Memorandum submitted by EDF Energy (FP
49)
INTRODUCTION TO
EDF ENERGY
1. EDF Energy is one of the UK's largest
energy companies with activities throughout the energy chain.
Our interests include nuclear, renewables, coal and gas-fired
electricity generation, combined heat and power, electricity networks
and energy supply to end users. We have 5.5 million electricity
and gas customer accounts in the UK, including both residential
and business users.
2. EDF Energy welcomes the opportunity to
submit written evidence to support the Energy and Climate Change
Select Committee's call for evidence on fuel poverty.
SUMMARY
— The UK's transition to a low carbon economy
must be achieved through incentivising investment in the most
affordable low carbon energy supplies for all and securing competitiveness
for sustainable growth. This will ensure that the Government's
policies are implemented with least impact on consumers, including
those in fuel poverty.
— Government has a role to play in addressing
fuel poverty through wider social initiatives to tackle all causes
of poverty. This will often be more efficient than energy based
initiatives.
— Where suppliers are required to provide
support to vulnerable customers, we believe that mandatory tariff
relief, funded on an equitable basis between suppliers, targeted
with Government assistance and direction to those greatest in
need, is the best way to provide clarity for customers and their
advisors.
— We are committed to continue working
with Department of Work and Pensions (DWP) and DECC on the project
to share Government data to provide a rebate for customers in
receipt of Pension credit. This project will provide important
lessons for developing Government data sharing to target future
supplier support to those in greatest need under mandatory tariff
relief.
— There is currently pressure on all household
budgets, including those who do not qualify as fuel poor. Putting
in place energy based initiatives that explicitly introduce cross-subsidies
between customer groups will drive more customers into fuel poverty.
— Levies and obligations placed on suppliers
to meet wider social and environmental objectives are inevitably
spread across all consumer bills, including those in fuel poverty.
— EDF Energy has led the industry in developing
initiatives to support customers most likely to be living in fuel
poverty.
— The majority of EDF Energy's social spend
will be focused on offering a social tariff to our most vulnerable
customers.
— For the current obligation period, EDF
Energy will spend around £300 million on meeting our
obligation under the Carbon Emissions Reduction Target, with the
greater part of our spend focused upon the Priority Group, ie
those on eligible benefits or aged 70 and over. In addition,
around £65 million will be spent on meeting our obligation
under the Community Energy Saving Programme to the end of 2012,
which is focused on the poorest communities in Great Britain.
EDF ENERGY INITIATIVES
3. As one of the UK's biggest energy suppliers,
EDF Energy has led the industry in developing initiatives to support
our customers most likely to be living in fuel poverty.
4. In 2003, EDF Energy established the EDF
Energy Trust Fund, a charitable trust, to help households in serious
household debt, and has so far donated over £13 million
to the Trust to help over 15,000 households. However, the
impact of the recession has meant that we have seen applications
to the Trust grow. As a result, we agreed to donate a further
£600,000 to the Trust in December 2009, over and above
planned funding, so that we donated over £4 million
in 2009 alone.
5. Some of our most vulnerable customers
are the hardest to reach, as they may be isolated, housebound
or simply unlikely to turn to their energy supplier for help.
We are constantly trying to build innovative partnerships with
reliable organisations that can help us to reach such households.
Examples of these include:
— Sponsoring London Warm Zone: This community
programme tackles the challenges of fuel poverty and climate change
through a systematic door to door assessment process, to identify
and help the most vulnerable people in society. Following its
initial success, the scheme has now been rolled out across 24 London
Boroughs. In the last three years alone we have made more than
80,000 door to door assessments and through this scheme we
have installed new and improved heating and insulation in over
13,000 homes. In addition, through the London Warm Zone income
maximization services, residents have claimed £2.2 million
of benefits to which they were entitled.
— Women's Royal Voluntary Service (WRVS)
Energy Advice Manager: As one of Britain's largest volunteering
organisations, WRVS is in a unique position to provide practical
support to older people, to help maintain their independence at
home and help them remain active in their community. Since April
2009, EDF Energy has funded an Energy Advice Manager's post within
the charity with the task of educating WRVS volunteers about the
dangers of fuel poverty and signposting the key sources of available
help. The aim is that the volunteers will in turn pass on these
details to WRVS service users, thus providing them with key information
from someone that they know and trust.
— Plymouth Citizens Advice Bureau: EDF
Energy has also funded the first energy advice development post
at the Citizens Advice Bureau in Plymouth. The adviser works with
agencies throughout Devon and Cornwall to support households experiencing
fuel debt and financial hardship.
6. Since introducing the industry's first
special tariff for customers likely to be in fuel poverty in 2006,
called Energy Assist, we have continued to offer this to our most
vulnerable customers, and have seen the numbers benefiting grow
by around 300% in the last two years. Today we have over 160,000 customers
on our special discounted Energy Assist tariff, which offers them
our cheapest enduring tariff. Customers on Energy Assist are also
offered a free benefit entitlement check to ensure that they are
receiving all the benefits to which they are entitled. These customers
are also provided with energy efficiency advice so that we tackle
all three causes of fuel poverty: low incomes, poor property condition
and energy costs. We were pleased when other energy companies
followed our example and launched their own social tariffs, so
that today over a million energy customers in Britain are getting
help from their supplier.
