.
5.4 It is further suggested that receipt of certain means-tested
and disability-related benefits will assist in identifying vulnerable
households and that this information can be supplemented by additional
data derived from other sources, including face-to-face meetings
and subsequent subjective assessments. It is difficult to see
individuals tasked with revenue protection on behalf of their
employers being well placed to make sensitive judgements like
these.
5.5 It is proposed that, as a last resort, referral can
be made to social services without there being any indication
of what action will be expected as a result of their involvement.
Unless it is anticipated that social services take responsibility
for payment of an existing debt, or are able to broker a binding
repayment arrangement, it is difficult to see what their actual
role might be. This proposal seems to take no account of the existing
workload of hard-pressed social workers with demanding caseloads.
5.6 It is entirely unclear what the procedure will be
if social services are unable or unwilling to become involved.
It seems likely that the energy industry will retain the right
to disconnect even those categorised as vulnerable, and at any
time of the year, provided the customer is defined as a "won't
pay"—a judgement that will ultimately be made by the
gas or electricity supplier.
6. ENDING THE
RIGHT TO
DISCONNECT
6.1 Entitlement to disconnect is the ultimate sanction
of energy suppliers and clearly they are reluctant to lose this
power. As noted earlier this power has been removed from water
companies and, whilst it is suggested that this has resulted in
burgeoning debt, energy suppliers are infinitely better placed
to recover debt and maintain payment for ongoing consumption through
measures such as prepayment meters.
6.2 A legal ban on disconnection from fuel supply would
encourage companies to develop alternative tariffs and payment
methods that enabled households to remain on supply, and the companies
to recover arrears and collect payment for current consumption.
Such a scheme might take the form of a revised, expanded and efficient
version of Fuel Direct which could develop into an acceptable
alternative tariff option rather than its current status as a
virtually moribund payment method of last resort.
6.3 Considerable progress has been made in reducing the
incidence of disconnection but the latest proposals are simply
an additional refinement of existing practice. No matter how effective
and conscientious suppliers are in following their agreed procedures
there will inevitably be errors and oversights that lead to the
kind of tragedy that encouraged Ofgem and the Energy Retail Association
to take action in the first place.[22]
6.4 The only means by which it can be guaranteed that
such incidents are not repeated is to end the right of companies
to disconnect domestic gas and electricity supplies. The issue
of vulnerable householders should be an irrelevance. The distinction
between vulnerable and non-vulnerable is too fine and complex,
and too important, to be left to subjective judgements. The power
to disconnect from access to essential services is anachronistic
and excessive and should be removed from gas and electricity suppliers.
22
The need for revised procedures to protect vulnerable customers
was raised by the deaths in October 2003 of an elderly couple,
George and Gertrude Bates, from cold-related illness. Mr and Mrs
Bates were 89 and 86 years old respectively and had had their
gas supply disconnected during the summer. Descriptions of their
household circumstances, and their contact with their gas supplier,
make it unclear whether they would have been offered protection
under the Energy Retail Association proposals. Back
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