Supplementary memorandum submitted by
E.ON UK (EEFP 09b)
1. Examples of effective approaches to tackling
fuel poverty through energy company programmes
We are able to provide a number of examples
of approaches to tackling fuel poverty through energy company
programmes, however it is important to bear in mind that each
country will operate a different regulatory system and that programmes
are also influenced by other country-specific issues such as quality
of housing stock.
SOCIAL VOUCHERS
FOR VULNERABLE
CUSTOMERS IN
ROMANIA
Low income households in Romania are entitled
to social vouchers to pay for their heating bills for the five-month
period November-March. Households with an income below the minimum
wage qualify, with vouchers posted to beneficiaries' homes. Local
authorities administer and cover all costs of the scheme. 32%
of E.ON Gaz Romania customers receive social vouchers.
E.ON GAZ ROMANIA
CREDIT DISCOUNT—FAVOURABLE
FINANCING FOR
NEW HEATING
SYSTEMS
E.ON Gaz Romania brings together a network of
specialised partners (including finance companies, and companies
which import, distribute and install heating systems) to help
customers living in flats where previously the heating was centrally
controlled to replace it with systems suitable for individual
homes. The finance company offers favourable credit terms, including
a three-month grace period after installation, a longer financing
period and lower interest rate.
IDENTIFICATION OF
VULNERABLE CUSTOMERS
IN HUNGARY
The Hungarian 2007 Electricity Act defines vulnerable
customers and the additional services to which they are entitled—this
does not include lower prices or any discount on energy costs.
The additional services do however include for example payment
by instalment, payment in cash at home, help with understanding
the bill and uninterruptible power supply. E.ON and other suppliers
cover the cost of these services.
Knowing that eligible customers were not aware
of their entitlement to these services E.ON Energiaszolgati sent
out leaflets and flyers with bills, made them available online
and in walk-in offices, so encouraging customers to register to
receive more detailed information and apply if eligible.
E.ON GERMANY SOCIAL
TARIFF
In autumn 2008, E.ON was the first German supplier
to voluntarily introduce social tariffs. Marketing activities
for the social tariffs were organised in consultation with social
welfare authorities and charities. The social tariff is available
for households exempt from paying the state TV licence fee and
lasts for one year with a renewal option. There are c. 25,000
customers on social tariffs; savings per customer are €65-108
p.a. (c. 10% of total bill).
2. Framework for a fundamental review of fuel
poverty policies
We do not believe that a fundamental review
of fuel poverty policies is required, as stated in our written
response:[1]
"We believe the current balance is reasonable,
with E.ON and the other five major suppliers delivering a programme
of energy efficiency measures with a cost of over £1bn/year,
and a further £0.3 billion from EAGA, in addition to Government
action on social housing and winter fuel payments. [Bullet
11]
Suppliers also contribute resources through the
voluntary agreement on social programmes reached with Government
in April." [Bullet 12]
However we did call for "much greater transparency
over potential options" [Bullet 1] and we stated that one
of the key actions required was:
"The need for more open debate—tackling
fuel poverty effectively requires a mixture of approaches and
some very difficult decisions over funding and eligibility, in
which the best interests of customers will only be met if all
stakeholders engage, innovate and challenge." [Executive
Summary]
This debate might be more open if it included
a fresh look at some of the key issues, which we identified in
our written response.
— Assessment of what is reasonably
practicable—including greater transparency over potential
options [Bullet 1]
— Clarity over policy constraints [Bullet
1]
— The need for effective targeting
[Executive summary]
— Recognition of different customer
circumstances [Bullet 3]
— Severe fuel poor [Bullet 4]
— Clear statement of desired outcomes
over the next eight years to 2016 [Bullet 2]
In order to address these issues, we would suggest
undertaking a free-thinking academic study to include:
— An assessment of actions to date.
— Draft proposals for the four areas
identified above.
The output from the academic study could be
taken forward by an established group such as FPAG, or form the
basis of a call for evidence led by DECC.
3. Annual spend by E.ON on CERT
a) How much of the
CERT expenditure is recouped through customers' bills and how
much is offset as a cost against profits
The costs of our CERT obligation form part of
our operating cost base and, as with any business, we aim to cover
our costs and make a profit.
However, competitive pressures are strong in
the GB energy market and the recent evidence, as highlighted in
the oral evidence session and in Ofgem's Initial Findings Report[2]
is that energy supply margins are low or negative. Thus, although
there are also many other factors, the costs of CERT might be
said to be offset against profits.
b) Whether the figure quoted by Defra/Ofgem
of £38 per customer per annum reflects accurately the actual
cost to your company per customer (before the extension of CERT
announced in September)
To clarify, the figure quoted by Defra/Ofgem
of £38/year is for a customer with electricity and gas supply.
The cost to customers off the gas grid is £19/year. CERT
measures are similarly available to customers on and off the gas
grid.
We cannot say any more than that Defra's figure
is reasonable—as with other elements of our operating cost
base, our spend on CERT is commercially sensitive information.
c) What the treatment is of CERT spend for
corporation tax purposes and is the expenditure under CERT eligible
for any capital allowances
The spend on CERT is an operating cost and therefore
reduces profits and hence corporation tax liability. Our CERT
expenditure is not available for capital allowances, as the expenditure
is for the benefit of a third party.
4. Programme for the installation of smart
meters
Energy suppliers currently recover the costs
of metering through general charges to customers and this cost
recovery is staggered over the life of the metering asset.
There are a number of benefits from smart metering.
Our own analysis, and we believe that of the Government also,
has identified that the benefits of introducing smart metering
exceed the cost, when the customer and carbon benefit of reduced
energy consumption is factored in.
The detail relating to the mandate has still
to be confirmed and the programme of change has not yet been initiated
so the detail on recovery of funding has still to be developed.
It currently seems likely that the solution, for electricity at
least, will be a single meter which is capable of being changed
remotely between pre-pay and credit mode. The difference in meter
asset cost between credit and prepayment meters would therefore
be removed. We are keen to see a similar solution for gas metering.
Jim Macdonald
Commercial Director, Retail
January 2009
1 Environment, Food and Rural Affairs Committee, Fifth
Special Report of Session 2007-08, Energy Efficiency and Fuel
Poverty, HC 1099, Ev 25 Back
2
Figure 8.1 Back
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