Memorandum submitted by the Joint National Right to Fuel Campaign and UNISON (FP 10)
1.1 The National Right to Fuel Campaign (NRFC) and UNISON welcome the opportunity to make this joint submission to the Energy and Climate Change Select Committee enquiry into fuel poverty.
1.2 The NRFC came into existence in 1975 with the single aim of ensuring that every household was able to afford adequate heat, light and power. Over thirty years later, the Campaign is still fighting to achieve that objective. UNISON has been a long time supporter of the Campaign. In addition to representing members in the energy sector, UNISON also has many low paid members and a large body of retired members - many of whom feel at the sharp end of escalating fuel prices.
1.3 The background to this joint submission is a piece of work that NRFC are shortly to publish on the fuel costs issues faced by working people who have fallen on hard times. The data for the report came from a series of interviews that NRFC undertook with members who applied to UNISON's Welfare Fund, which is the registered charity serving members of the union. Its aim is to provide support to members and their dependants during times of financial hardship or personal difficulty such as redundancy, bereavement, illness or relationship breakdown. UNISON Welfare Fund provides support services to current members and their families (and to past members of NALGO) through the delivery of confidential information, advice and guidance on areas such as debt management, benefits and housing and through the provision of financial assistance through grants and loans.
1.4 NRFC and UNISON believe that the research will be of interest to the Committee as they undertake their inquiry into fuel poverty. Not just for what it might tells them about addressing the energy needs of people in similar situations, but also for what it says about the fuel cost issues faced by people on low incomes more broadly.
2 Overview of findings
2.1 This small scale piece of research involved structured interviews with 11 people from different households whose circumstances had changed due to factors beyond their control. The household income dropped dramatically and they were no longer able to sustain lifestyles which had previously been manageable. Within a context of personal and multiple financial problems, they were asked about the impact of fuel costs and their attempts to get advice and support to help with these new conditions.
2.2 These respondents were dealing with a multiplicity of problems, difficulties in adjusting to changing household circumstances and sorting out various different repayment and debt issues. They were trying to find out if help was available on a number of fronts, whilst still suffering from the impact of the original problem.
2.3 The research concentrated on the energy issues, cost and energy saving. Although the report is still being finalised, we believe that the research highlights the problems faced by households in fuel poverty, as they show the problems of high fuel bills, inadequate help and support facilities and the lack of resources to make their homes energy efficient so they could keep their fuel bills down.
2.4 These cases also show fear and uncertainty about the energy market and how households can find a clear way through the options available and a fair, sympathetic treatment by energy suppliers. In terms of developments relating to climate change, this group also shows that they are reducing their energy use, not to be more energy efficient but to try to keep out of fuel debt. As fuel bills rise, in response to additional levies for climate change investment and wholesale energy prices, households in fuel poverty will be increasingly deprived of the ability to use adequate energy for hot water and heating their homes and for other functions which require energy. This will have increasing impact on the health and social wellbeing of these and other households in fuel poverty.
3.1 Almost all respondents had been brought to the UNISON Welfare Fund through a personal catastrophe, either in the form of an illness, the loss of a partner through divorce or prison or the loss of employment. Many of the respondents had already been dealing with life on a low income. It was apparent, through the conversations, that there was absolutely no capacity within their situations to deal with anything that was out of the ordinary. This was not through extravagant living. Several were already dealing with their finances in a reasonably efficient manner by paying bills by direct debit and ensuring that bills came out at the beginning of the month. A small number of respondents had had relatively high incomes by comparison to others, yet they too found that the changes that brought them to the Welfare Fund had had a catastrophic effect and were finding it difficult to adapt to the changed circumstances.
4 Income levels
4.1 Most respondents were left in a financial position where they were not apparently entitled to any benefit or benefits which would allow them to access grants such as Warm Front. This group highlights problems for those households whose income is above benefit cut off levels.
4.2 Mrs N had contacted her supplier to see if there was any help but there was none available because they were not on any benefits. She said that she used to "work for a CAB and I know that there isn't much help for people not on benefits. We have to pay for everything".
4.3 Mrs M never has money left at the end of the month. She described herself as "being between a rock and a hard place", she was not eligible for benefits, yet her income did not meet her financial commitments [after the catastrophe which had left her in this position].
Mr G is aware that his energy companies, British Gas and Scottish Power, offer special tariffs and services but believes that he is not eligible for them, "because I am on incapacity benefit and not on income support".
4.4 Mrs V said she had not qualified for any welfare support because she did not earn enough money for tax credits and earned too much to receive income support.
5 Energy markets and affordability
5.1 Most respondents had recognised that energy prices and profits had increased and were shocked by the levels of expenditure on energy for their daily needs.
