Examination of Witnesses (Questions 40-59)
22 JUNE 2004
Mr Duncan Sedgwick, and Ms Jill Harrison
Q40 Mr Clapham: Would that be the same
for electricity, Ms Harrison?
Ms Harrison: Yes. We had a similar
issue about the Human Rights Act around electricity. It was in
the warrant application process, which is the same whether it
is gas or electricity. There was a stall on disconnections while
that was resolved and once it was cleared obviously there was
a backlog waiting to work its way through.
Q41 Mr Clapham: Could you both give us
an idea of what the average level of the debt is for a customer
who is disconnected? Could you say whether that is the mean average
at the moment?
Mr Sedgwick: It really does vary
tremendously and averages are not necessarily going to tell us
a great deal. It can vary on what is happening as far as the customer.
For instance, a customer where there may be children at home.
They may be using more energy. The sort of numbers that we are
talking about tend to be the average consumptions for customers,
whether it is gas or electricity. There does not tend to be a
huge amount of variation in there.
Q42 Mr Clapham: Is that the same for
electricity? Are you able to say whether there is a median average,
a mean average or a mode average?
Ms Harrison: People would tend
to be around the average. The important point is that for us our
debt path takes 140 days to work through. There are along that
debt path 14 attempts to make contact with the customer through
different channels, whether it is by correspondence, by telephone,
by telegram and by face to face visit. If we take the 140 days,
most customers would be into their second or third unpaid bill
as we go through the debt process. It is a very elongated process
with many, many attempts to make a resolution with the customer
to organise a repayment arrangement that suits the customer and
that fits within the things that we can provide.
Mr Sedgwick: That is a really
important point. With all the suppliers, there are multiple attempts
made by all means to be able to speak to that customer. That would
include trying to find, with personal visits, when is a good time
to try and get the customer at home and that sort of thing. This
is not a process where someone simply appears at the door, there
having bee no previous contact at all.
Q43 Mr Clapham: Is it possible to say
how much money the energy companies lose as a result of bad debt
by domestic customers?
Mr Sedgwick: Certainly there are
bad debts for a whole variety of reasons and perhaps Ms Harrison
can answer that specifically from the point of view of British
Gas. Again, the important thing here is that what we have tried
to do is to put into place a series of proposals that are going
to deal with the needs of the vulnerable. Everything is focused
here on vulnerability.
Ms Harrison: Bad debt gross write
off for British Gas in 2003 was £62 million. That is about
one per cent of our turnover.
Q44 Chairman: The figure that was quoted
to us by energywatch was about £150 per debt. Would that
be something in the region that you would regard as the kind of
sum you are talking about?
Ms Harrison: As we have said,
it will vary. The average consumption over two months would be
slightly upside of £150. Given the length of the debt path,
that probably is a fair assumption to make.
Q45 Mr Clapham: Given that you worked
together with Ofgem on that consultation document and having heard
what energywatch had to say about some of the gaps that they feel
might be very positively approached—and they were delighted
of course by the document—maybe there is an area there that
you could work with energywatch on?
Mr Sedgwick: One of the things
that we always said as far as these proposals is that they were
exactly that. They were proposals. It was a consultative document.
What we wanted to do is to hear the views of others about this
incredibly important subject. We have had a whole stack of responses
to the consultation document. Our intention now is that we will
be looking through those and we will be making certain proposals
next month as to what we believe is the right way forward. I will
give you one example though of something where we have had a number
of comments that we will be taking on board. That is to ensure
that we are including within the definition of vulnerability other
people who are in the household. That came through consistently
from pretty much all of the responses that we had. It is almost
certain that we will revise our definition to ensure that we include
all people who are in the house.
Q46 Mr Evans: Using the definition of
vulnerable now and the new definition of vulnerable, how many
of the 22,000 that were disconnected would now not be disconnected?
Mr Sedgwick: That is a really
difficult one to be able to answer. Our estimate is that we are
talking of below five per cent of the total number of customers
who are disconnected who would necessarily come into that definition
now. It is very difficult to be absolutely precise on that. It
is a very clear distinction between the focus on the `cannot pay'
instead of a focus on the `will not pay'. It is also very noticeable
that the vast majority of customers who are disconnected pay within
24 hours and are reconnected. One of the things we want to do
is to get that focus on the cannot pays to ensure that whatever
the definitions of vulnerability are including all of those. It
is also very important to say, whatever the definition is, there
is going to have to be some subjectivity from when we are talking
to the individual customer. That is one of the things we want
to do in working with external agencies, whether it is social
services or a whole range of other agencies. Another point that
has come out from the consultation is the need to talk to a whole
series of people about what the particular circumstances of a
customer are.
