Memorandum submitted by the Energy Retail
Association (FP 30)
1. The Energy Retail Association (ERA) welcomes
the opportunity to respond to the Energy and Climate Change Committee's
inquiry into fuel poverty.
2. The ERA, formed in 2003, represents electricity
and gas suppliers in the domestic market in Great Britain. All
the main energy suppliers operating in the residential market
in Great Britain are members of the association—British
Gas, EDF Energy, E.ON, RWE npower, ScottishPower, and Scottish
and Southern Energy. The ERA's members will also be providing
individual responses.
EXECUTIVE SUMMARY
— Energy suppliers take the problems faced
by fuel poor and vulnerable customers very seriously. Under their
Voluntary Social Spend in 2008-09, suppliers spent £157 million
on social programmes—£57 million more than required.
— According to Ofgem figures, the number
of customer accounts benefitting from some form of social tariff
has increased to over one million, from 800,000 the previous year.
— Although not a fuel poverty scheme, suppliers
help poorer customers by contributing through the Carbon Emissions
Reduction Target (CERT). Suppliers fulfil their obligations under
CERT by directing 40% of energy efficiency measures at a priority
group made up of people on lower incomes and eligible benefits
and aged 70 and over.
— Energy suppliers are investing significant
sums in tackling fuel poverty, and a more targeted approach to
the problem is needed. Government must ensure that its existing
interventions are working effectively and focused on those who
need help the most.
— According to the Department for Work
and Pensions (DWP), approximately £16 billion of means-tested
benefits went unclaimed in 2007-08. Maximising income should also
be a priority in order to help people pay their bills.
3. In order to tackle fuel poverty, Government
intervention must focus on all its causes as well as the relationship
between the three main drivers (income; quality of housing; and
energy prices). Energy suppliers have had much experience in delivering
fuel poverty alleviation measures and are keen to see a more effective,
coordinated approach being taken by Government.
4. Last year, as part of their Voluntary
Social Commitments, energy suppliers committed over £150
million to initiatives such as rebates, trust funds, and social
tariffs. This included:
— £130 million on social tariffs;
— £11 million on trust funds;
— £10 million on rebates; and
— almost £6 million on various other
schemes to tackle fuel poverty.
5. Government has a key role to play in
tackling fuel poverty, particularly with targeting support. It
should seek to identify those customers who are most severely
fuel poor, spending more than 20% of their income on heating their
home. The emphasis of policy should be less on responding to the
increase in the absolute number of fuel poor customers and more
on the increase in the severity of fuel poverty for those customers
who have been fuel poor for some time.
ENERGY REBATE
SCHEME
6. The pilot Energy Rebate Scheme will use
data matching to identify a group of pensioners who are likely
to be vulnerable to fuel poverty so that their electricity supplier
can award a one-off automatic rebate to their electricity bill.
The results of this pilot will be used to inform the policy development
of DECC post 2011 mandated scheme.
7. Energy suppliers remain keen to identify
more effective ways to target vulnerable and fuel poor customers
who are entitled to additional support, and data-sharing between
the Government and suppliers could be an effective way of identifying
groups of households more likely to be fuel poor. Suppliers and
government will use the Energy Rebate Scheme to analyse the potential
for data-sharing to form a central part of the new Social Price
Support scheme.
8. The ERA agrees that focusing support
and funding on those most in need remains one of the major challenges
for all organisations working to alleviate fuel poverty. Suppliers
have played an active role in the Government's data sharing pilot,
which targets low income pensioner households. Suppliers believe
that data sharing may offer a potential solution to the difficulty
of focusing support on those most in need.
9. Suppliers have already made significant
commitments as part of their social assistance programmes but
identifying the fuel poor and targeting help towards them is a
key challenge.
SOCIAL PRICE
SUPPORT
10. The intention is that Social Price Support
(SPS) will be mandated in legislation, it must be simple for customers
to understand; well focused; and equitable for those who are funding
it with implementation costs being kept as low as possible. It
must also be set up so that eligible customers can be easily found
by energy suppliers.
11. There have also been concerns that,
given that the focus of the scheme is on price support to a selected
group, this may impact on other initiatives operated by some suppliers.
There is a fear that schemes operated by some suppliers may be
displaced—such as trust funds (which focus on community
work, benefits entitlements checks etc) and benefit entitlement
checks. Such schemes can be effective in helping customers, and
suppliers would hope that they were allowed a degree of flexibility
as well as the ability to offer innovative products and services
under any new arrangements.