"Disgusting that energy prices have shot up as they have but that companies are still making ginormous profits."
"Energy is too expensive and it should not be down to the vagaries of the market, companies should not be allowed to make profits out of essentials, it's not morally justifiable."
5.2 This was exacerbated in households where there was additional need for heating where a household member was ill or disabled.
5.3 Mrs B's husband's illness had required that the heating be on all the time and the winter bill was £850. Her energy supplier, npower, informed her, via her energy bill, that her monthly direct debit was being increased to £160. She said she had always paid by direct debit for as much as she could so that she would avoid the shock of big bills. Her husband contacted npower and explained their situation and the reason for the high energy bills. She believed that npower may have offered a discount as a consequence of his illness and said that it was in the region of £15 per annum. Her husband's MacMillan nurse had also contacted npower who said that they were doing all that they could for them.
5.4 Mr F's electricity bill is around £80 per month and his gas bill is not far behind that amount. The heating is on all the time for his osteoarthritis. He also has a skin condition which means that it is uncomfortable to wear too many clothes. He describes things as being "bad but not the worst off in the scheme of things".
5.5 Responses also showed the problems arising from switching energy suppliers when the level for the Direct Debit is inaccurately assessed and the issues that can occur when the customer contacts the supplier for help when their circumstances have changed. The former problem resulted in some cases when switching in response to a doorstep sale, where the expenditure on fuel was underestimated. 8 out of the 11 respondents had one or more problems with their energy supplier.
5.6 The level of direct debits being set either too high or too low affected 5 of the respondents. Generally, they were set too low initially which led to the build up of debt. Then the supplier increased the direct debit to a much higher level, beyond the limits of the customer's finances.
5.7 Mr G had switched to paying for gas by direct debit. The level of the direct debit was not sufficient and he ended up owing an additional £400. He fell behind and had a prepayment meter installed.
5.8 Mrs V's current supplier had door-stepped her and said her monthly energy bills would be £25 per fuel. However, a debt had quickly built up because of an underestimation of consumption and increasing energy prices. Mrs V had assumed that her monthly direct debit was sufficient to cover her consumption until she received a statement saying that her direct debit would need to increase from £25 per month to £90 each for gas and electricity.
5.9 Other problems included not being able to get direct debits set up, bill disputes in spite of providing meter readings and inability to get keys for meter boxes.
5.10 For some reason that British Gas had not been able to explain, it had been impossible to set up a direct debit for Mrs M's electricity account. This meant she had to pay the bill at the bank.
5.11 In Mrs N's experience, energy companies "estimate your bills and then get you to read the meter for them and then, when you get the bill, it's still wrong".
5.12 Mrs R wanted a key for her meter box and had been promised that one would be sent so that she could check her consumption. Southern had not sent it to her and she was now waiting for a statement to see what her bill would be.
5.13 Several respondents had a poor experience of dealing with their energy suppliers "it was like talking to a brick wall"; another said that her treatment was "terrible". Only one respondent mentioned having any assistance dealing with their energy suppliers though respondents were not asked this question directly.
5.14 Mrs D said that her treatment by British Gas had been "terrible". She had explained her financial situation and none of the many advisers she had spoken to had been at all sympathetic. She had had to make "millions" of calls and had got "fed up" with the whole thing. If she missed a payment even by a day, they were on the phone straight away to ask her for the payment.
5.15 Mrs N had contacted her energy supplier because she was trying to get them to correct a direct debit payment that was too high. She found this difficult to achieve and said that on occasions it was like "talking to a brick wall" with the supervisor wanting to increase the payment to £135 per month. She stuck to her guns and kept the payment at £129.
5.16 Mr F pays for his gas and electricity by direct debit. He had previously been paying by cash on a monthly basis. "So I put it on direct debit and let them sort the amount out. The overdraft has absorbed the increases." Mr F had had an energy debt which he described as "a short term thing bound up in paying for the repairs to the shower". He had been reluctant to contact his energy supplier saying that he was a bit "frightened that they would not be very sympathetic because they can insist on you having a prepayment meter" which he said were much more expensive to use. He said it was "pointless to contact them and the less they know about you the better. They have all the power in the relationship".
5.17 Mrs V described her supplier, SWALEC, as being very good when she contacted about the massive increase in her Direct Debit amount (see 3.3.3 above) and was "quite surprised" at the support she had received. The adviser had explained that the new payments had been generated automatically and that she would not have to pay that amount. The adviser said that they were expecting people to be in difficulty because of the cold weather and higher energy prices. A new monthly amount of £45 per month was agreed which would recover her debt and pay for her current consumption.
