Examination of Witnesses (Questions 20-33)
22 JUNE 2004
Mr Allan Asher, and Mr Ed Gallagher
Q20 Sir Robert Smith: To get the companies
to do this best practice, is there some kind of stick needed somewhere?
Mr Asher: I think it is a combination.
We always believe that where companies want to do the right thing
they should be encouraged and praised. Some are doing that but
it also is the case that, where they are failing to live up to
it, they should be named and shamed. They should be required to
do the right thing. They are all prepared to sign up to those
debt and disconnection guidelines. They all live under the obligations
of the priority services register and also they all live under
the law of common decency. We believe that if this Committee were
to recommend some of those simple, common sense proposals that
we have put in our submission the number of disconnections would
plummet and the damage to individual consumers would be far less.
Q21 Mr Clapham: Can I take you on to
Ofgem's recent consultation paper? It tends to focus on three
areas: the one we have been talking about which is definition
of the vulnerable; also, designing a safety net for those defined
as vulnerable and developing protocols so that information could
be exchanged. Do you feel that if those proposals were implemented
they may remove or reduce disconnections?
Mr Asher: I can say initially
we are delighted that the industry has got together to recognise
the problem and come up with the proposals so we want to praise
them for that, but I might observe that the safety net they speak
of has holes in it that are so big that it would protect very,
very few customers. It is a good starting point but by better
defining vulnerability to include those in these areas of multiple
deprivation, which they currently exclude, by including other
members of households, not just the account holder, which they
exclude and then by recognising that there are many of these procedural
problems that the companies themselves cause, which they do not
accept—if those things were included in there plus the warrant
process, I am absolutely convinced that the number of disconnections
would fall considerably.
Q22 Mr Clapham: You feel that it is a
good start and we may be able to fill in some of the gaps?
Mr Asher: Yes. In the press release
issued by the industry association today, they have invited this
Committee at the end to provide some recommendations for them.
I would urge the Committee to do that and I believe that the industry
association would be morally bound to incorporate them. I think
that would be in the best welfare interests of tens of thousands
of consumers.
Q23 Mr Clapham: You feel that that would
lead the energy companies to try to find out the circumstances
of those defined as vulnerable?
Mr Asher: Indeed. We have suggested
in submissions to them a much better way of proceeding on the
definition of "vulnerable". They have had a bit of a
shot at doing that but a better place to start, in our view, is
where Parliament started in defining vulnerable for the water
disconnection regulations. There is a rather good definition there.
It is not perfect and of course is orientated around water consumers,
but with a few changes it would provide an excellent basis on
which to work and one that would be consistent with another utility.
Q24 Mr Clapham: Do you feel that the
energy companies would be sufficiently motivated to train their
staff to carry out the assessments that are required?
Mr Asher: There are some issues
there. As Ed Gallagher, our chairman, pointed out, it turns out
to be good business practice as well. In our estimation, the average
yield that a company would get from a gas or electricity customer
in a year is going to be around £11 to £13. That is
their net profit from supply. Once something goes wrong and they
enter this process of disconnecting, it can cost the company hundreds
and hundreds of pounds. It seems to me that by spending just £20,
£30 or £40 in trying to save that debt by providing
advice, better systems, better billing and stopping errors everybody
is going to be much better off.
Q25 Chairman: The Ofgem paper was produced
in consultation with the Electricity Retailers' Association. Is
that correct?
Mr Asher: Apparently.
Q26 Chairman: Do you not think that is
a bit off in the sense of the fox sitting down with the gamekeeper?
Mr Asher: We are delighted that
the regulator has encouraged the industry to do something about
it. I guess we would have been even more delighted if we had been
involved in the process too.
Q27 Chairman: Surely it would have made
more sense to talk to you than talk to them because the idea of
independence would have been perhaps preserved. I must confess
that I am immediately suspicious of a regulator who gets into
bed with the people he is supposed to be regulating, to deal with
a third party that is extremely vulnerable.
