Memorandum submitted by ScottishPower
1. INTRODUCTION
ScottishPower welcomes the Committee's inquiry
into poverty in Scotland. As one of the largest providers of gas
and electricity to domestic customers in Scotland, ScottishPower
takes seriously the contribution we can make to assisting vulnerable
households, in particular through measures to address fuel poverty
and energy efficiency.
This submission outlines the action we are taking
to target assistance to households in greatest need in Scotland.
Our activity is shaped by the recognition that energy price is
an important factor affecting levels of fuel poverty, but that
it is not the sole contributor. Overall household income and the
energy efficiency of the home also have a major impact on levels
of fuel poverty. Notwithstanding the energy supply industry's
activities through the Energy Efficiency Commitment, measures
to improve income and the quality of the housing stock also require
the attention of a range of stakeholders.
2. FUEL POVERTY
ScottishPower provides a range of services to
focus assistance to the vulnerable households that need help most,
and we consider these to offer innovative and targeted approaches
to addressing fuel poverty.
In November 2005 we set up the Energy People
Trust, an independent charitable trust fund to support not-for-profit
organisations and groups that work directly with those in fuel
poverty. As well as crisis funding, the Trust invites funding
applications for research, energy efficiency improvements and
income maximization projects, with a key focus on projects which
target families with children and young people. By June 2007,
ScottishPower will have donated £4 million to the Trust,
and to date £2.2 million has been awarded to 57 not-for-profit
organisations, assisting over 56,000 households across the UK.
In Scotland, 24 projects have received almost £1m in funding,
helping over 22,000 individuals (see attached Annex). Further
information on how to apply to the Trust is available at www.energypeopletrust.co.uk.
We offer targeted and detailed face-to-face
advice to customers through our unique network of Community
Liaison Officers (CLOs). Twelve dedicated staff represent
ScottishPower within the community, assisting customers and providing
training across the business, including on how to identify and
deal with vulnerable customers. Last year ScottishPower's CLOs
undertook 14,500 customer visits, 1,200 of which specifically
related to providing energy efficiency advice.
We are working on a number of other community
outreach approaches through our current trial programmes with
the Citizens Advice Bureau, including a dedicated phone
line for all CAB advisors to call our Collections Team for specialist
advice on accounts in debt. The Energy People Trust is also funding
a project with Dumfries & Galloway CAB's Fuel Advice and
Benefits to set up a specialist service that engages low income
families, lone parents and other hard to reach groups in order
to maximise their income and reduce fuel/household poverty. The
funding covers the cost of employing two welfare benefits specialists
who conduct benefits checks, assist at welfare benefit appeal
tribunals, advise of sources of grant funding for energy efficiency
measures, issue information leaflets and refer customers for additional
assistance. The main aim of our association with CAB is to encourage
consumers to seek independent advice and prevent debt and disconnection,
particularly for vulnerable customers.
At a UK level, ScottishPower worked last winter
with other energy suppliers to support the Home Heat Helpline
for a second year, which assumed greater importance in the wake
of the Department of Health's decision to withdraw its "Keep
Warm-Keep Well" helpline. We supported the pilot scheme led
by Ofgem and DWP to target 100,000 pensioner households with energy
advice and assistance. This activity was supported by our Winter
Warmer Campaign, an integrated media campaign across Scotland,
North West England and North Wales which we ran for a second successive
year to raise the profile of our work to assist young families
and pensioners during the cold winter months. This included information
on the Energy People Trust, the role of our Community Liaison
Officers, and the Home Heat Helpline, as well as promoting energy
efficiency tips and insulation offers.
Last winter, we took mitigating action against
the impact of retail price increases on our most vulnerable customers.
For customers who paid by pre-payment meter or weekly card, and
who were also on our Carefree Priority Services Register, ScottishPower
provided £80 in total payments for vulnerable customers
to help towards reducing their fuel costs. We also mailed
these customers with a package of advice and information on energy
efficiency services such as free insulation, and supplied them
with four free energy efficient light bulbs and a free thermometer
card.
3. ENERGY EFFICIENCY
Through the Energy Efficiency Commitment
(EEC), ScottishPower and other energy suppliers make a significant
contribution to household insulation, appliance efficiency and
heating standards for public and private sector housing stock.
The current arrangements for the second phase of EEC are scheduled
to run until 2008, under which ScottishPower's current expenditure
on energy efficiency projects across the UK is some £50m
per annum. In the past two years under EEC2, we have delivered
more than 55,500 heating and insulation measures in Scotland.
We have provided over 120,000 low energy lamps, and have installed
more than 11,900 "A" rated boilers in Scotland to deliver
energy efficient heating systems. A further 2000 Scottish homes
have benefited by converting from electrical or solid fuel heating
to full gas central heating system, and on some occasions this
has involved the extension of the gas infrastructure network in
partnership with local authorities and the private sector.