6 The failure of market competition to deliver for the fuel poor
6.1 An important issue around switching suppliers is shown in these cases. From this small sample, 9 of the 11 respondents had either switched and had problems or were fearful of switching in case there were problems. Respondents feared loss of supply, final bills that would upset finances, problems from overuse of energy on a capped tariff or were generally sceptical or confused about the process and benefits. The other 2 respondents did not consider changing as they did not want upset current arrangements.
6.2 Mrs N said she would not switch supplier because she would have to pay the final bill and also have 2 direct debits in one month, the one from the previous supplier and one from the new supplier, "they all want their money in the same month".
6.3 Mrs M had considered switching to Marks and Spencer Energy but had decided against this; she had heard horror stories about switching supplier and she also had her servicing contract with them which she did not want to disrupt.
6.4 Mr G knows that he can switch supplier but has not attempted to do so, "with being in arrears to British Gas, I can't imagine anyone else wanting to take them over".
6.5 Mrs D had been approached by Scottish Power who said that she could save more with them. She switched supplier and found that she was putting more money into her prepayment meter so she switched back to EdF, "he (SP representative) said it would have been cheaper than EdF but it wasn't".
6.6 Mrs V said that having got into trouble as a consequence of switching supplier would make her unlikely to switch again in future. She felt she had not made the savings she had expected and described suppliers at "six of one and half a dozen of the other".
6.7 Mrs R switched from EdF, because she felt they were too expensive, to Southern Electricity. She could not say whether or not she felt that Southern's prices had gone up or down since May 2008. She was, however, having some difficulties with Southern.
6.8 Mr F knew that he could change supplier but had never tried to switch. Friends had switched telephone supplier which had ended up leaving them without access to a phone and he was fearful that the same thing might happen with his energy supplier. "I don't want to be without a phone or fuel. I don't know how to change supplier and I'm not sure I would make any savings. They'd want their money back at some point in the future."
6.9 Mr W has little idea whether or not he can trust what gas and electricity companies tell him about energy prices. He said it was all "so confusing, I don't know what is true ... I don't know how they work it all out and I don't know if I'm being ripped off ... I just go with the flow." It appears that he switched supplier when sales agents were in the area but had no idea that his previous supplier, British Gas, would require him to pay off the debt he had with them and his final bill. He has now had to sort out a payment arrangement with British Gas.
6.10 Mrs C switched supplier last year to Eon, having used a price comparison service, after seeing Martin Lewis's advice on GMTV to look out for capped energy prices. She pays £70 per month for her gas and electricity via direct debit. She manages her account on-line and has worked out that she is using a lot more energy than £70 per month according to her calculations. She still turned off lights and appliances in her home for fear that the energy company would say that she had used more than she should have done. The capped price arrangement comes to an end this month and she is hoping to arrange another deal.
6.11 Mr W said that he was also on a special tariff, possibly a social tariff which gave him cheaper prices, in addition to the discounts from the direct debit tariff of which he was aware. He felt that British Gas were a reputable firm, that everyone buys their gas and electricity from them. He had previously been with npower but had switched to British Gas because of the capped prices deals on offer. He had been contacted by other suppliers but did not intend to switch again.
6.12 Until the onset of Mrs B's husband's illness, they had switched supplier regularly as a means of ensuring their energy costs were as low as possible. She said that her husband was "always on the internet" trying to get the best deal. Their most recent switch had come about as a consequence of an approach at a supermarket. However a month into the deal, and prices began "creeping up". She went on to add that all energy suppliers were "much of a muchness".
6.13 In these conversations, there was some evidence that respondents were unaware about the costs of different fuels and how expensive they were to use. Mr W described his house as "big and cold." One of his coping strategies is to only use electricity because gas "is so much more expensive".
7 Effects on daily life
7.1 Two statements stand out from these interviews about the impact of financial difficulties on a household; "not living but existing" and "living from hand to mouth".
7.2 In this context, Mr G copes with high energy bills by not using it. For example, he tries not to use the washing machine. His daughter who lives with him takes her washing each week to her mother's house over 15 miles away.
7.3 The size of Mrs D's energy bills have led her to dramatically alter how she consumes gas and electricity. She only heats water when she needs to and they don't turn the central heating on, preferring instead to use the gas fire which she described as being "cheaper to use". Her new home is much more difficult to heat. She said that it was really cold in winter and she had to increase the amount she spent on gas to £20 per week.
8 Help and support
8.1 Only one respondent had had a reasonable experience in asking his fuel supplier for assistance. Others had either had a bad experience or had been too worried about the likely outcome to contact them. No one mentioned being advised about Consumer Direct, the Energy Ombudsman or Consumer Focus for further advice and help with their problems.
