The Committee consisted of the following Members:

Chairmen: Mr. Peter Atkinson, †Hugh Bayley

† Binley, Mr. Brian (Northampton, South) (Con)

† Ellwood, Mr. Tobias (Bournemouth, East) (Con)

Engel, Natascha (North-East Derbyshire) (Lab)

† Hendry, Charles (Wealden) (Con)

† Hughes, Simon (North Southwark and Bermondsey) (LD)

† Kidney, Mr. David (Parliamentary Under-Secretary of State for Energy and Climate Change)

† McCabe, Steve (Lord Commissioner of Her Majesty's Treasury)

Main, Anne (St. Albans) (Con)

† Mallaber, Judy (Amber Valley) (Lab)

† Robertson, John (Glasgow, North-West) (Lab)

† Ruddock, Joan (Minister of State, Department of Energy and Climate Change)

Thornberry, Emily (Islington, South and Finsbury) (Lab)

† Tipping, Paddy (Sherwood) (Lab)

† Twigg, Derek (Halton) (Lab)

† Weir, Mr. Mike (Angus) (SNP)

Whitehead, Dr. Alan (Southampton, Test) (Lab)

† Wiggin, Bill (Leominster) (Con)

† Willis, Mr. Phil (Harrogate and Knaresborough) (LD)

Gosia McBride, Committee Clerk

† attended the Committee

Witnesses

Jonathan Stearn, Energy Expert, Consumer Focus

Jenny Saunders, Chief Executive Officer, National Energy Action

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Public Bill Committee

Thursday 7 January 2010

(Morning)

[Mr. Hugh Bayley in the Chair]

Energy Bill

9.4 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.

The Chairman: Thank you both very much.

Q 198Paddy Tipping (Sherwood) (Lab): There has been a lot of discussion on social tariffs over a long period. Jenny—you 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 don’t 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 company’s cheapest offering. That was one way we

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could make it clear to people that, if you were frightened of switching—which a number of customers were—and 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 good—British 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 cards—in 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. Isn’t 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

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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 aren’t 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 customer’s 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 people’s 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 Jenny’s point, why should customers pay for social tariffs? Why can’t 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 don’t 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 people’s 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 Tipping’s 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

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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 moment—by 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.

Mr. Willis: I agree with that but we could argue over a definition then.

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 take—whether 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 Government’s 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 legislation’s 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 people—families with young children, people on premium income support, those on jobseeker’s allowance and those with disability—who we think should fall into that bracket. That will add to the cost of

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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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Prepared 8 January 2010