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23 Jan 2007 : Column 386WHcontinued
What I seek to achieve through todays debate is fairness for low-income pensioners and families with young childrenindeed, fairness for all consumers. I have produced evidence that proves beyond doubt that consumers are being treated completely unfairly and unacceptably, and I have exposed the role of energy companies excessive and indefensible pricing policies. I have also demonstrated that the Government have made a tremendous commitment towards tackling fuel poverty, which should continue. When I started working on this issue, I was driven by the urge to help
my constituents, and that is still my aim, but this issue affects every household in Britain. I therefore look forward to the rest of the debate and to the action that I am sure will follow it.
Mr. Nicholas Brown (Newcastle upon Tyne, East and Wallsend) (Lab): I congratulate my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) on securing the debate. He has a distinguished career as a parliamentarian in championing causes that matter very much to the poor and disadvantaged. I am thinking particularly of his private Members Bills that became the Disabled Persons (Services, Consultation and Representation) Act 1986 and the International Development (Reporting and Transparency) Act 2006. Those causes are important to us all, but particularly to the poor and disadvantaged. It is therefore no surprise that he has secured this debate to which I am delighted to make a short contribution.
According to Ofgem, since 2003, gas bills have risen by 71 per cent. and electricity bills by 45 per cent., yet wholesale gas prices have fallen by 25 per cent. and wholesale electricity prices by 30 per cent. The problem is that wholesale price reductions have not yet been passed on to consumers. I understand that supply companies try to even out fluctuations in market price so that consumer rates do not fluctuate confusingly and become difficult to administer, but I suspect that while increases in wholesale prices are passed on to consumers, decreases are not so readily passed on.
The background to the debate is that there were sharp wholesale price rises in the summer of 2005 that fed through quickly to higher industrial prices and rather more slowly, as I expect the Minister will tell us, to higher domestic prices. The reasons for the price rise are well known: they are high oil prices and, to some extent, declining United Kingdom gas supplies. Gas-fired power stations generate about one third of our electricity. We are now a net importer of gas through the European interconnector, so we are part of the European gas market. What happens to continental gas prices will be reflected in the domestic market, and gas prices are inextricably linked to oil prices.
There are other pressures on energy prices, such as our desire to cut carbon emissions. Carbon emissions are the greatest, most significant and most intractable problem that the world faces. It must be taken seriously, and the pressure to cut emissions must intensify. That will impact on investment in power generation among other things.
It is hard in such debates, but we must remind ourselves that the most effective constraint on consumption is probably price. It is a difficult argument, but we cannot ignore it. Nor can we overlook the need for renewed investment in energy generation, including investment in more environmentally friendly forms. In the short to medium term, we also need to invest in our aging energy distribution infrastructure. The pressures will not go away; they are with us and they are bound to impact on price.
My right hon. Friend pointed out the main focus of todays debate. We, as parliamentarians, must consider the consequences of all those issues. In particular we must consider the impact of rising energy pricesfor whatever reasonon the incomes of the least prosperous in our society, such as pensioners, lone parents, students and others on low and fixed incomes. I do not really have to say that to the Minister, because he is well aware of it. It is a cause close to his heart.
My hon. Friend the Member for Southampton, Test (Dr. Whitehead) intervened on my right hon. Friend to make a well judged point about pre-payment meters. We are asked to control our energy consumption, and the pre-payment meter is one way of exercising tighter control over energy bills. However, that method of receiving energy is more expensive than others, such as direct debitthe obvious example.
It is telling that one quarter of all customers with pre-payment meters are on incomes of less than £10,000 a year. When energy prices change, the meter needs to be recalibrated manually. There have been delays in carrying out that necessary task, and because customers are responsible for back-charging, the delays can push people into debt that they did not realise they were incurring. Ofgem tells us that energy companies are not doing all that they can to help customers who have accrued debt while awaiting recalibration. We must remember that the wait is not the customers fault. Ofgem must examine even more sternly than it has done the fact that some companies have barred customers with debt on their meter from switching. It is an anti-competitive practice, and Ofgem should look into it.
I do not want to complain and then say nothing else. Such debates are an opportunity to explore the remedies as well as to describe the problem. One remedy would be for supply companies to consider the possibility of equalising the tariff between pre-payment meters and other methods of paying for energy. I also urge the replacement of outdated pre-pay meters with smarter pre-pay meters. The technology exists, but it requires up-front investment. Companies could also consider debt write-off. It is easier to advocate than to do, but they could consider it in cases of hardship, and they could also be far more proactive in recalibrating meters when prices change.
We have debated other remedies before. I have debated with the Minister home insulation, driving up building standards, education on energy use so that people understand how to keep their bills low, encouraging renewable energy production, and doing precisely what the Government and industry are doing, which is to increase UK gas supplies and to expand storage capacity.
