Further supplementary memorandum submitted
by energywatch
1. SOCIAL TARIFFS
Mr Berry questioned what the relationship might
be between social tariffs and Warm Front.
It is the view of energywatch that the successful
eradication of fuel poverty requires action on all three of its
conspiring causes:
— Poorly insulated housing with energy
inefficient heating.
— The actual cost of energy paid by
this group.
energywatch believes that Warm Front has a vital
role to play in the provision of insulation and efficient heating
to fuel poor households and that this work should be closely integrated
with suppliers' Carbon Emissions Reduction Target emissions, which
also provide energy efficiency measures to low-income households.
We do however share concerns over some recipients being asked
to pay top up fees and the waiting times that they can be subject
to. We are also concerned at reductions by government in funding
for Warm Front at a time when fuel poverty is increasing. Various
government policies are helping increase incomes of the poorest
in society and a government sponsored benefit entitlement checks
service to maximise income that suppliers could refer consumers
to. Social tariffs would address the actual cost of energy paid
by fuel poor households and minimum standards would ensure these
are offered in a consistent and effective manner.
It is on this basis that energywatch advocate
that social tariffs should be offered as an integral part of an
energy assistance package that also comprises energy efficiency
and benefit entitlement elements.
2. GREEN ENERGY
TARIFFS
In response to comments from Allan Asher about
green energy tariffs, Mr Oaten requested more information about
these tariffs.
With 19 different green tariffs currently on
offer from specialist green suppliers and the big six energy suppliers,
it can be extremely difficult for consumers to choose a tariff
that is right for them. And what do energy suppliers mean by "green"
anyway?
A green tariff can mean one or a combination
of three things: a supplier will guarantee to match a percentage
of the electricity used (from 10% to 100%) with a supply of renewable
electricity back into the grid (a green source tariff); a supplier
will make a donation to a fund that supports the development of
new renewable generation or environmental causes (a green fund
tariff); a supplier will make a donation to a carbon-reduction
project in the UK or abroad in order to help offset a household's
carbon dioxide emissions (a carbon offset tariff).
The information that suppliers provide about
the different green tariffs on offer is not always transparent,
and it can be particularly unclear about the environmental benefits
that they deliver. There is currently no scheme in place to verify
the claims that suppliers make about the "greenness"
of their tariffs.
Licensed electricity suppliers are already legally
obliged to supply a certain percentage of electricity from renewable
sources under the Renewables Obligation. Some of the green tariffs
on offer today are simply a "repackage" of this legal
obligation. Thus, signing up to one of these tariffs may not amount
to environmental benefits (ie carbon dioxide emissions reductions)
in addition to those which would already occur under the law.
Energy consumers are also actually contributing towards the Renewables
Obligation and currently pay around £10 per year on their
electricity bill, with this amount likely to double by 2015. It
is likely that many consumers are not aware that they are already
paying towards renewable energy.
Creating transparency and confidence for consumers
Since last year, Ofgem has been consulting on
developing their 2002 guidelines which set out criteria for the
use of environmental or green claims in the description and marketing
of electricity by suppliers.
energywatch has been heavily involved in these
consultations, and we have set out clearly that there is the need
for the mandatory disclosure of accurate and transparent information
that will allow both domestic and non-domestic consumers to make
reliable choices in terms of both carbon emissions reductions
and renewable electricity generation. In our view, the existing
Fuel Mix Disclosure requirements (joined owned by BERR and Ofgem),
with some adjustment, together with strict and even-handed enforcement,
are sufficient to deliver the required outcome.
Under the Fuel Mix Disclosure requirements suppliers
are obliged to disclose accurate overall information about the
generation fuel mix of the electricity they supplier. Suppliers
have the option to disclose this information for individual tariffs
as well. A small change to the fuel mix disclosure regulations
could make it mandatory for suppliers to disclose the fuel mix
for every tariff.
Accurate fuel mix disclosure will allow for
the carbon content of the supply to be calculated, and, when compared
to the average, will give a picture of carbon emission reductions.
It will also allow for ranking of suppliers" offerings in
terms of renewable and carbon content. All renewable energy electricity
must be backed by renewable energy guarantees of origin (REGOs)
and renewable climate chance levy exemption certificates (LECs).
This will ensure it is not supplied to more than one customer
simultaneously and thus double-counted.
We recommend that the government appoints an
independent certification body to monitor and audit fuel mix disclosure
and to ensure that certified green tariffs deliver additional
environmental benefits. The duty to enforce the rules should remain
with Ofgem.
30 May 2008
Figure 12
PRICES OF ELECTRICITY AND GAS
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