8.2 While there was some awareness of the availability of energy efficiency advice, none of the respondents mentioned other advice sources suggesting they get this type of advice or where they might be able to find it. There is a national network of energy efficiency advice centres run by the Energy Saving Trust.
9 Energy efficiency
9.1 Most respondents had at least a basic understanding of what was involved in being energy efficient. Only small number linked energy efficiency to climate change policies about reducing carbon emissions and that was either because energy issues were part of their work or because the issue had been raised with them by their children.
9.2 When describing what it took to be more energy efficient, most respondents were able to mention normal measures such as loft insulation, low energy light bulbs and cavity wall insulation. No respondent mentioned any more advanced measures such as boiler replacement, solid wall insulation, windows replacement or renewables. The overall view was that there was little more that could be done by way of making their homes any more energy efficient.
9.3 There is a very patchy picture of how energy efficient the homes of these respondents were; 6 of them mentioned some energy efficiency measures but there is no sense that any of them live in a dwelling that would rate very high on any scale.
9.4 Most talked about cutting back on energy use, mentioning turning down thermostats or turning off lights. Some respondents were clearly talking about reducing energy consumption, turning off heating and hot water, in a punitary way as a means of dealing with reduced income and high fuel bills.
9.5 There is limited experience of receiving energy efficiency advice and most talked about getting leaflets from gas and electricity suppliers and others and throwing them away. No one mentioned getting energy saving advice from advisors helping with fuel debt or being referred to this sort of help.
9.6 There was also some scepticism about using energy advice if it was available, even a statement that "it's not for people like me, I don't want to feel like a beggar".
10 Report recommendations
10.1 Looking at a small number of cases in research like this throws up all the human variations that make planning difficult for Government, fuel suppliers and the regulator. However, it does show up characteristics which could help improve help and support provision to low income households and which can identify households where energy efficiency investment should be targeted as a priority.
10.2 Income levels
This group also shows the problems for households whose income is just above cut off levels for benefits, or whose benefits do not make them eligible for grants such as Warm Front. This has always been an area of concern for the NRFC and UNISON. There was a sense, in some of the interviews, that there is a lack of fairness in the way low income households are treated.
The report of the research, when it is published, will be urging the Government to find an innovative approach to the issues in this research to be able to include these households in its various programmes, especially for energy efficiency investment
10.2 Fuel Suppliers
We have looked closely at the experience of our interviewees with their fuel suppliers. The picture is not good. There were problems with switching and Direct Debit amounts, not much evidence of sensitive help with fuel debt and real worries about contacting the fuel supplier in the first instance.
We are concerned that hard working staff in customer service centres aren't always able to provide more help and advice to customers because of the number of calls they are required to make per hour and commercial considerations.
Fuel suppliers need to look at their customer services arrangements to allow for more time, so that customers who are having real difficulties are given realistic support, such as longer debt repayment times, and avoiding expensive payment methods such as prepayment meters.
There needs to be clearer, and more accurate, information about and during the switching process. Suppliers should improve the knowledge they have of customers' energy use when they switch to ensure that there are no surprises when Direct Debit amounts are adjusted.
Suppliers' advisors should ensure that clients are referred either to an in-house energy efficiency advisor or given the national energy efficiency advice helpline number.
Ofgem should be monitoring suppliers customer services closely following the changes to consumer advice and support with the set up of Consumer Direct, the Energy Ombudsman and Consumer Focus.
10.3 Help and support
Energy Saving Trust should do more to publicise their energy efficiency advice centre network to other types of advice agencies, such as CAB and local advice centres.
While the issue of benefit entitlement did not come up very much in
these interviews, there is real concern that low income households are not claiming benefits to which they are entitled. A wide recommendation that all advisors dealing with these clients should either do a benefit check or refer the client to someone who can do this. This will ensure that these households receive the maximum income to which they are entitled and may make them eligible for other benefits and schemes such as Cold Weather Payments, Warm Front or social tariffs from their fuel suppliers.
10.4 Energy Efficiency
In addition to recommendations on access to energy efficiency advice in the section above, we would also make some recommendations on energy efficiency investment.
In response to all consultations on energy efficiency investment programmes, the National Right to Fuel Campaign has said that households in fuel poverty should be the priority group for action. Households like those in this research should be on priority lists for fuel supplier programmes such as CERT and HESP. From the point at which they contact their fuel suppliers for help, they can be marked as likely to need improvements in the energy efficiency of their homes.
A couple of respondents mentioned seeing no difference as a result of reducing their energy use a bit. The Campaign has argued for higher ratings as targets for energy efficiency investment. It is only with high standards of energy efficiency of buildings that householders will see real financial benefits. Limited financial benefits will deter households from making savings in their energy use.