When the energy market was liberalised, the hope was that competition would encourage people to switch. Indeed, about 4 million customers did so in the first 10 months of 2006. The figure suggests that our fellow citizens are trying to make use of the market. However, we are discussing companies that provide the function of utility, and a competition policy will take us only so far. Parliamentarians must be alert to the ever-present dangers of collusion, not necessarily unlawful but parallel action to ensure that energy company profits stay high at the expense of the
consumer. The industry still has many features of a monopoly, but it produces something that people must consume.
I congratulate the Government on the steps that they have taken, but there is a further danger. The more they endeavour to help the poor and the disadvantaged with energy costs, the more tempting it will be for energy companies to put the contribution in their back pocket, rather than to accept that the Government have endeavoured to help the poor and the disadvantaged, not the energy companies. The Minister is alert to the problem, but parliamentarians must be alert to it, too. As a Labour Member of Parliament, my job is to stand up for the poor, the disadvantaged and those people who have no power. On the face of it, price reductions in the wholesale market have not been passed on to consumers, whereas price increasesand we understand whyhave been readily passed on.
My right hon. Friend has made a characteristically good case in a good cause. I urge the Minister to take the issue seriously, as I know he will, and to do what he can to bring comfort to the elderly, the poor and, indeed, the students who struggle to pay such costs. They are, in the main, unavoidable.
Jim Sheridan (Paisley and Renfrewshire, North) (Lab): I congratulate my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) on securing this crucial debate. He thinks that he has his finger on the pulse of ordinary people and those less fortunate than ourselves, and I know that he does. He has a distinguished career of campaigning for those less fortunate than ourselves.
I am delighted that all the major parties are represented here today. Unfortunately, once again, the nationalistsin particular, the Scottish National partyhave failed to turn up to a debate on what is an increasingly important issue, not just for those in Scotland but for the whole of the United Kingdom. I wish that at times like this they would turn up and speak up for Scotland, as they profess to do.
I begin with the issue of fuel poverty. The UK has a higher number of winter deaths than comparable European countries. Last winter, according to the Office for National Statistics, 31,000 people over the age of 65 died as a direct result of the cold in England and Wales. In Scotland, research undertaken in conjunction with Energy Action Scotland identified a clear link with poverty, cold living conditions and premature deaths.
Fuel poverty is usually described as 10 per cent. of income being spent on energy costs to warm a home. The UK Government and the Scottish Executive have made significant strides to reduce fuel poverty through a number of initiatives including the winter fuel allowance. However, we are still concerned that action is being substantially undermined by increasing energy prices, as described by my right hon. Friend.
The massive rises in costs at a time when energy production companies have seen massive profit increases has led to calls for a windfall tax to ameliorate the cost of living for pensioners. We believe that such redistribution to assist the most vulnerable in our society is both equitable and affordable given the
massive profits of companies such as BP, which makes £30 million per day, and Shell, which makes £45 million per day. We need a fairer distribution of the cost of energy to tackle the scourge of fuel poverty within the UK.
I apologise for mentioning again token pre-payment meters, because I know that several colleagues have covered the issue, but I genuinely believe that if more parliamentarians were to speak this language and talk to the energy companies, the issue would become more important and they would take heed. I shall expand on what my colleagues have already said about token pre-payment meters.
Pre-payment meters are marketed to consumers as a pay-as-you-go budgeting tool. I am sure that few, if any, of our colleagues here today would use token pre-payment meters because such meters are designed for the more vulnerable and those less well-off than ourselves. Certainly, pre-payment tariffs are often the suppliers most expensive tariff option. All token pre-payment meter consumers have a card containing their account details and transactions, which is used to buy credit at PayPoint outlets. In return, consumers receive paper tokens to insert into their meters.
Unlike smartcard or key pre-payment meters, token meters need to be manually adjusted after every price rise. Consumers will continue to buy tokens unaware that they are no longer paying the correct price for their electricity. Around 700,000 consumers of npower, Powergen and Scottish Power who use token electricity pre-payment meters to pay for their electricity are already in debt, or at risk of falling into debt, simply because their supplier does not adjust meters quickly enough to take account of price rises.
Mr. Clarke: My hon. Friend is making an excellent speech and he has reached an extremely important point. Does he agree that one of the reasons why organisations such as citizens advice bureaux tell us that they are extremely worried about this matter is that the people who have such meters are often those with learning disabilities, frail, elderly people or even those with mental illnesses? They are the people least able to adjust to the circumstances they face. I think that we would both agree that that situation represents an additional exploitation.
Jim Sheridan: As usual, my right hon. Friend makes an extremely valuable point. At this juncture, I would like to give credit to citizens advice bureaux for the advice they give consumers on energy prices and other issues. One of lifes imponderables for me is what would happen to those people if organisations such as the citizens advice bureaux were not there to help them. My right hon. Friend has made an absolutely valid point.