Q47 Mr Evans: You heard what energywatch
said about `cannot pay' and `will not pay' as well. Do you agree
with their definition?
Mr Sedgwick: No, I think it is
fair to say I do not entirely agree with their definition. One
of the things that we would also like to do is to explore with
them the research that they have talked about. It is a shame we
have not been able to see that before. Certainly out of this we
would like to sit down with them and see what that research is
saying. If that research is robust and proving some different
things, as we have always said with this consultation process,
we will listen and we will take into account what people are saying
to us.
Q48 Mr Evans: How is it that so many
people are getting disconnected when they have already paid?
Mr Sedgwick: The number that Mr
Asher quoted was six per cent. That is a high number which I have
to admit I do not recognise, based on many years' experience in
this sector. One of the things that I would again want to do is
to sit down with him and look at the research that they have done
on that and look at the statistics. Clearly, if we have some issues
there, those sorts of things need to be solved.
Q49 Sir Robert Smith: Can that be done
quite quickly because it would inform us if you and energywatch
could explain where you disagree and where you disagree on that
figure.
Mr Sedgwick: I am disappointed
that we have not been shown the research that they talked about
prior to this but certainly it will be one of the things we will
pick up straight away.
Q50 Sir Robert Smith: One of the things
that came up in the previous evidence was that a few years back
in 2002 there were some suggested good practices that could reduce
those getting into debt and prevent disconnections. There seems
to be some disappointment from energywatch about the implementation
of those good practice guidelines. How do you feel they have been
implemented?
Mr Sedgwick: I think they have
been implemented very well. Again, I am afraid I would have to
say that I disagree with many of the views that energywatch have
put forward on that. We accept the fact that we have some challenges
in certain areas. For instance, to give you one of the examples,
we have a piece of work that goes across all suppliers that is
looking at the customer transfer process. That is an industry-wide
piece of work that energywatch, Ofgem and a number of other stakeholders
are actively involved in. That is trying to make sure that we
improve the processes for the good of customers. I just do not
accept the fact that many of the things that the suppliers are
doing are as poor as energywatch stated them to be. We have made
a lot of progress in a lot of areas but we are never going to
be complacent. It is not the way that the sector should work.
Q51 Sir Robert Smith: What sort of percentage
of bills do you think are in error at the moment?
Mr Sedgwick: It depends what you
mean by `in error' because in error could cover a whole range
of issues. It could be something fundamental like the wrong name,
the wrong address, the wrong meter reading etc. I would have to
say to you I would be straight guessing. The problems, if there
are any, are likely to centre around some form of meter reading
issues rather than necessarily things like names and addresses.
I suppose we also have to be a little realistic though with the
millions and millions of bills that go out. There will be mistakes
made from time to time. One of the things that all suppliers have
to do is put in place procedures to ensure that those are kept
to the barest minimum. There has to be very good reaction to a
problem being discovered. In the same way that energywatch have
case studies where things have gone wrong, we have many, many
case studies where something gets discovered which is not necessarily
a fault of the company. The sort of action in dealing instantly
with the problem, speaking to an agency in order to assist the
customer, ends up by making sure that we do not have the sort
of problem that nobody wants to see.
Q52 Sir Robert Smith: You have already
mentioned the Fuel Direct payment scheme and one of the suggestions
you have there is that it should be widened to cover a greater
range of benefits. Is there any other aspect of the scheme that
you see could make it more attractive or more useful?
Mr Sedgwick: I think it is about
saying that Fuel Direct works for particular types of customers,
not all customers, in the same way as pre-payment meters are absolutely
the right thing for certain types of customer. It is not about
trying to create a square peg in a round hole as far as a payment
arrangement. It is looking at the circumstances in which the customer
is saying what is right for them.
Ms Harrison: I would endorse that
it works well for many people. It does not work well for everybody.
For some people on Fuel Direct, it means they remove the responsibility
for managing their own affairs and that is not always helpful
for some people. For many, it is very helpful. The thing that
we would hope to change, as well as external qualifying benefits,
is also the administration process around Fuel Direct because
at the moment we have to deal with many, many different social
security offices. It is not a very straightforward process to
do that. You do get variance in the way in which they handle cases.
A simplified process would be very welcome.
