Examination of Witnesses (Questions 560
- 579)
TUESDAY 15 MAY 2007
MR EDDIE
FOLLAN, MR
ADAM SCORER
AND MS
ELIZABETH GORE
Q560 Mr Davidson:
Is that not really effectively the cold weather payments eligibility
criteria?
Ms Gore: Yes, if winter fuel allowance
could be extended to people in cold weather payments.
Q561 Mr Davidson:
The emphasis has got to be on those who are eligible for cold
weather payments rather than just indiscriminately across the
board to the elderly.
Mr Scorer: Just to make it more
difficult, I think you have had witnesses certainly more expert
in social policy than I, and I suppose you could have the two
approaches: universal provision, everybody over a certain age
gets the winter fuel payments and it means that you cover the
waterfront. It means that you are sure you are getting everybody
there and that is really important. If you want something that
is narrowly focused but deep, you really are trying to focus active
support on the people who you think need more, then you have got
to go for a more targeted approach. I am insufficiently expert
to say which ones should win out in terms of exchequer priorities.
They both have validity. Energywatch's concern is that a group
of people who get cold, some of them die in the winter because
they do not heat their homes properly and it is shameful that
we are not providing them with more support.
Ms Gore: On the winter fuel allowance
we talked earlier about the fact that Scotland has a colder climate
and it takes more energy to heat your home to recognised standards.
What we could do with the winter fuel allowance is that on top
of the standard rate, which there currently is, introduce a banding
system whereby from a central point in the UK you could introduce
bands north of that whereby each band as it goes progressively
north has a regional weighting on the winter fuel allowance.
Q562 Mr Davidson:
And then we take it off people in the south.
Ms Gore: I would not like to comment
on that. That extra part could be in the form of a credit to the
fuel supplier.
Mr Scorer: I am sure every witness
you have has just complicated the picture every single time and
to me, although I think it is shameful that we have not done something
for that group, I think it would be madness to do it unless we
address the fact that the market is disadvantaging vulnerable
consumers by charging them more for their energy.
Q563 Mr Davidson:
I understand that point as well. I am interested in the combination
of the points that you make in relation to the cold weather payments
which are triggered and also the geographical banding. Indeed,
if we could get it done across the EU as a whole then presumably
we would take money from the Mediterranean countries and transfer
it to ourselves. The other issue that I want to pursue is this
question of information on benefit entitlements, energy efficiency,
fuel debt being all brought together. I cannot understand why
that is not being done already. You indicated that in some circumstances
it is and that is best practice, but it is not in others. Can
you clarify why it is not being done for everyone?
Mr Scorer: It is a part of the
Central Heating Programme and the Warm Deal that people applying
for them or receiving them get a benefits entitlement cheque now
from the DWP. Many schemes do offer advice but I think our point
is more about being proactive at different opportunities.
Q564 Mr Davidson:
Who is not being proactive?
Ms Gore: Fuel suppliers.
Q565 Mr Davidson:
They would think that that was not their responsibility really
to pay benefits checks.
Ms Gore: But they already do offer
them in quite a number of the packages that they offer, but they
should also offer information about the tariffs that are available
and payment methods that are available. There has been a lot of
publicity about some of them where successful.
Q566 Mr Davidson:
Should Ofgem not police all this? Life is too short for government
to be involving itself in everything. If there is a regulator
there then surely the regulator ought to be assessing all of these
things?
Ms Gore: It is in a supplier's
interest to have customers who can pay their bills. If a company
sees that a customer is having difficulty—
Q567 Mr Davidson:
I understand that, but I am trying to clarify whose responsibility
it ought to be to ensure that this is done?
Ms Gore: It is happening but I
think there needs to be more creativity by fuel suppliers when,
for example, someone switches supplier. If somebody switches supplier
or moves house or when they go to a house to recalibrate the PPM—that
is an example of when information at that point can be given on
the choices available.
Q568 Mr Davidson:
If they do not do it, whose role is it then to press them into
doing it? That is Ofgem again, is it?
Mr Scorer: I think you have to
look at the plethora of programmes and initiatives that exist
out there because I think anybody who is doing anything is going
to say this is the important part of what we are doing. Some of
those will be under Ofgem's ambit, some will be Defra, some will
be the Warm Deal, Warm Front, Warm Zones, a whole range of other
things and it is because you have that plethora you do have isolated
bits of best practice but you do not have coherent delivery.
Q569 Danny Alexander:
But no-one is taking responsibility for making this happen, is
that right?
