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Session 2009 - 10 Publications on the internet Energy Bill |
The Committee consisted of the following Members:Gosia McBride, Committee
Clerk attended the
Committee WitnessesJonathan
Stearn, Energy Expert, Consumer
Focus Jenny Saunders, Chief Executive
Officer, National Energy Action Public Bill CommitteeThursday 7 January 2010(Morning)[Mr. Hugh Bayley in the Chair]Energy Bill9.4
am
Q
197197The
Chairman: We are going to hear evidence this morning from
Jonathan Stearn from Consumer Focus and Jenny Saunders from National
Energy Action. I need to tell the Committee formally that Dr. Gill Owen
from the Fuel Poverty Advisory Group, who was due to be with us, has
been prevented from getting here by the snow and has telephoned through
her apologies.
I remind
witnesses in particular that the rules under which I operate are
absolutely strict. If we have not finished the proceedings at literally
the second 10.25 am comes, I am required to stop you even if you are in
mid-sentence. Perhaps with two rather than three witnesses we will not
be running up to the clock in quite the same way. It remains for me to
welcome our two witnesses to the meeting. Can I ask you to introduce
yourselves and the name of your organisations? We will then start the
questioning. Jonathan
Stearn: My name is Jonathan Stearn; I am a programme
head from Consumer Focus. My particular area of concern is vulnerable
and disadvantaged consumers. For the record, before that I used to work
for
Energywatch. Jenny
Saunders: I am Jenny Saunders, chief executive of
National Energy Action. We also have a subsidiary not-for-profit
company called Warm Zones. We are a campaigning organisation
specifically focused on helping people on low incomes to save energy
and take them out of fuel poverty, but we also have practical
experience of running programmes as
well.
Q
198Paddy
Tipping (Sherwood) (Lab): There has been a lot of
discussion on social tariffs over a long period. Jennyyou and I
have talked about that. We are moving from a voluntary approach to a
mandatory approach in the Bill. Does that really prove that the
voluntary approach has
failed? Jenny
Saunders: I dont know that I would go so far
as to say that. It depends what we are trying to do under that
voluntary agreement. It had been an organic process. Companies, through
social corporate responsibility programmes, started to identify
customers that they felt needed additional help. The problem with that
voluntary agreement was that the companies were not certain who they
should be helping and how to find some of the more vulnerable
customers. We felt that for the agencies trying to give advice to
people, there was a lot of confusion as to which was the best tariff.
How were we really describing these social tariffs? We had campaigned
to get recognition that the social tariff should be the
companys cheapest offering. That was one way we
could make it clear to people that, if you were frightened of
switchingwhich a number of customers wereand if you
stayed with your particular supplier and asked them for the social
tariff, you knew that that should be the cheapest deal. We have not got
there yet.
What is
proposed in the Bill is an alternative to that, and maybe in the
discussions we can explore the pros and cons of the two different
approaches, because what is proposed here is simple. It means that
people will know what they will get; it is automatic. There are some
advantages to that; however, it is a rebate. It is not what we had
defined as a social tariff, but I think it is a welcome initiative,
certainly. We believe that putting it on the statutory footing is what
is required.
Q
199Paddy
Tipping: I shall ask Jonathan about that as well, but let
me add a bit more. Some companies have been pretty goodBritish
Gas, for example. Others, such as EDF, have not performed as well as
some of the others. Will a mandatory approach sort that
out? Jonathan
Stearn: Certainly Consumer Focus, and before us
Energywatch, absolutely wanted to see a mandated social tariff, because
we thought that it really was the responsibility of the Secretary of
State to tell the companies who should be getting price support. As
Jenny said, it has been left up to the companies. We had variations
between companies in the support that was being given. For example, in
some of the agreements recently, some consumers have been let off price
increases. There are all sorts of variations in the way that this has
been implemented and the amount of support given by companies. It also
means that you get gaps as well. For example, two companies provide
support only for older people. This is an issue that we might come on
to later. Who gets support is effectively at the whim of the companies.
We thought it absolutely right that the Secretary of State should get
involved and mandate, saying, This is the group who should be
getting the support and this is what the support should look
like. We are quite pleased that the Bill does not define who is
going to get what and what that support will be.
There are
still quite a lot of areas for discussion in terms of who the eligible
groups should be and what form that support should take. Jenny
mentioned social tariffs. Consumer Focus still thinks that should be on
the cardsin other words you have a deal where the household
gets the cheapest deal from that company. We see variations of up to
about £250 between what you can get from the same supplier
through online direct debit and through prepayment or paying your bill
quarterly, so you are looking at quite a wide difference between what
consumers pay. We think it is really important to recognise that. That
is why we think the issue of social tariffs should not just be
disregarded and should still be thought of as part of the
mix.