CURRENT CONTEXT:
SECURING LOW
CARBON AFFORDABLE
SUPPLIES
7. In the current economic context, there
is pressure on household budgets for all customers, including
those who are not fuel poor. We believe that Government has a
role to play in addressing fuel poverty through wider social initiatives,
to tackle all causes of poverty, which are often more efficient
than energy based initiatives.
8. Costs arising from environmental initiatives
such as the EU ETS, the Renewables Obligation, the Carbon Emissions
Reduction Target (CERT) and the Community Energy Saving Programme
(CESP) are inevitably spread across all consumer bills, including
those in fuel poverty.
9. EDF Energy believes that, in addition
to efforts to improve energy efficiency, large scale investment
is urgently required if the UK is to meet its climate change targets
in a way that keeps prices as stable and affordable as possible.
It is vital that the right decisions are made now to secure investment
in large-scale low-carbon electricity generation.
10. While the current economic climate may
have reduced the extent of any projected capacity gap in the near
and medium term, the need to deliver the UK's carbon ambitions
will require unprecedented levels of investment in new generation
capacity and electricity networks. It is widely estimated that
investment in electricity generation and transmission alone could
approach £200 billion by 2030, depending on the mix
of technologies adopted.
11. With this broader energy policy context
in mind, EDF Energy believes that the best way for the energy
industry to tackle fuel poverty is to ensure investment is directed
to the provision of the most affordable low carbon supplies for
all and securing competitiveness for sustainable growth.
MANDATORY TARIFF
RELIEF
12. Where support is provided by suppliers,
we believe that mandatory tariff relief, funded on an equitable
basis by all suppliers, is the best way to provide clarity and
consistency for customers and their advisors. We therefore welcome
the introduction, proposed in the current Energy Bill, for mandatory
tariff relief, which will require all suppliers to offer a similar
type of support to groups identified by Government as being in
greatest need.
13. Customers are often faced with a confusing
array of offers which vary between suppliers and are often targeted
at different groups: this is why EDF Energy has long campaigned
for mandatory tariff support from suppliers.
14. It is critical to focus tariff relief
on those customers that are in greatest need, to ensure that the
overall costs for consumers are minimised. EDF Energy believes
that Government is best placed to identify those who should benefit,
and should provide information so that suppliers can target support
most effectively. In the longer term, Government needs to be aware
of the potential for customer cross subsidies to create further
distortions in energy costs and compound inequity between customers.
15. EDF Energy is currently working with
other energy suppliers, the Department of Work and Pensions (DWP)
and the Department of Energy and Climate Change (DECC) on proposals
to deliver a rebate to customers in receipt of Pension Credit
guarantee who are not already receiving help with their energy
costs. This project, to share Government data to allow energy
supplier support to reach those in greatest need, represents an
important milestone in the battle against fuel poverty. If this
project is successful, we hope that it will be a precursor for
Government data to be used to target the majority of energy supplier
support to the most vulnerable customers.
16. Without such data sharing from Government,
our experience in delivering energy efficiency programmes to the
Priority Group[152]
has shown that significant resources to improve energy efficiency
have instead been spent on acquisition costs in trying to find
the most vulnerable customers. We believe that Government has
a fundamental central role in identifying the customers in greatest
need, so that we can maximise the use of resources to achieve
the real objectives of the schemes and have the greatest impact
on tackling fuel poverty.
ENERGY EFFICIENCY
PROGRAMMES
17. Energy efficiency has a role to play,
both in terms of resource efficiency and reducing carbon emissions.
It should however, be considered as part of the broader policy
framework and the need to reduce carbon emissions cost effectively
across all sectors and driving investment in the provision of
affordable low carbon supplies.
18. EDF Energy supports making homes more
energy efficient, improving the nation's housing stock and helping
domestic householders reduce the carbon footprints of their homes.
Retrofitting measures to the fabric of existing homes, along with
low carbon heating solutions and a decarbonised electricity grid
across GB, have a significant role to play in ensuring that the
UK's climate change mitigation targets are met.
19. EDF Energy supports both the CERT and
CESP programmes. Our experience with CERT has demonstrated that
reductions in carbon emissions have been achieved cost effectively.
20. EDF Energy supports a Government extension
of CERT to take the scheme to December 2012. This will ensure
that both the CERT and CESP programmes work to the same time period.
It will also facilitate new delivery mechanisms from 2012, building
upon the lessons learned from CERT and CESP. Future delivery mechanisms
will need to be fully integrated with wider energy policy to deliver
cost-effective solutions for carbon reductions.
21. The total current expenditure for CERT
and CESP is over £1 billion per annum, according to
DECC estimates. As the costs are ultimately passed through to
customers' bills it is important to optimise the financing and
delivery of these programmes, to minimise the impacts on all customers.
The funding of CESP is shared equally between generators and energy
suppliers.
22. It is important that Government's Household
Energy Management (HEM) Strategy provides greater clarity and
certainty on the development of any future supplier obligations.
23. EDF Energy believes that any future
supplier obligations should not have a requirement to focus a
large proportion of energy efficiency measures on "priority
group" households. Targeting measures on a priority group
will increase acquisition costs of finding those whom are eligible
for support. These increased costs to deliver the programme will
increase all customer bills, including those in the priority group
itself.
February 2010
152 The energy supplier Energy Efficiency Commitment,
which was the precursor to the current Carbon Emissions Reduction
Target (CERT) identified a Priority Group of households in receipt
of certain benefits who had to receive a specified proportion
of the measures. Back
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