Many consumers are already having trouble paying for their energy costs as a result of the 60 per cent. increase in the cost of an average electricity bill since January 2003. Most pre-payment meter customers do not receive frequentthat is, quarterlystatements of account, so they will be unaware they are building up significant debts. Although suppliers have plans to replace their token meters with smarter key or card meters over the next one to five years, 700,000 of their customers are still at risk of falling further into debt over the next few years.
Consumers with token pre-payment meters have already experienced, or are set to experience, an overnight price shock which may amount to a 138 per cent. increase in their weekly energy bill. The limitations of token meters were less visible when energy prices were more stable orif anyone can remember thisdecreasing. Price increases since have exposed the clear deficiencies of meters. For example, electricity prices have increased by 60 per cent. since January 2003 with each supplier raising its prices one, two or even three times a year during this period.
The problem with token meters is that suppliers recalibration processes have not been keeping track with the price rises, which means that consumers using those meters may not be paying the correct price for their electricity. That problem may push large numbers of consumers into debt. Furthermore, when the meters are eventually recalibrated a consumer may get hit with a substantial price shock, especially if their meter has not been recalibrated for a year or two, on top of the debts that had built up over the period. Energywatch are calling on the three suppliers who continue this practice to follow the lead of the other big three and end it.
I shall now give hon. Members a short case study. A token meter consumer in Glasgow contacted Energywatch after receiving a statement from her supplier stating that she owed £245, which had accrued since 2001. The consumer did not understand how the debt had been built up as she uses a pre-payment meter. The supplier had attempted to collect the debt at £6 a week, which the consumer could not afford as she is on benefits. After Energywatch, to its credit, took up her complaint the supplier agreed to write off the debt.
Consumers paying for their energy through pre-payment meters pay on average £173 more a year for gas and £113 more a year for electricity compared with someone paying by quarterly bill. For someone on benefits, as many of our constituents are, or on low incomes, this is money they cannot afford. Suppliers have done little to ease the hardship of pre-payment meter users, a third of whom are single parents with dependent children, and a third of whom are unemployed and in receipt of benefits. Citizens Advice Scotland recommends that suppliers should equalise tariffs between PPMs and other payment methods for both gas and electricity, as this would make a real difference to many of the most vulnerable people. Citizens Advice has joined forces with Energywatch to campaign to end the practice of back charging. We urge the suppliers that are still back chargingScottish Power, npower and Powergento follow the good practice of the other suppliers and act responsibly towards their customers, by implementing price increases only when they manually reset meters.
As has already been said, the Government have done a great deal to help with winter fuel costs, but as my right hon. Friend the Member for Coatbridge, Chryston and Bellshill said, the more that they do to help people less fortunate than ourselves, the more the major energy suppliers seem to exploit that situation.
Susan Kramer (Richmond Park) (LD):
I join others in congratulating the right hon. Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) on
securing this debate on such a crucial issue. With the cold snap that we have experienced over the past couple of days, hon. Members will be conscious that some people have decided not to turn the heat up to the level at which it should be for their health and security, because they are exceedingly worried about the energy bills that will result.
The energy market is one in which there seems to be precious little transparency. As hon. Members have said, some suppliers still plead the need to keep consumer prices high, when the wholesale price for gas has been in sharp decline for months. From March 2006 to December 2006, domestic gas bills rose by about 30 per cent., while wholesale prices fell by 40 per cent. Given that evidence, there is a prima facie case for arguing that the energy suppliers have sticky or jammy fingers, so we need a coherent response from Ofgem about the issue.
There are underlying problems with energy supply. Both Conservative and Labour Governments have been pretty complacent following the discovery of North sea oil some 40 years ago. We have lacked long-term investment in pipelines and in gas storage, and even more so in renewables and in conservation, and we are now paying the price of that. However, to stick with the immediate present, according to Alistair Buchanan of Ofgem, many of the current gas supply constraints have been dealt with. The Langeled pipeline and the Balgzand Bacton line are completed, open and functioning. The rough gas storage facility in Yorkshire that was damaged by fire has been restored and is back up and running, while the interconnector gas pipeline between the UK and Belgium has been upgraded. With all those projects, the UK will, at least from February onwards, receive an additional 140 cu m of gas a day, as compared with last summer. If we add to that the absence of severe weather disruptions such as last years hurricane in the United States, it becomes even harder to understand the current pattern of consumer pricing for gas andas that gas flows throughelectricity bills.
One hears a variety numbersit is a soul-destroying fact that, as far as I can see, every organisation measures things differently. However, the average household now faces a bill of some £1,000 a year for its energy. Energywatch estimates that the standard credit energy bill in Britain is £642 for gas and £388 for electricity, giving a total of £1,030. For many people that is about to get worse. British Gas, with its most exquisite sense of timing, has announced that it will charge £5 for late payments of bills. The company says that it will not charge the most vulnerable, but I am always curious about the definition of vulnerable.
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