Q
200Paddy
Tipping: In fairness to the companies, the amount they
have been spending on social tariffs has increased quite significantly
over recent years. Isnt that the case? Looking into the future,
how much should we be spending on social
tariffs? Jonathan
Stearn: It depends on how the scheme works going
forward. Consumer Focus would like to see the mandate become the major
part of the support so there is a clear diktat to companies about whom
they
should be providing support for. What is being envisaged is a scheme is
where you have part mandate, part voluntary agreement. It is very
important to make sure that all the households who should be covered
are covered and given the support they need. As I said, we are seeing
major price differences between different types of tariffs. If you are
lucky enough to have a bank account which allows you to pay for things
through direct debit and you happen to be a consumer who is online,
then you are going to get by far the best deal. Unfortunately, lots of
the consumers who we think should be eligible for this just
arent in that
position. Jenny
Saunders: Just to add to that, when you ask how much
we should spend on social tariffs, it is important to recognise that
this is a regressive way of helping customers. The proposal in the Bill
will potentially add £12 to every customers bill. We
think that is a reasonable amount, but it has to be proportionate. If
we are going to start to load more and more costs on to bills there has
to be a limit. There are other ways in which we should be addressing
peoples incomes and the affordability of energy, not just
through loading it on to energy bills, because the current levies for
reducing carbon already amount to around
£100.
Q
201Paddy
Tipping: Jonathan, you said in your evidence that at the
moment energy companies spend about 0.5 per cent. of their turnover on
social tariffs. Is that the correct figure? Is that the figure we ought
to be shooting at into the future? Picking up on Jennys point,
why should customers pay for social tariffs? Why cant companies
pay it out of their
profits? Jonathan
Stearn: If you could find a way of making companies
pay it out of their profits we would be very pleased to see that. Any
plans to try to see companies using their profits rather than passing
bills on to other customers dont tend to hold water in my
experience. You also need to look at this in context. Generally, we are
seeing costs being added to bills to an increasing extent to pay for
climate change policies, and this is quite small beer in comparison. As
Jenny said, this is trying to do something to change the regressive
nature of that general policy of getting consumers to pay through
bills. It
is also worth pointing out that in the Bill there are schemes for
reducing fuel poverty. Fuel poverty has three elements: prices, energy
efficiency and income. We have strongly argued that energy efficiency
should be absolutely centre stage in the challenges to fuel poverty,
not least because it means that you can have a major impact on
consumers bills. If you brought homes up to the standard of a
home built today, you could potentially halve peoples energy
bills. It also means that the regressive nature of paying for climate
change policies through bills has less of an impact on those on low
income. That is why energy efficiency is absolutely essential as part
of this. In some ways, the Bill is looking at one small part of the
equation on tackling fuel
poverty.
Q
202Mr.
Phil Willis (Harrogate and Knaresborough) (LD): Can I
follow that up? Clause 8 will give the Secretary of State significant
discretion in secondary legislation. Does that worry you? That picks up
Paddy Tippings point. Would it not be simpler, in your view, to
have in the Bill a simple mechanism, for instance to define a social
tariff as the lowest cost per unit available
by a supplier, which could be done in a very simple way? It would then
be very clear that any scheme that included a social tariff thereafter
had that definition, rather than there being a plethora of ways in
which the companies get over this at the momentby having a
bewildering array of tariffs, often meaning that if you take
electricity and gas and other facilities you get a better tariff. Would
it not be better to have a simple definition in the Bill?
Jonathan
Stearn: It depends on what that definition
is.
Jonathan
Stearn: We have not had that debate yet and what is
in the Bill is Government taking powers. What the Secretary of State
said, both on Second Reading and in the summer, was that the Government
are minded to use those powers to give price support to older people
and pensioners. Our concern is that, as they stand, the powers allow us
to have that debate and discussion about who should be included and
what form that price support should takewhether it should be a
one-off payment or a social
tariff. As
it stands, the Bill allows us to have that debate in the future and
discuss who should be eligible. What concerns me is that if we were to
put who should be eligible in the Bill now, what we would put in the
Bill would be pensioners; it would just say that pensioners would be
eligible for this. My concern there is that, as I have already
mentioned, two of the energy companies only supply their support system
for pensioners. That means that if you were one of those 40 per cent.
of lone parents who are living in fuel poverty, you would not get any
price support if you happened to be with those one or two of suppliers
or were relying on the Governments mandated scheme. We are
pleased that the Bill is taking powers. We can have a debate in the
summer about what those powers should be and about the type of support
that we should be giving to consumers.
Q
203Mr.
Willis: I have a supplementary, Mr. Bayley.
What always worries me about legislation is that so much of the detail
is in secondary legislation, to be determined sometime later. We are
about to have a general election and things may change quite
dramatically. Do you feel that it would be helpful if the Minister,
when we discuss the Bill, gave an indication of the secondary
legislation in order for us to understand the primary
legislations
context? Jenny
Saunders: I think that would be helpful. Quite a lot
of thinking has been done about it. There may not be firm agreement,
but the work has certainly been done to try to identify which customers
would be most likely to be and remain in fuel poverty. I think we can
be clear that there are certain categories of customers on the pension
credit guarantee who are more likely to be in fuel poverty than
others.
There is
already recognition of that, but we would like to see the help extended
to households that are currently eligible for cold weather payments.
People are going to need that in this current cold spell. There are
other categories of peoplefamilies with young children, people
on premium income support, those on jobseekers allowance and
those with disabilitywho we think should fall into that
bracket. That will add to the cost of
the overall scheme, but we believe that we need to put that group of
customers forward, and the Government themselves have already
identified them as vulnerable.
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