Q
219Charles
Hendry: We and the Liberal Democrats have tabled
amendments on efficiency, so we will have the opportunity, even within
the timetable available, to discuss them and, I hope, to make those
changes.
Jonathan
Stearn, do you think that any other elements are missing from the
Bill? Jonathan
Stearn: No; I agree with Jenny that energy efficiency
should be centre stage and I know that some amendments have been
tabled. We have pressed to try to get high standards in place that
would mean that homes were brought up to the energy efficiency level of
a home built today, because that would have a tremendous impact on fuel
poverty and protect the fuel poor from future price hikes.
In terms of
what the Bill is trying to achieve on price support, I think the
mandate has the potential to give clarification to consumers. It means
we should be clear at the end of this as to who is going to be eligible
and what they are eligible for. At the moment, it is completely
variable depending on what supplier you happen to be with. Some
suppliers will give schemes only to pensioners, while others will do
pensioners and other groups, depending on their own definitions. A
mandate would give us and consumers a clear indication of who is
eligible and who is not.
Q
220Charles
Hendry: You referred earlier to the problems of
identifying who is in fuel poverty and the accompanying difficulty in
identifying the right people who should benefit. The Government made
some changes in data sharing. Have they done enough to provide accurate
information to companies? What more needs to be done? Does any of that
require
legislation? Jonathan
Stearn: Data sharing at the moment just covers
pensioners. As you might gather from what I have been suggesting, I
think that the mandate should be wider than pensioners. If you are
going to use the same data sharing process—again, the data
sharing is a trade-off in terms of data protection and protection of
consumers——we feel that the relationship that has been
established with the Department for Work and Pensions and with the
companies could mean that you could maximise the take-up of price
support. If we are to use the same process for groups other than
pensioners, we are going to need new legislation. If we had a wider
group who were mandated, we would have to have some interim solution
which, I suspect, would not be as effective in getting take-up as data
sharing.
Q
221Charles
Hendry: You have also talked about the importance of smart
metering as a way of helping people. My understanding is that, in
Northern Ireland, people on pre-payment meters pay less than others, so
there is a positive benefit for them rather than a gap. Would you like
the roll-out of smart metering prioritised so that homes occupied by
people in fuel poverty are targeted
first? Jonathan
Stearn: My understanding of Northern Ireland is more
or the less the same as yours. You might be able to get about 1 per
cent. less with one other deal.
My point was that investment can pay off. It became a very popular way
of paying for energy among Northern Ireland consumers. I would support
the roll-out. My key point is to make sure that everybody, when they
get a smart meter, has the ability to pre-pay, because that can
dramatically change the marketplace. Just think about the marketplace
with mobile phones and the ability to move between contracts and
pre-pay. You would have the same ability with your energy, and it could
have a dramatic impact on the market itself. It would mean that we
would stop having this discrimination against those who are using
pre-pay as a way of paying.
Remember that
more than 1,000 people a day are being put onto pre-payment meters
because of debt. That means they are being put on to a more expensive
way of paying—ironically because they have got into debt. We
need to work our way through that, and smart metering is a key way of
doing it. I can see some real benefits of rolling it out to people in
deprived areas first, but we need to make sure that everybody gets a
smart meter that has the ability to pre-pay. That is what can change
the
marketplace. Jenny
Saunders: I think that we should start the smart
meter roll-out by replacing those pre-payment meters. That is clearly a
real problem. I think it is complex territory that we might be going
into. It might change the market, but without very good advice to
customers and some Ofgem intervention, I think we could get into very
complex arrangements and more confusion, so I think there would be a
note of caution. I think that the Ofgem duties to protect customer
interests will need to be looked at very carefully when it comes to
these new tariff offerings that might result from smart meter
roll-out.
Q
222Charles
Hendry: Just one more question, if I may, Mr.
Bayley. Picking
up on the conversation earlier with my colleague Mr. Binley
about clause 27, would it be your preference that, if Ofgem had the
powers and was using them as you would think appropriate, those powers
should rest with Ofgem rather than the Secretary of State? Do you think
that the Secretary of State having some powers to help disadvantaged
customers and Ofgem having others creates scope for confusion, as some
might fall through the net because neither organisation knows whose job
it is to deal with things? Also, the Secretary of State’s powers
appear pretty arbitrary, and subsection (7) essentially gives him the
power to make up what evidence he does not have. That is a degree of
proof that is not available to Ofgem, which must have evidence-based
material to go forward. Would you prefer, if possible, that this should
be done through Ofgem rather than the Secretary of State?
Jenny
Saunders: Yes. It would be much preferable for the
regulator to be working effectively, knowing where authority rested.
There will always need to be guidance from the Secretary of State about
environmental and social issues. At the minute, Ofgem must take into
account the guidance that it receives from Government, and we would
still want that guidance to be given. I do not know that things are
terribly contentious, as far as we are concerned, in relation to the
reserve power, because our reading it is that it could be used only if
Ofgem failed to implement its duties, although I might be misreading
it.