Mr Asher: I guess our view is
that the goal of all of this is to assist vulnerable consumers
and whatever arrangements can effectively do something about that
we tend to support. It is true that, because they were mainly
looking at the supply side issues, there was inadequate attention
to the concerns of consumers. We feel though, in our submissions
and our discussions with them, that we have brought those to their
attention and we are quite confident that, with the Committee's
support, the industry and the regulator will press for these important
clauses in the code.
Q28 Chairman: It might make our job more
difficult if the two are inextricably intertwined, as they would
appear to be in the preparation of this document. There is a certain
degree of cynicism about an operation of this nature. Where are
the people who disconnect coming from? Are they doing this because
they are losing revenue and they want a way of getting it, or
are they doing it because they are genuinely concerned about the
damage they cause to people's lives through their sloppy practices
and their recourse to disconnection?
Mr Asher: One must start at the
most recent controversial incident. The deaths of the Bates couple
brought this to attention. From our point of view, these are issues
that we have been concerned about for a long time. I recently
had a meeting with a debt collector and disconnection specialist.
His comment to me was that he thought it was a terrible job to
have because, among other reasons, he finds that in about one
in ten of the homes in which he has to disconnect people he is
persuaded that there is a real dispute about the accounts. Our
own evidence showed 50 per cent of those disconnected were disputing
the accounts so it does really mean that there is a need for a
good, hard look at these procedures.
Q29 Linda Perham: As the consumer watchdog,
do you not feel that the best thing for the customer would be
to go down the same road as the water situation and not have disconnections
in this utility, as opposed to water?
Mr Asher: Our starting point was
that if we can have a look at some of these obvious problems of
poor billing, the problems of disconnection in error, the problems
of failure to implement current licence conditions or the guidelines,
it might be that the substance of the problem goes away. We were
wanting to focus on what is doable and achievable right now. We
feel that you only get caught up in a much wider debate that might
leave tens of thousands of consumers suffering on some of those
wider debates of principle.
Q30 Chairman: Do you think sufficient
attention has been paid to the universal service obligation side
of this equation? Here is a regulator and licensed utility companies
which have responsibilities and, in a number of areas, they are
clearly not fulfilling them. Let us face it: it was not the tragic
deaths of these two pensioners that started all of these things.
They have been going on for years. As Members of Parliament and
Members of this Committee, we have raised this in the past.
Mr Asher: Yes indeed. It was concerns
expressed by this Committee and others that led initially to the
development of the preventing debt and disconnection guidelines.
They have been around now for a couple of years and they set out
a practical blueprint as to how to make the industry work better.
It is just that more recently there have been a number of these
events. Also, you might recall the break in that occurred to the
home of Mr Mackay I think in Glasgow, where a door was bashed
down and a meter removed. That was an awful case. In another case,
meters were removed from the home of a woman with a sick, dependent
child and it was discovered they were removed in error and the
company refused to put them back. They said because they did not
supply her they could not put them back. These things are just
outrageous.
Q31 Chairman: Sick, dependent children
are not vulnerable, are they, under the guidelines? They do not
count as vulnerable, do they?
Mr Asher: Under the current proposals
by the industry association, they would not be treated as vulnerable.
However, if one were to look at the water regulations which Parliament
approved, you would see that children, disabilities, poverty and
a number of factors which society always regards as indicators
of deprivation should be material factors in deciding how people
are dealt with.
Q32 Chairman: Cleanliness is next to
Godliness but you do not need gas and electricity to be clean.
You only need water.
Mr Asher: For many families, especially
those with children, perhaps dependent individuals in the house,
to be robbed of heat, light and power I would say is barbaric.
Q33 Chairman: On that note, we will end.
Thank you. I am the honorary president of Energy Action Scotland.
I should have declared that as a non-pecuniary interest beforehand.
Thank you for your evidence.
Mr Asher: Thank you for hearing
us and we very much look forward to your recommendations.
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