Supplementary memorandum submitted by
the Department of Energy and Climate Change (FP 01A)
ENERGY & CLIMATE CHANGE SELECT COMMITTEE
INQUIRY INTO FUEL POVERTY, FOLLOW UP TO WEDNESDAY 10 MARCH ORAL
EVIDENCE SESSION
As promised when we met on Wednesday, I am writing
to give the further information the Committee requested on social
price support, price differentials relating to various means of
payment for energy and costs associated with the Government's
work on the National Energy Efficiency Database.
SOCIAL PRICE
SUPPORT
Members of the Committee expressed interest
in how much it would cost to give SPS to a wider group, for example
those entitled to Winter Fuel Payments or Cold Weather Payments.
Suppliers agreed to spend £150 million
in the final year of the voluntary agreement on a combination
of direct financial support (like social and discounted tariffs)
and the provision of other activities (like the home heat helpline
and partnership working). We have said that we are minded to continue
to provide support to those being helped under the voluntary agreement,
and some of the non financial activities such as those mentioned
above. We are still considering the eligibility criteria and the
appropriate level of the benefit for the additional support provided
under social price support post 2011.
In PBR 2009 we said that, subject to the
successful passage of the Energy Bill, the Government would require
energy suppliers to make available at least £300 million
per annum by 2013-14 for mandated social price support. This
would mean helping up to an additional one million households
on top of the existing voluntary scheme, which is already providing
help to around one million customer accounts. However, the actual
final number helped will depend on, amongst other things, the
level of discount offered through social price support. There
are currently over four million households eligible for Cold Weather
Payments and approximately nine million households eligible for
Winter Fuel Payments.
We have said that we are minded to focus a significant
proportion of the additional spend on older pensioners on low
incomes. We have not however made final decisions on eligibility,
and will not do so until after the consultation this summer.
We are working with consumer groups and other
stakeholders in developing the detail of the policy, and our proposals,
including the underlying evidence, will be published as part of
our consultation this summer.
We have said that we are minded to focus on
older poorer pensioners, and the reasons for this include that
they:
— Have a high propensity to be fuel poor
—over 50% of all fuel poor households have someone over
60 in them.[15]
— Are significantly more likely to suffer
from excess winter deaths—91% of those suffering from excess
winter death in 2008 were over 65.[16]
We have however said that we are minded that
some resource should be available for other groups, and that we
are minded to continue to provide support to those receiving help
under the voluntary agreement.
PAYMENT METHOD
PRICE DIFFERENTIALS
I promised to provide current information in
relation to price differentials between different payment methods.
The table below gives a breakdown of the payment
methods of the 2.8 million households identified as being
in fuel poverty in England in 2007.
| |
| | |
| Direct debit |
Standard
credit | PPM
| No Gas |
| |
| | |
| Electricity customers | 1.1m
| 1.2m | 0.5m | N/A
|
| Gas customers | 0.9m | 0.9m
| 0.4m | 0.6m |
| |
| | |
| |
| | |
Of the 2.8 million fuel poor households in England,
only 20% of them (0.6 million) use a pre-payment meter (for
gas or electricity, or both). Around 40% of fuel poor households
pay for their electricity and around 30% of fuel poor households
pay for their gas by direct debit, therefore benefitting from
the cheapest payment method available.
Ofgem introduced a license condition change last September
to ensure cost reflective pricing between payment methods and
will be reporting on the effect of this change in the coming month.
The most recent data available on tariff differentials, as
provided by Ofgem shows:
|
| Average PPM/standard credit
differential (at July 2008)
| Average PPM/standard credit
differential (at Oct 2009)
|
|
| Average Gas | N/A | -£5
|
| Average Electricity | N/A |
-£5 |
| Average Dual Fuel | £41
| -£4 |
|
| |
|
|
| Average PPM/direct debit
differential (as at July 2008)
| Average PPM/direct debit
differential (as at Nov 2009)
|
|
| Average Gas | N/A | £49
|
| Average Electricity | N/A |
£28 |
| Average Dual Fuel | £125
| £97 |
|
| *figures provided are without prompt pay discount for standard credit.
|
| These figures are provided by Ofgem and are the average of the differentials across all regions for the Big 6 suppliers based on average consumption levels, 20,500 kWh gas, 3,300kWh electricity.
|
| |
|
In November 2009, the average PPM-Direct Debit differential
stood at £97, a 22% decrease from its level in July 2008.
At PPM-adjusted levels of consumption the differential is £86,
which again represents a significant (22%) decline from the 2008 level.
Ofgem estimated in their Probe into retail energy markets
that the difference between costs of direct debit and PPM was
around £88 per year (however, this will vary, for example.
between suppliers).
Ofgem are monitoring the impacts of their new licence conditions
closely, both in terms of their overall impact on the market,
and in terms of detailed differentials. They intend to publish
a Probe follow-up document shortly, updating stakeholders on their
monitoring activities, with a particular focus on what they have
observed since the introduction of the Undue Discrimination licence
conditions in September of last year.
Ofgem has reported that over one million customer accounts
are benefitting from a suppliers social tariff. Ofgem has defined
a social tariff as the best tariff a supplier offers in the customer's
area, regardless of their payment method. This will mean that
many of the most vulnerable customers will be benefitting from
a suppliers cheapest tariff regardless of their method of payment.
NATIONAL ENERGY
EFFICIENCY DATABASE
DECC is leading the development of a National Energy Efficiency
Data Framework (NEED). This is a major matching exercise of GB-wide
address level energy consumption records with building and individual
characteristics. It will deliver its first nationally matched
dataset by July 2010, with further analytical tasks expected later
in the year.
Phase 2 (to be completed by Spring 2011) will allow
for linking of additional data-sets, determine NEED maintenance
strategy and will allow other users to have access to the database.
This is a very complex and challenging task.
We expect that the main output of the NEED project will be
improved evaluation of energy efficiency and related policies
across domestic and non-domestic buildings. It is envisaged that
NEED could eventually be used to help appraise and target fuel
poverty policies more effectively, it is difficult to say however
at this early stage of the NEED project when will this be possible.
The research costs of scoping and pilot work have been around
£300,000 (which excludes internal staff time which has
also been deployed). We are now in the process of commissioning
Phase I and decisions around future funding will be made in the
normal course of business. It is also worth noting that the Engineering
and Physical Sciences Research Council has, independently of DECC,
engaged University College London's Energy Institute to investigate
and advise on making best use of the NEED and DECC are in regular
contact with them to discuss their emerging findings.
Finally, the Committee asked what the waiting times for the
installation of Warm Front measures in my Stafford constituency.
I can confirm that for insulation, customers the waiting time
is currently an average of 12 days and for heating measures,
36 days.
March 2010
15
2009 Fuel Poverty Statistics, p 33-http://www.decc.gov.uk/en/content/cms/statistics/fuelpov_stats/fuelpov_stats.aspx Back
16
ONS statistics on Excess Winter Mortality-http://www.statistics.gov.uk/statbase/ssdataset.asp?vlnk=7089 Back
| 