Jonathan
Stearn: That was my reading as well. I would not have
an objection, because it means the Secretary of State is taking the
ability to make regulations in the future. That can act as a major
lever to Ofgem to look at the issues of concern for disadvantaged and
vulnerable consumers who are facing detriment in the marketplace at the
moment.
Q
223Derek
Twigg (Halton) (Lab): May I just come in on a point in
Charles Hendry’s second question—the issue of Ofgem? I
get the impression, although maybe I am wrong, that you think that
Ofgem is not intervening and using its powers to the extent it should,
and that you believe the Bill would force its hand on that. What
exactly is it not doing that it should be
doing? Jenny
Saunders: I can give you an example of what it did
not do. It did not intervene when we saw the pre-payment meter
differential rise massively, and it should have. It should have seen
that those additional costs were not justified. It should have
intervened when it saw that legacy electricity customers off gas grid
areas were being charged more than they ought to have been and that the
margins that the companies were making on electricity were much higher
than gas supply.
I think that
this ought now to give it encouragement—confidence even. When we
tackled it on the reason why it was not acting, it kept coming back to
us saying, “We do not believe it is within our statutory duties
to be intervening.” Of course, affordability generally is not an
issue for Ofgem—that is an issue for Government—but in
terms of customers getting a fair deal, it is the least that we can
expect. In a competitive market, everyone gets a fair
deal.
Q
224Derek
Twigg: It seems rather interesting that the regulators
just do not have the confidence to know whether they should intervene.
Will the Bill give them that confidence?
Jenny
Saunders: I think that the Bill clarifies it. If you
have a primary duty to protect customers’ interests, which is
competing with other primary duties, I hope that the Bill will make it
more clear that customers’ interests are not necessarily best
served by just having a number of companies that they can go to or
switch to—competition is not an end in itself. It is one of the
things that the Government still believe will best serve
customers’
interests. We
took the view a while ago that there was no competition for the social
sector—there was nothing on offer for people who were in debt or
who were on prepayment meters. There was no
offer—nowhere—where they could switch to. The competitive
market has failed those customers completely. I think that this is not
radically changing their powers, but at least they will be able to look
at alternatives to just straight competition—for example,
tightening up licence conditions, imposing greater penalties or
imposing penalties after a longer period of time, when they have had a
chance to explore. It took them longer to undertake the probe than
12 months, which is the period that they can impose fines on
companies if they find that they have acted against customers’
interests.
The
Chairman: There is time for a couple more
questions.
Q
225Simon
Hughes: If we are really trying to deal with fuel poverty
and make Ofgem effective, is the
following something that we ought to do, as well as simplifying the
tariffs hugely? We can ensure that every consumer—either twice a
year, just before the winter begins and after the winter, or three
times, at beginning of the new year, when people think about things,
the school year and the tax year—has something through their
door that says, “These are the options available to you to buy
your electricity. There are five or six companies in your area, and
these are the prices they are offering.” Therefore, everyone can
choose. They can see the choice and would not have to go groping on. Is
that not simple? It does not require anything other than a power for
Parliament to say, “Ofgem, you will insist that this is
done.” Is that not the sort of thing that would make a fantastic
difference? Jenny
Saunders: I think that getting simple consumer
information out is something. I do not know whether that in itself will
be adequate, because people do not always select the things that come
from unsolicited information. But certainly, through advice agencies
and all our contact with people, when they are receptive to this
information, we should be thinking about how we get that message
across. Much clearer consumer information would be beneficial. Again,
however, we will have many companies that, in the competitive market,
will go out with their own offerings, and there will still be
confusion. It would be good if people knew to go to a Consumer Focus
website or an Ofgem website to get that information, but I do not think
that we are terribly good at getting that messaging out, partly because
for a lot of people it has not been a big problem. We would like to see
it directed at people on lower incomes and put in ways that they can
take advantage of, and perhaps find a way through the plethora of
offerings that may or may not, when they get there, be on offer to
them. Jonathan
Stearn: Again, we need to remind ourselves that not
everybody has access to the internet, to the cheapest deals available.
We also know that when people change their energy supplier—for
example, from representations on the doorstep—they often make
the wrong decision and end up paying more for their energy. This is why
smart metering has some potential, because it is a two-way flow of
communication. We have the ability to give people information in their
own homes and it is not going to be dependent on whether or not they
have the internet—it will come to everybody. There is real
potential in terms of giving very useful and clear information to
people.
The
Chairman: Thank you. The first witness for this
afternoon’s session, Jeremy Nicholson from the Energy Intensive
Users Group, has now also given his apologies. He is unable to make it
to London because of the weather. I understand, however, that the
Ministers and departmental officials are available to give evidence
from 1 pm, so the Committee will still meet at 1 pm—the time
agreed by the Committee on Tuesday in the programme motion. After the
private session to allocate questions, we will move straight into
questions to the Ministers and the Department. I expect that the
Committee will finish about one hour early as a result, at
approximately 2.30
pm. Ordered,
That further consideration be now adjourned.—(Steve
McCabe.) 10.22
am Adjourned
till this day at One
o’clock.
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