Examination of Witnesses (Questions 20-39)
ENERGYWATCH AND
POSTWATCH
19 JANUARY 2005
Q20 Mr Allan: There is no problem when
you beat them up over network reinvention or something, they are
still nice to you.
Mr McGregor: Obviously as a consumer
council, our interests and those of the economic regulator are
going to diverge from time to time, but yes, we maintain a sensible
working relationship with them even when there are disagreements
around policies.
Q21 Mr Allan: Specifically, when you
look at this Report, you can see that Energywatch deals with large
numbers of ordinary residential consumers who are spending £520
a year on average and putting in quite a substantial number of
complaints. You are dealing with a much smaller economic interest
for most consumers and a much smaller number of complaints, yet
you do not seem to be spending that much less. Does this give
you pause for thought?
Mr McGregor: The marketplace for
post is very different from that for gas and electricity. We have
already noted that about 86% to 87% of the mail goes from business
mailers and therefore only 13% to 14% goes from the social posters.
We have an equal responsibility to the 60 million social users
of the system as we do to the 300,000 or 400,000 business users
of the system. The costs of the complaint that we have to deal
with are very similar to the costs of complaint that Energywatch
have to deal with, even though customer bills on the social side
tend to be larger for those utility services.
Q22 Mr Allan: So the costs reflect the
cost of the administration of dealing with a complaint, irrespective
almost of the value of the items covered by that complaint.
Mr McGregor: Yes, or indeed the
value of the annual expenditure say by a household, which I agree
with you is very low in the postal services.
Q23 Mr Allan: Finally in the last couple
of minutes, just to look at what is going to happen in the future,
we are told that the DTI is going to set up something called Consumer
Direct, yet another one-stop shop. Do you have views on that,
are you involved in the debate around that? It seems to me that
if the government are setting up a one-stop shop, there is potentially
scope for even more confusion as we introduce another player into
the market. I should be very interested if you have a view on
it.
Mr McGregor: We are indeed. We
are closely involved and we like to think that we are assisting
Consumer Direct in setting up their organisation. Consumer Direct
is in trial mode at the moment, so we are trying to work out,
first of all, what impact Consumer Direct would have on the number
of calls, because it is being set up as a call centre, that consumers
overall will be making and what is likely to be the percentage
of those calls that Consumer Direct would need to forward on to
us and also on to Energywatch for action.
Q24 Mr Allan: They might reduce your
costs, because as a call centre, they might do some of the front-end
work for you.
Mr McGregor: Yes, and to the extent
they do, that would be welcome to us.
Q25 Mr Allan: Energywatch.
Mr Asher: We have been closely
involved with the formation of Consumer Direct. A number of our
national and regional directors are on some of the Consumer Direct
committees and we have helped them with software and complaints
handling systems and we have developed cross-referral mechanisms.
The idea is that Consumer Direct gets the first call and it is
designed particularly for people who in the past would not have
complained, who would not have had a voice. The Consumer Direct
call centre then passes those on to various agencies for investigation.
Q26 Mr Allan: Seamlessly?
Mr Asher: Well that is the goal
and so far the four Consumer Direct offices have passed to us
about 200 matters that have involved energy.
Q27 Mr Field: Could I pick up a point
which Richard touched upon? There is a summary table of your expenditure.
Mr Asher, your expenditure is £12.8 million and Postwatch
is £10.3 million. As Richard said, postal expenditure on
average per household is £26 and fuel expenditure is £520.
Would that suggest to you that you do not spend enough, or that
Postwatch spends too much?
Mr Asher: In relation to our own
expenditure, we have a fairly tight set of key performance indicators:
the time in which we deal with complaints, customer satisfaction,
we are now measuring the amount of compensation we receive, we
are doing a lot of research from consumers. All of those are telling
us that consumers are generally pleased. I do not mean to be complacent,
but we are generally pleased with the direction we are headed
in, so I think that our level of expenditure per complaint seems
to be quite reasonable.
Q28 Mr Field: In the introduction to
the Report, the National Audit Office reminds us that part of
your job is to represent the views of the consumer. There is a
table further up in the Report which shows, as we all know from
holding constituency surgeries, that the middle class have bushy
tails on this issue and they can turn up in quite large numbers.
Looking at your expenditure, both of you has got £0.3 million
for research. I just wanted to probe you further on what you do
with this money. When we had a monopoly supply and there was the
Post Office and there was the Gas Board and the Electricity Board,
we might have all been ripped off, but we were all in the same
boat together. Now there is a huge medley of supplies, particularly
for energy, and I never understand which deal I should be on.
It does not matter too much for me but it does matter for other
people, given their resources. I just wondered whether you would
tell us what proactive work you do to see whether, at the end
of the day, particularly poorer consumers are getting the best
deal they could get from this free market.
Mr Asher: I should love to because
that is one of our key priorities and on our website we publish
for all of the companies the tariffs for customers who are pre-payment
meter customers and by various credit types and by low, medium
or high consumption. We also put in an evaluation of complaints
against the companies. For those who do not have access to a website,
we have a call centre where this information, at a phone call,
will be provided in hard copy form to consumers. We accredit a
whole range of bodies who will help consumers switch from one
account to another and right now we are setting up a dedicated
team just working on the interests of disadvantaged consumers.