Mr Scorer: I do not think anyone
has the responsibility to make sure that every programme that
goes out to reach vulnerable consumers to make sure their incomes
are maximised through benefit take-up, that they have the right
information about the grants that are available, that they are
taking appropriate energy efficiency measures and that they are
with the right supplier on the right deal.
Q570 Danny Alexander:
Different levels of government and different energy suppliers
are saying we are all doing our wee bit. It does not add up to
very much, but it is nobody's fault.
Mr Scorer: I think that is probably
right. There is another element as well that you can add to that
to make it even more difficult which is just that I think it is
established by bodies like Citizens Advice Scotland that face
to face advice is vital for vulnerable consumers. These programmes
are not necessarily the best delivery mechanism for that; you
need the community organisations involved as well just to make
it even more difficult.
Ms Gore: A particular example
is Fuel Direct. The numbers using Fuel Direct have plummeted in
the past 10 years and yet there are a lot of people in debt. What
our members are telling us who deal with the public direct is
that very often when a customer gets into difficulties paying
their bills they are on means-tested benefits and so they should
qualify for having fuel direct. When they make an approach to
DWP the advice that they are often given is to ask their supplier
for a prepayment meter. The cynics amongst us will possibly say
that that is because it is a cheaper payment method, but the benefit
of fuel direct is that the customer is kept on supply and they
are paying off their debt.
Q571 Mr Davidson:
On that particular point could you drop us a note about that because
that is something that we may be able to take up with the DWP
about these practices rather than getting into the detail here.
Ms Gore: Yes[14].
Q572 David Mundell:
Can I ask you generally about the prepayment meters. Subject to
the discussion we have had about the different tariff, what evidence
is there to show that prepayment meters are an effective way of
dealing with both debt and poverty per se?
Ms Gore: We did a survey, again
with the help of some of our members, a couple of years ago. We
had been told by quite a number of fuel suppliers who have now
published reports to this effect that the majority of the customers
on prepayment meters were happy with them, but there was a small
significant percentage who were not happy with them, so we wanted
to look at the reasons behind this. What we found was that to
say people were happy with them was perhaps not telling the whole
story. People had a great fear of debt. They liked the budgeting
aspects of prepayment meters because they feared falling into
debt. What we also found was that a great number of people had
inherited a prepayment meter. It was there when they moved into
the house and they had not realised that it could be changed.
They had not realised that it was perhaps a more expensive way
of paying for their fuel. There is also confusion because some
people said that, yes, they were given information about the high
cost of having a prepayment meter, but when they were later asked
if they would like to reduce their bills in the long term they
said yes but did not know how to go about that. That is another
example of how the supplier could be more proactive in giving
advice about payment methods.
Mr Scorer: It is worth saying
that PPM's are a great device for suppliers to recover debt from
consumers. We have had a huge number imposed for debt in Scotland
over the past year and it is growing, just as the number of letters
threatening disconnection are growing so are the numbers of PPM's
being put into consumers home imposed for debt, not because the
consumer likes the benefit of budgeting—consumers do not
like to budget if the cost is £200 more over the year—so
you have PPM's being imposed because the supplier knows that it
can recover debt otherwise the consumer goes cold with more expensive
charges and unfortunately no incentive to get more efficient,
better levels of service in their back office to make sure those
consumers get a decent level of support.
Ms Gore: We have found in the
survey that I referred to earlier that people living on emergency
credit was a way of life, especially in winter.
Q573 David Mundell:
You are effectively saying that they are exasperating the situation
rather than anything else.
Mr Scorer: Exactly.
Mr Follan: I do not know the numbers
for Scotland specifically but around 320,000 prepayment meters
across GB have been installed for debt, a 21% increase in 2005
from Ofgem's latest figures, but the prepayment meter use in Scotland
is more prevalent; something like 20% of people up there use prepayment
meters compared to 14% across GB.
Q574 David Mundell:
For my own and the Committee's clarification, what is smarter
metering?
Mr Scorer: At the moment we have
archaic metering systems; they are Victorian. A smarter meter
can do a number of things: first of all, it can transmit to the
energy company exactly how much energy the consumer is using,
so it means that you get better bills. It means also that the
company could see if someone had not been using energy for an
amount of time and if that person was on a priority register that
would be great. It is a better set of technology. It communicates
directly with the companies and makes sure that everyone gets
accurate bills. It enables consumers to have a better idea about
how much energy they are actually using, both in terms of energy
efficiency measures but also in terms of budgeting. These are
new meters which are in existence in Ireland, Italy, Canada and
in a whole range of places that would resolve many of the customer
service issues, would enable the consumer to go from one tariff
to another quite easily and then go back from a credit tariff
to a prepayment tariff. It enables consumers to see how much they
are using and it would also drive out the huge inefficiencies
in the industry caused by the fact that a third of our bills are
estimated with customer service people at the back of the office
trying to sort it out.
