Supplementary memorandum submitted by
Energy Action Scotland
It has been brought to the attention of Energy
Action Scotland by a number of its members who deliver advice
to the public that there are problems in the use of Fuel Direct
which have caused the number of people using this payment method
to drop dramatically. In 1996 the numbers using Fuel Direct were
188,000; in 2005 they were 48,500. The result is that customers
are put on to prepayment meters, which may be a more expensive
form of energy supply and may well lead to repeated instances
of self-disconnection.
It has been reported to Energy Action Scotland
that the Department for Work and Pensions (DWP) blames the fuel
companies for this situation, while the fuel companies blame the
DWP. Our members say that both parties are to blame, with one
saying that "there's only a bus ticket of difference"
between the two in terms of causing the difficulty with Fuel Direct.
When the industry was privatised, the government
put in place instruments to minimise the number of customers who
were taken the whole way to disconnection from supply. However,
this has not inhibited companies making statements on their correspondence
and literature that result in the customer believing disconnection
is likely and making a near-panic decision on how to avoid or
deal with a debt.
One of the difficulties now found when trying
to arrange the Fuel Direct payment option for clients, is that
there is an inconsistency within the DWP and the fuel companies
themselves on Fuel Direct. For example, one member reported that
the majority of customers come to Fuel Direct via a Social Works
or Advice Works service and from the fuel companies themselves,
but that at least one company repeatedly refers customers to the
Benefits Agency, only to reject the Fuel Direct application from
the same customer and try to direct them to accept prepayment
meters.
Another member described what a number of advisors
reported, that is, how their office now finds itself having to
re-address the advice given to clients when it comes to the choice
of Fuel Direct over prepayment meters. "This has come about
due to fuel suppliers purposely inflating the customer's consumption
figures so that they receive more than the payment limit of £3
per week for direct deductions. This then eliminates this softer
payment option (Fuel Direct) from clients" choices, and in
most cases the only other alternative is a prepayment meter and
the associated "self disconnection" risks".
A further example is that the Benefits Agency's
Third Party Accounts staff have no way of telling what the breakdown
of the "take" really is eg a fuel company request for
say £18 should on paper be £3 maximum for single fuel
arrears and £15 for fuel. Customers in due course will find
that they use £12 per week meaning that the fuel company
is really recovering at £6 per week. One organisation said
"It seems certain that many customers feel `duped' and re-
present themselves to the fuel company and accept the Quantum
gas and Key electric solutions offered".
Advisors report that this practice of debt recovery
has been on the increase over the last year or so and feel that
this should be tackled at the highest level. At present, most
of their clients now take the prepayment option, as this is now
often the cheaper route despite the associated risks to clients
on limited household incomes. Staff report feeling "that
we are stuck between a rock and a hard place when it comes to
this issue".
The current restrictions on who can apply for
Fuel Direct, and also the overall "negative attitude"
this option is met with within some supplier organisations "sometimes
has to be seen to be believed". It was thought that clients
were not being accommodated in terms of Fuel Direct, and it was
considered that the subsequent outcome was a serious impact on
clients" overall quality of life and a that this was a contributing
factor to fuel poverty.
To explain the significance of the £3 limit,
Energy Action Scotland sought some background information. Fuel
Direct was put in place as a payment method of last resort for
people on particular benefits (Income Support, Job Seekers Allowance
and Pension Credit), and it was considered as a better option
for suppliers' customers where appropriate, as it was cheaper
in terms of set up costs in comparison to prepayment meters. Additional
benefits were the maintenance of a supply for the client while
paying off an agreed and regular amount of debt.
Fuel Direct payment limits are currently set
at £3 per week per fuel. In effect if a customer has fuel
debt for both gas and electricity, the maximum they should be
paying is £6 per week for arrears plus on-going consumption.
This is where the vast majority of client problems arise due to
the following issues:
1. Fuel suppliers have an obligation accurately
to bill the accounts in question prior to quoting for Fuel Direct
consumption purposes. This does not always happen and can lead
to inflated consumption levels for customers. This in turn either
stops customers from joining the scheme or has them paying more
than the maximum level for arrears.
2. The prepayment meter payment method is often
implemented without taking into account customers' circumstances
regarding income and lifestyle. This then limits the options for
customers who are already likely to be in fuel poverty and to
be socially excluded.
3. In these instances the hands of the DWP were
thought to be tied. They can either implement the quote as provided
by the supplier and set up this payment option or shelve it and
a prepayment meter is installed.
4. The DWP faces high running costs for this
scheme.
Members have also reported a reticence on the
part of the DWP to use Fuel Direct. Citizens Advice Scotland has
stated that it has case evidence of this reluctance by DWP in
addition to suppliers' reluctance to use Fuel Direct and that
it will be happy to supply this to the Committee when it gives
evidence to the Inquiry on Poverty in Scotland.
To illustrate a recent case:
A young single mother with mental health issues
was receiving assistance from a support worker. When it became
apparent that the client was in serious arrears for both gas and
electricity, an advice agency (a member of Energy Action Scotland)
became involved. Fuel Direct in this instance was the only viable
option due to the health concerns surrounding the case and the
quotes from the fuel suppliers in question were as follows. It
should be noted that these quotes were based on usage for a 2-bedroomed
upper villa with minimal occupancy.
Supplier A quoted £28 per week for electricity
consumption + £3 per week for the arrears.
Supplier B quoted £9 per week for gas consumption
+ £3 per week for the arrears.
Overall total per month = £172.
The quote for the electricity supply was seriously
inflated and, in this instance, was due to the supplier using
estimated meter readings. The advisors' involvement in up-dating
the account billing resulted in the client receiving a £200
refund. However this particular account is still in dispute with
attempts being made to resolve it, but at present the client is
still paying the above amount. A further refund is therefore likely
to be due.
Elizabeth Gore
Energy Action Scotland
May 2007
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