Q29 Mr Field: May I ask a question to
which we might get an answer when we come back? It is one thing
to provide this information about what people should be doing,
but do you actually do surveys to see, after you have provided
this information, whether a representative group of consumers
ends up now with the best deal? If not, what move might you make
to advise them on what best deal they could get?
The Committee suspended from 4pm to 4.09pm
for a division in the House
Mr Asher: There were two parts
to the question: one about research and then one about aspects
of our effectiveness for vulnerable consumers. In relation to
research, we have a pretty full programme of research underway
at the moment which is going to be looking particularly, not only
at the needs of vulnerable consumers, but trying to find some
novel ways of reaching vulnerable consumers. We think it is going
to be through partnerships with NHS Trusts, with Age Concern and
groups of that sort, where we will see our role as equipping them
to pass information and assistance to disadvantaged consumers,
but, in addition to that, about making markets work. There are
many features of the market that do not work well, especially
for disadvantaged consumers. There are those on pre-payment meters
who do not get to switch to lower prices, there are those who
technology prohibits from changing anyway and there are those
who are not even on networks. Our research is also trying to and
find ways of overcoming those problems. In terms of our impact
and effectiveness, we have been working particularly with the
Scottish Executive to get companies to come up with social tariffs
for people who just are not able to afford the full tariffs, with
the companies to establish trust funds for the alleviation of
poverty and we also have been working with the Energy Savings
Trust on 10,000 referrals which we are making this year and we
shall be following those up by phoning people back afterwards
to see what use they have made of that advice.
Q30 Mr Field: I was asking a slightly
different question and that was: do you have a regular sample
survey of consumers to see whether at any one point in time, and
then to regularly do that each year, whether people are understanding
how to work the market to get the best possible deal? If you did
such a survey and it showed that, say, 70% of poorer people, however
we define them, could, with better knowledge, get a better deal,
it would suggest that the market is not working very well, would
it not?
Mr Asher: There are those gaps,
certainly.
Q31 Mr Field: Are you going to fill them?
Mr Asher: Just last month we launched
a campaign with the Secretary of State for Trade and Industry
called Energy Smart. The key part of that is bringing targeted
information to groups of less well-off consumers to tell them
how to change payment methods to save, how to buy different sorts
of energy services and then to give them also energy saving advice
to save as well.
Q32 Mr Field: But unless we know how
many are getting the wrong end of the stick on all of this, there
is no urgency in all of this. So I ask you again, for the third
time of asking, whether you are going to carry out a survey which
would present for the first time how well this market in fuel
is working or is not working.
Mr Asher: Apologies that you have
needed to ask three times. We do a number of regular surveys,
one of which does poll consumers' experience, their knowledge
of the market and their switching behaviour.
Q33 Mr Field: Let us narrow it down to
my constituency. I do not know how many of my constituents could
get a better deal in buying fuel than they currently do. It is
answering those sorts of questions.
Mr Asher: We know that every consumer
who has not switched at all is almost immediately able to save
10% or 15% a year and we know that every consumer of five out
of the six companies who is on a pre-payment account is paying
more than they need to. We are finding ways of bringing this information
to such consumers.
Mr Field: Chairman, I have finished my
questions, but Richard has one on this very point. Might I give
him my two minutes?
Q34 Mr Allan: On the prepayment question,
this is a problem we have identified in other areas in this Committee.
The poorest consumers in general end up paying higher energy prices
than wealthy consumers on direct debit. You have described the
problem, but what can you, Energywatch, do? What do you do to
sort this out? It is still there, it has not changed.
Mr Asher: There are several things.
So many pre-payment meter customers actually also have a large
amount of debt and they cannot switch from one supplier to a cheaper
supplier because they are blocked by that debt. We have encouraged
Ofgem to at least give them partial relief from that. Now, if
your debt is £100 or less, you are allowed to switch. We
want to see that limit increased and we also want to see companies
reduce the difference in price between their rates to pre-payment
customers, where there is no credit risk because they pay in advance
generally, and some of their credit customers. We find that for
some that margin is shrinking. There is one company now where
there is almost no difference between their credit customers and
pre-payment meters, but for the vast majority, there is still
a margin and that is an area where we are actively lobbying the
companies. That is what I meant by encouraging them to come up
with social tariffs, tariffs which are designed for people for
whom the market just does not work.
Q35 Mr Allan: So in that respect you
are a lobbying organisation and if that gap does not narrow, you
have failed in your lobbying.
Mr Asher: Yes that is right.
Q36 Mr Jenkins: Mr McGregor, I see on
page 25 that your staff costs have risen from £2.1 million
in 2002 to £4 million in 2003-04, that is staff costs have
almost doubled. I presume you must have twice as many staff.
Mr McGregor: Yes, our numbers
of staff have been going up and the two reasons underpinning that
have been the quadrupling of the number of complaints that we
have had to deal with over the past two years and also the launch
of the urban reinvention post office closure programme.
