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, i.e. 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 200billion 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 for 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[1] 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

 



[1] 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.