Q53 Sir Robert Smith: Even with the current,
limited range of benefits you encounter what you see as administrative
hurdles?
Ms Harrison: We have to work with
the local Department of Social Security office. It is a manual
process. It is not automated, so obviously you will get different
administrative processes that sit around that, which make it more
difficult for an organisation that is nationally based to put
something in place that is consistent for its customers. Some
simplification of that process would be welcome, particularly
if we are extending the number of people going onto it.
Q54 Sir Robert Smith: Have you discussed
with the Benefits Agency what the barriers are to that?
Ms Harrison: We are at the moment
talking to DWP about expanding the range of benefits. There was
some work done about 18 months ago by the Fuel Poverty Action
Group to look at Fuel Direct and to see whether or not processes
could be simplified. Some improvements did come out of that but
there is still some way to go.
Q55 Chairman: You would have thought
that in this age of e-government it would have been a doddle.
Ms Harrison: You would. I would
agree.
Q56 Linda Perham: Could I move on to
your consultation paper? It focused on three major issues: achieving
a common definition of vulnerable customers, encouraging suppliers
to adopt a thorough procedure for assessing customers in debt,
which is designed to provide a safety net for vulnerable customers,
and giving clearer guidance to suppliers to reduce fears about
the data protection implications of passing information on vulnerable
customers to social services departments. To some extent, these
are difficult areas that require subjective judgments. I am wondering
about the staff time and training that might be needed to make
the safety net work. Have you any comment on that?
Mr Sedgwick: Yes, and I think
it is a good question to ask because there is everything in it
from the supplier point of view to make sure that we make a big
success of what we are talking about here. Therefore, every one
of the suppliers working in a way where we are utterly united,
utterly working to the same definitions and that sort of thing,
is going to be focused in on making sure that the correct staff
are trained to the right levels. You would not expect for instance
someone who is on the frontline of dealing with hundreds of telephone
calls a day to have the same in-depth training, say, as someone
who is in one of the back office specialist functions. One of
the things that we are going to be doing with these proposals,
and have started already, is making sure that that quality and
depth of training is given to all types of staff who may be talking
to customers. I think what this is trying to do is make absolutely
sure that we are focusing in on the needs of the vulnerable. It
is not always a straightforward thing to be able to spot when
a customer is telling you things that are utterly true, as compared
to a customer who may be being slightly more economical with the
truth.
Q57 Linda Perham: If people are referred
to social services or a charity, what do you expect would happen
then? Would you hope that they would be able to sort that person's
problems out, including debt problems, and anything else related,
then get back to being good paying customers again? Would you
follow up at all?
Mr Sedgwick: I think it is about
doing what is right in the circumstances, and where these things
operate is that there is never any one answer; you cannot say
"If you do that you solve the problems". Sadly, very
often customers in these problems have multiple debts, so we are
not just talking of energy-related debt; there can be a whole
stream of others. So what we have to do is focus in on what is
the right thing for that particular customer, taking advice from
the agency, taking advice from the charity, or whatever it is.
Our aim would be absolutely to make sure that we do not take the
disconnection action against customers who come into that sort
of vulnerability definition.
Q58 Linda Perham: The consultation paper
as a whole, have you had any responses to it or any suggestions
as to how the proposal should be changed or supported?
Mr Sedgwick: We have certainly
had a great many responses, something in the order of 30 or 40,
which is the sort of number that we would have expected. I think
the general feeling has been supportive, as energywatch said themselves,
a feeling that "How can we improve it even further?"
As I said, we will be looking at all of those comments that we
have received. It is very important to say that this wider definition
of people in the household is certainly something that we will
be taking on board, because our intention has always been to consult
on this. We are not claiming that we are the only people with
an interest here, and we are also not claiming we are the only
people who are expert in this area.
Q59 Chairman: What are the consequences
of disconnection, beyond the inconvenience of not having gas and
electricity? Are the people put on a bad debt register?
Mr Sedgwick: No, not necessarily.
I think one of the issues with disconnection, again based on years
of experience, is that there are multiple other debts, and it
is often a case of trying to ensure that we find a way of managing
all of those things. The consequences tend to be that for the
vast majority of people they are put back on extremely quickly.
For instance, I talked earlier about some problems we had had
in Scotland a couple of years ago, and an interesting little story:
there was a road where pretty much no-one had paid. One customer
was disconnected in the morning, and in the afternoon the rest
of the road paid. That is the sort of thing where from time to
time we see that, where stern action sometimes has to be taken
against people who are in the `won't pay' category.
| 