Q37 Mr Jenkins: I notice in Figure 22
that the actual percentage of the rent in the Midlands for instance
is 2% of the overall rent paid by your organisation for premises.
Does that reflect the seriousness with which you regard the Midlands
area or does it reflect the fact you need so many of your staff
in your headquarters and in London?
Mr McGregor: It certainly is not
a reflection of the importance of the Midlands region, because
we view all our regions as being of equal importance. Yes, there
is an element within that that obviously our office accommodation
in central London is considerably more expensive on a square foot
basis than those office spaces that we have in the regions. That
is why we are looking to move staff and functions out of London
and into the regions.
Q38 Mr Jenkins: I hope so, because it
will then make sure that the Midlands is worth more than 2% of
your budget on premises and indicate that you may take it seriously.
Mr McGregor: Yes, although I would
say on that, that in fact we have just taken out a new office
in the Midlands, because in fact the old office was really not
fit-for-purpose. The Midlands team moved into that about three
or four months ago.
Q39 Mr Jenkins: It says you are to increase
your staff for the urban post office closures programme. I had
a lot of involvement in that and I should like to take you through
a case and ask how you can justify to me our different roles.
When the figures came out—and I was not pre-warned until
it appeared in the press by the way—that the Post Office
were going to close six post offices in my town and open up a
new one in a garage, I considered it inappropriate. I then got
onto the Post Office and met the Post Office on 19 December 2003
and took them on a tour round the area to show them the inappropriate
nature of the siting of new Post Office. When I worked out the
figures, and saw that it covered less than 50% of the population
in an urban area, I said we would need to relocate it. I then
had consultations with Postwatch, very nice people in Postwatch
and they did what they could, no problem with them. I started
negotiating with the Post Office and I found it a very arrogant
organisation and I had to go to the top and I actually had to
go to the top in the government. When they told me that they could
not force people to take over the post office and they actually
indicated they had written to them, I wrote to the two companies
in the very centre of this location, one being Morrison's and
the other being the Co-op. They replied that they had had no contact
at all with the Post Office. Upon further investigation and after
a bit of prodding, the Post Office came back and said to me that
in light of the representations made by me during the consultation
period regarding alternative options available, they were currently
in talks with the Midland Co-op to negotiate a new branch office
in the area. The Post Office promised me that it would be open
before local election day. Was it? No. I opened it on 29 November.
It had taken 12 months. I had to get involved in doing a job I
thought firstly that you would have been involved with. I found
out then that you did not have the teeth or the drive and the
Post Office were just as caring of you as they are of the ordinary
members of the public. I have another one now which has come up.
We allowed them to go ahead with the closure of one post office
in Amington, a poor area of the town, one of the most deprived
wards in the country, therefore it has a status. We let them close
one and to pool all their activities into the existing one to
make it sustainable, part of the overall plan. But unfortunately
this one has been taken over by Tesco and they no longer wish
a post office to be there. When they gave notice to the Post Office,
the Post Office then had two applicants for this and I handed
in a petition on 9 July. The post office closes today. Have a
guess where the alternative post office is. You are right: after
six months of negotiation, they still have not come to an agreement
to move it into the local Co-op and Tesco are now providing a
bus to run their customers on a Tuesday morning two miles down
to the nearest post office. It has taken over six months. Any
business in the private competitive industry which takes six months
over a negotiation like this would go out of business rather quickly.
So can you tell me and justify your existence as far as the cases
my constituency have suffered are concerned? Although you are
very nice and very caring, are you effective? Can you tell me
why you are there please?
Mr McGregor: You have quoted a
couple of examples of a process which has affected nearly 3,000
urban offices. You are quite right when you say that we do not
have any formal powers. Our role in assessing closures and whether
the right offices are closing is purely down to the influence
that we are able to bring to bear. We have said to government
and we have said to DTI that we do not think this is a satisfactory
position, so far as consumers are concerned. We do believe, particularly
where very large sums of public money are involved, both in the
urban reinvention programme and in supporting rural post offices,
that there should be the right of veto over commercial decisions
by Post Office Limited, which is the operating arm of Royal Mail
which controls the post offices, by a public body in order to
ensure that consumer interests are properly safeguarded. Now I
said that the role we had developed in discussion with Post Office
Limited and with the Department of Trade and Industry was to help
with the consultative process, to improve the consultative process,
to make sure that the right people in the local community were
being contacted and were being consulted. At the end of the day,
you are correct in saying that we are not able to put our hand
up and actually prevent a closure. If I may just quote two or
three figures about what has happened overall, because I have
said this is a programme that has been affecting some 3,000 urban
offices, we have, to date, actually received nearly 2,700 proposals
to close particular offices. Out of those, some 60 offices have
been withdrawn by Post Office Limited from the closure programme
before consultation has begun, for about 140 of those offices
the proposals have been modified as a result of our influence
and the consultations that we have had. We have formally opposed
the closure of very nearly 400 of those offices that have been
put forward and out of those 400, some 290 have either been withdrawn
completely from the closure process or have been significantly
modified. So although we do not have formal powers, I do believe
that we have had quite a constructive influence on the way in
which the reinvention programme has happened.
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