12. Financial measures like social tariffs
can be useful to some customers or households in fuel poverty,
but will not necessarily be the best solution for all vulnerable
customers. The ERA's members recognise that social tariffs can
have an important role in helping the fuel poor, and all suppliers
already offer lower tariffs to certain groups of customers.
13. However, social tariffs should not be
seen as a single solution, but part of a package of measures.
Other measures offered by the industry include: winter rebates;
price freezes; energy efficiency measures; means to replace appliances
and improve heating systems; personal debt management services
and tailored flexible payment arrangements; writing off energy
debt; free insulation and energy efficiency advice; partnership
work with charities, local authorities and health services; and
home visits.
HOME HEAT
HELPLINE
14. In many cases, however, it has proved
hard for vulnerable customers to access help that may be available,
which was the reason that the ERA set up the Home Heat Helpline
(0800 33 66 99) in 2005.
15. The Home Heat Helpline is a free, not
for profit, phone line set up to help energy customers who are
struggling to pay their fuel bill and keep warm. The Home Heat
Helpline was launched by the ERA in October 2005; it is funded
entirely by energy suppliers and has become a cornerstone service
for low-income households in urgent need of heating help and advice.
16. Calls to the Home Heat Helpline are
free and answered by expert advisors (many are ex-nurses and social
workers) at the call centre in Glasgow. The advisors are trained
to give quick, clear information on the grants, benefits and payment
schemes to which customers may be entitled, as well as basic steps
that can be taken to save money on heating bills by making the
home more energy efficient.
17. The advisors at the Home Heat Helpline
also have the ability to transfer callers, at no cost to the caller,
directly to each energy supplier's specialist vulnerable customer
team in order to ensure that each customer receives the best possible
level of care. The Helpline is the only line able to offer this
service.
ENERGY EFFICIENCY
18. CERT has been designed in an attempt
to reduce carbon emissions as well as alleviate fuel poverty.
It is our belief that having a single scheme to achieve two very
different goals means that neither goal can be reached satisfactorily.
The ERA believes that it would be more beneficial for consumers
if there were two separate programmes—one for fuel poverty,
and another to tackle carbon emissions. This would mean that the
schemes could be properly targeted and managed, with far greater
success attained in both important areas.
19. This year, the Government increased
the obligation on energy companies to help the most vulnerable
and created a "Super" Priority Group obligation for
the most vulnerable—poorer, older pensioners—as part
of the extension to 2012 CERT. The new Community Energy Saving
Programme (CESP) also aims to deliver around £350 million
of energy efficiency packages to the poorest 10% of communities
in England, and poorest 15% in Scotland and Wales.
20. Expenditure on both these schemes amounts
to approximately £3.7 billion over three years. CESP will
target customers in the most vulnerable areas in the Britain and
will adopt a whole house, street by street approach with "hard"
energy saving measures.
TARGETING
21. While it is true that pensioners comprise
approximately half of the fuel poor population in Britain, being
over 60 by no means equates to being fuel poor or vulnerable,
and many other potentially vulnerable groups such as the house-bound
disabled, long-term sick, low-income families and people living
in sub-standard housing, who could benefit from a payment such
as the Winter Fuel Payment are not able to receive it.
22. Around 50% of people in fuel poverty
are pensioners and 19% of pensioners are in fuel poverty. For
example, in 2006-07 Winter Fuel Payments were made to around 100,000
households containing pensioners with total annual income above
£100,000. The industry strongly believes that the Winter
Fuel Payment, if targeted at those who need it most, at the time
of year they need it most (it currently arrives in early December—two
or three months before the winter energy bills) could make a significant
impact in tackling fuel poverty.
23. Suppliers also support Fuel Direct as
a means for households in debt and receiving benefits to pay for
their continuing energy usage and past debt. The ERA and our members
have worked closely with JobcentrePlus and the DWP to improve
the current working of Fuel Direct. In particular, we strongly
support the automation project of the Fuel Direct decision process,
which will make the process quicker and more consistent across
DWP regional offices. This will deliver benefits for customers,
DWP and suppliers. We believe that Fuel Direct can be a viable
option for preventing energy debt and assisting debt repayment.
24. Although most customers do not experience
problems paying for their energy, all stakeholders must work together
to address the issues experienced by those in, or at risk of,
fuel poverty. Energy suppliers have a wide array of schemes for
their vulnerable customers, and will continue to work constructively
with DECC, Ofgem, charities and advice agencies to tackle this
issue.
February 2010
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