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 350m 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 3.7bn 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