Examination of Witnesses (Questions 34-39)
22 JUNE 2004
Mr Duncan Sedgwick, and Ms Jill Harrison
Q34 Chairman: Good afternoon, Mr Sedgwick
and Ms Harrison. Perhaps you could give us an idea of who you
are. I think this is the first time the Energy Retail Association
has appeared before us, for reasons which I am sure you will reveal
and explain.
Mr Sedgwick: I am Duncan Sedgwick.
I am the chief executive of the Energy Retail Association. Our
Association has only been in existence for nine months. We represent
the interests of the six major energy retailers in the UK.
Q35 Chairman: As far as the size of this
problem is concerned, the figures that we have had suggest that
there has been an increase of late but in some respects the number
of people disconnected for non-payment has declined over the last
15 years. What would you say was the reason for this decline?
Mr Sedgwick: I think you are absolutely
right. There has been a decline. That decline has been driven
by the need to make sure that we are working closely as energy
retailers with vulnerable people in society. What we have really
been trying to do with these proposals that we put together with
Ofgem is to tighten even further the sort of work that we are
doing in that area.
Q36 Chairman: What about the question
of self-disconnection? Would that be a factor, do you think, in
the reason for the reduction in disconnections as well?
Mr Sedgwick: Clearly, if you went
back over enough years, something like 20 years, the advent of
the much more sophisticated range of pre-payment meters, the days
of a coin in the slot type meter, have long since passed, so token
and key meters, that sort of thing. That type of technology and
meter is very attractive to a whole series of customers. The research
that has been done over the years definitely proves that customers
like the option of a pre-payment meter. What we are seeing is
the introduction of methods of payment that customers want. Some
customers are happy with that; other customers are happy with
other sorts of options. What the retailers have done and need
to continue to do is to make sure that they put forward a proposal
that is right for that particular customer.
Q37 Chairman: Ms Harrison, perhaps you
could tell us why there are still more gas disconnections than
electricity disconnections. 18 million homes get gas. 24 million
homes get electricity but you disconnect far more than electricity.
I imagine British Gas as a major supplier is perhaps the one with
the hand on the spanner, as it were.
Ms Harrison: The reason that you
see more disconnections in gas compared to electricity is in electricity
you can fit a pre-payment meter. There are no safety issues. When
you fit a gas pre-payment meter, you have to have somebody in
the house who can go round and test and check every appliance
to make sure that it is safe. You need a qualified engineer in
attendance and you need the customer present to do the purge and
relight of the appliances. At the moment, we do not have a process
which says we will always fit a pre-payment meter in gas, but
that is part of the proposals that we are taking forward now.
We are working with Transco to look at how we can deal with the
safety issues as part of that changing process. In electricity,
the same issues do not exist.
Q38 Chairman: Is this something which
has become apparent recently with heightened awareness of safety,
or is it something that you have just been rather slow on?
Ms Harrison: No. It has always
been an issue in terms of the safety of gas meters. What we have
been doing as part of the look at vulnerable customers is looking
at how do we protect vulnerable customers and how do we put in
place sensible payment arrangements for that customer going forward.
Some of that may be installing pre-payment meters. It may be that
Fuel Direct is the best option for some of these customers, but
we will have to get the qualifying benefit range extended. At
the moment the only benefits that qualify for Fuel Direct are
income support and income related jobseekers' allowance. You will
see in the consultation document that we have identified a range
of I think nine benefits that we believe ought to qualify for
Fuel Direct. If Fuel Direct is opened up to those benefits, that
would be a much more sensible payment option for a number of people.
Q39 Mr Clapham: Perhaps you could say
why you feel it is that the disconnections fluctuate so widely.
Just to give some examples: there were 22,177 gas disconnections
in 1999, 16,500 in 2000, 26,088 in 2001. Also, after achieving
a lower level in the late 1990s, electricity disconnections did
start to rise again in 2002-03. Could you say why that might be?
Mr Sedgwick: There were certainly
some issues to do with human rights legislation and there were
particularly some problems in Scotland some two or three years
ago which caused to begin with some decreases in the number of
disconnections and then, as those issues got resolved, it caused
some increases. Those issues have now been resolved. What we would
always be doing is trying to focus in on what is the size of the
problem, trying to look almost customer by customer, because I
think this is the only way we are ever going to resolve some of
these difficulties, looking at it from the point of view of what
are the particular circumstances of the customer; what are the
difficulties that they have? How can we find a means of ensuring
for those vulnerable customers that they continue to have heat
and light?
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