As part of this programme, we are making a substantial
commitment to energy efficiency improvements in Scotland through
partnerships with over 53 local authority and registered social
landlords, and have delivered approximately 19,300 measures with
our local authority project partners. These include our involvement
in major schemes such as the Keep Edinburgh Warm programme,
which will begin next year, as well as successful existing projects
such as:
— three Combined Heat and Power (CHP)
District Heating Schemes in partnership with Aberdeen Council,
to which ScottishPower has provided more than £250,000 in
funding. These include schemes at Stockethill (288 electrically
heated flats in two high-rise blocks, completed in 2004), Hazelhead
(184 flats, 30 sheltered accommodation dwellings and the local
academy), and Seaton (503 electrically heated flats to benefit
from a new 0.4 MW CHP unit later this year;
— the Dundee Community Energy Partnership,
through which more than 5000 fuel poor homes were helped between
2002 and 2005; and
— the Lanarkshire Community Energy
Partnership (LCEP), which was set up in 2004 as a partnership
between North and South Lanarkshire Councils, the Scottish Executive,
Transco and ourselves. To date we have contributed more than £190,000
to LCEP's running costs and have provided more than £700,000
of energy efficiency funding. Measures carried out by LCEP include
2600 cavity wall insulations, 2000 loft insulations, and 8300
home energy surveys. We have extended our relationship into non-core
activities, including the provision of 30,000 energy efficient
light bulbs for North Lanarkshire's 2006 Winter Warmer Pensioner
campaign.
In addition to these EEC-related measures, ScottishPower
actively promotes a free energy efficiency advice line;
domestic and non-domestic codes of practice on energy use reduction;
specific business customer `Smart Packs' that provide energy saving
advice; and a range of promotional literature on all aspects of
financial help with energy efficiency products including lighting,
insulation, heating, energy efficiency home audits, and guidance
on appliance usage. Energy efficiency information is also communicated
to customers on bills and bill inserts, via the news and internet
media, and through our partnership with a variety of organisations
including local authorities and other community organisations.
4. WHOLESALE AND
DOMESTIC ENERGY
PRICES
There has been significant public interest in
wholesale and retail energy pricing in recent months, and it may
be helpful to set out ScottishPower's current position on pricing.
Between 2003 and 2006 wholesale energy costs
rose dramatically, and although retail price increases were required
to offset these high wholesale costs, we were able to protect
our customers from a substantial part of this increase. At their
peak in April 2006, wholesale prices had increased by more than
200% from January 2003. Over the same period, our retail gas prices
went up about 90%, and our retail electricity prices about 50%.
Our approach to wholesale procurement meant that we were able
to absorb and delay much of this impact, and we estimate this
approach to have benefited a typical dual fuel customer by an
average of £200 per annum over the past two years, which
is a subsidisation of our customers' bills of at least £1
billion in that period.
To reflect the fact that wholesale costs are
now starting to subside, ScottishPower announced energy price
cuts for domestic customers which take effect from 15 June 2007.
Gas prices will drop by up to 16.5% and electricity by up to 6%,
taking the typical direct debit bill down £75 to £836
per year. The decrease follows the launch of ScottishPower's Price
Fall product, which at an average of £811 per year is one
of the cheapest offline deals in the UK. This offer shields customers
from any potential increases until October 2008 and guarantees
to pass on future decreases should standard prices fall below
Price Fall rates. We have also launched the Savings Challenge
to encourage existing customers to ensure that they are on the
best deal. Over 80% of our customers could pay less by making
simple changes to their energy account. For example, switching
to direct debit could save up to £125 and managing accounts
online up to a further £64.
Under the new price structure, ScottishPower
is now the only UK supplier to support customers using prepayment
meters with prepayment rates for gas and electricity that are
cheaper than standard quarterly payment rates. Our prepayment
customers will accrue the benefit of this reduction immediately,
as it will be effective for all customers from 15 June and not
delayed until recalibration. Given the higher proportion of vulnerable
customers choosing to use prepayment meters as a payment option,
we believe that this initiative should be regarded as a welcome
step in reducing consumer debt. We recognise that there has been
significant interest in the issue of prepayment meter tariffs
and recalibration. Working with Ofgem, the energy regulator, we
have redoubled our efforts to recalibrate meters from the time
of our last price increase in July 2006, and we have accelerated
the roll-out of new key meters which do not require manual recalibration.
5. CONCLUSION
ScottishPower supplies a high number of vulnerable
customers and we take seriously the issue of fuel poverty. We
are actively involved in tackling many of the factors that contribute
to fuel poverty through our direct assistance to vulnerable households,
our product offerings, our energy efficiency programmes, and our
wider investment in the UK economy. The levels of effort and investment
undertaken through the above initiatives demonstrate our commitment
to playing a role in addressing the issue of fuel poverty in Scotland
and throughout the UK.
The issues of energy pricing and fuel poverty
are complex, and require interventions not solely the energy supply
industry, but also from government and other stakeholders, if
they are to succeed. Other market developments that increase innovation
in the products and services suppliers offer their customers,
such as the national roll-out of smart metering, have the potential
to drive improvements in domestic energy efficiency and to help
reduce fuel poverty.
A note on the projects in Scotland currently
supported by the Energy People Trust projects is attached. If
the Committee would like further information on these or any other
aspects of ScottishPower's activities, we would be very pleased
to provide it.
ScottishPower
11 June 2007
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