Energy and Climate Change CommitteeWritten evidence submitted by Hastoe Housing Association

To what extent (if at all) should the Government or the regulator intervene in the market to affect the prices consumers (or certain groups of consumers) pay for their energy? Should any changes be made to the Government’s current approach?

How effective is Ofgem in ensuring consumers get a fair deal? Are there any areas for improvement?

1. Hastoe would urge the Committee to consider:

How the most competitive tariffs can be made available to those on low fixed income who pre-pay and do not have access to the internet.

A reform of the current system where heavy users pay a reduced charge per kWh and low users pay a higher than average charge per kWh.

2. Fuel poverty is a serious issue and people living in rural communities are often at greater risk due to being off the mains gas system and having lower incomes. Hastoe is responding to the problem of rural fuel poverty by building all our new homes to very high environmental standards and developing a “Hastoe Green Homes Standard” which guides our retrofitting programme including the retrofitting of over 100 ground source heat pumps over the last two years utilising RHPP funding. We are also leading on the construction of Passivhaus homes, with two completed schemes (Ditchingham, Norfolk and Wimbish, Essex) and another 146 in our programme. Passivhaus is we believe the way forward for rural communities both on and off mains gas.

3. We are concerned that the current energy tariff structure is both preventing our residents from fully benefitting from improvements in energy efficiency and penalising those people who are at greatest risk of suffering fuel poverty. We know from our discussions with our residents, many of whom live in rural off-gas communities, that they are not able to benefit from the most competitive energy tariffs.

4. Many of our residents are pre-paying for energy ie not paying via direct debit often due to cash flow problems or because they do not have access to bank accounts and, as a result are not eligible for the best energy tariffs. In addition, many of our residents do not have broadband and are not able to benefit from on-line offers and comparison websites.

5. For some of our residents who are on low fixed incomes, the inability to access the most competitive tariffs can significantly reduce their opportunities to achieve affordable warmth in their homes.

6. The lack of access to the most competitive rates is a problem for our residents across our housing stock and somewhat perversely can also have an effect on residents living in our most energy efficient Passivhaus homes. This is because the amount of energy consumed in our Passivhaus homes falls below the thresholds for many of the better tariffs. In other words, the current tariff structure penalises those who are consuming the least energy as they pay more per kWh than those consuming more energy.

7. The scheme at Wimbish won the Best Residential Project in the UK Passivhaus Awards 2012 and has attracted funding for an in-depth performance evaluation study from the Technology Strategy Board.

8. Data from the first 12 months confirms that gas consumption for heating and hot water is very low, averaging 1500 kWhs a year for the six flats, and 2500 kWhs a year for the eight houses—far below the national average of between 18 and 20 thousand kWhs.

9. When we fed these figures into online comparison websites, we discovered that our tenants were being heavily penalised for their low consumption, paying nearly twice as much per kWh for gas as “normal” consumers. This is because their consumption is well within the threshold for the lowest tier but far from far from lowest cost tariff. Ostensibly, these unfair bills could be offset by the online and direct debit discounts on offer which could amount to £55 and, at Wimbish, would be at least a third of the total. However, many of our tenants are unlikely to be in a position to take advantage of such discounts being neither eligible for direct debits nor having broadband.

10. In summary, we would ask that a review of the energy tariff structure considers how low income, rural households at high risk of being in fuel poverty can be given fair access to the best energy deals.

February 2013

Prepared 26th July 2013