Mr Follan: One of the benefits
of smarter metering is that it cuts out the risk of self-disconnection
and that is something that we never mention in relation to prepayment
meters because people on prepayment meters are at risk of self-disconnection.
They can see that it is hoovering up their tokens and they are
then at risk of cutting themselves off supply. Some of the figures
on disconnection show that disconnections have gone up. There
was a campaign previously and the number of disconnections reduced
dramatically but they have gone back up again. In the first nine
months of this year there has been a four-fold increase in Scotland
in disconnection. That is small. There were 250 disconnections
but we are looking here at an increase and a trend of increasing
disconnection which relates to the level of debt. Secondly, we
also know that from most recent information we have from suppliers
that over five million letters have gone out where the threat
of disconnection is first mentioned. That is five million GB,
but you can extrapolate that I would imagine quite easily for
Scotland. Disconnection on its own is becoming an increasing issue.
Smarter metering would cut that out. You can get texts from the
company who can monitor if you are using more electricity or if
you are using less, or if you have cut down on your supply it
can alert somebody somewhere.
Q575 David Mundell:
You think smarter metering would make a significant difference.
Mr Follan: We certainly do. We
certainly hope to see smarter metering.
Mr Scorer: It would make a huge
difference, not only to the level of service in terms of accurate
bills, better consumer information in terms of climate change,
sustainability actions and also having an industry which is able
to provide real support to vulnerable consumers at risk of self-disconnecting.
The consumer benefit argument is unanswerable. It is absolutely
clear. The difficulty is that the mechanism of getting over the
obstacle which is an industry where some want it, some do not
want it; a regulator does not want to drive it. I think the consumer
benefits are absolutely clear.
Q576 David Mundell:
So Ofgem are not there—
Mr Scorer: Ofgem are seeing through
a process which should end with smarter metering being more possible
than not. We would like to see them driving the process more,
rather than just allowing the process to emerge—for understandable
reasons; if they want to impose something on the industry, I can
understand why. However, I think consumers probably want to see
a faster reaction.
Q577 David Mundell:
There is inevitably a cost issue. Where is that borne in the process?
Mr Scorer: I think consumers are
paying the cost already. You have huge numbers of inaccurate bills.
We had an example a few weeks ago where we revealed the mess that
Scottish Gas, British Gas, had got themselves into in their customer
service. Hundreds of thousands of people and hundreds of call
centres dealing with millions of complaints costs money. Not having
clean data coming into your company costs money. The benefits
of getting smart metering are not just for consumers getting better
information; they are about making the industry more efficient,
more competitive, and able to recover its costs and drive down
its costs to serve and drive down money, and not too long-term
either.
Q578 Chairman:
My question is to Eddie. What do you consider the two most significant
things the Government can do to alleviate fuel poverty?
Mr Follan: It is always difficult
to pin down but there are three drivers. I would say the most
significant thing to eradicate fuel poverty and for the Government
to meet its own targets is to go back to what I said earlier about
social tariffs. If we had a mandated social tariff that was applicable
cross the industry—and we have suppliers that are supportive
of that idea—we could deal with the people who are the poorest
in society who are paying more for their energy than others. I
am going to ask you, Adam, for the second one!
Mr Scorer: The second one has
to be action on incomes, and that is because energy efficiency
is the long-term solution. Housing stock is the long-term solution.
That is a long way off and we have the need now for consumers
who are cold and making invidious choices between their heating
and a whole range of household necessities. It is not just an
important issue, it is an urgent issue: support for the incomes
of those consumers who are most vulnerable and susceptible to
the cold.
Ms Gore: I would say make all
houses in Scotland as energy efficient as possible and for properties
where that is not possible for technical reasons to give people
on benefits the income support that matches the difference in
extra heating that they have to pay because of the difference
in the energy efficiency rating of their house.
Q579 Chairman:
I would like to thank our first witnesses this afternoon.
Mr Follan: We have produced a
report on social tariffs and social responsibility, and we will
send that to you because it will give you the whole thing in a
nutshell.[15]
Chairman: Thank you very much for your
attendance. I am sure your evidence will be very useful to the
Committee.
14 Note by Witness: Members also tell us that
the DWP blames the fuel companies for the down-turn in Fuel Direct.
They have experience that both parties have caused the drop in
the use of Fuel Direct. This is further explained in a separate
note, See Ev 189 Back
15
Energywatch report-A Social Responsibility by Richard
Bates, May 2007 Back
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