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I remind noble Lords, and emphasise the point that the Minister outlined very clearly, that at least 40 per cent of the carbon emissions reduction obligation must be achieved by action carried out in the priority group. Article 2 defines priority group as those who get benefits or tax credits as listed in Schedule 2, have the relevant income of £15,592 or less or are at least 70 years old. I was interested that the Minister said that that last group is the most vulnerable. I fear that I have to declare an interest, as I come into that group. I am over 70, as is my wife, but I had not hitherto regarded myself as vulnerable, although I recognise that there are many pensioners who are.
The Minister explained that the order doubles the level of energy emissions to be saved from the household sector as compared with the previous EEC target. That has nothing to do with the European Community; it is the energy efficiency commitment. The Ministers honourable friend in another place called it eek. I shall not call it eek because I think EEC is best. Given this major increase in the overall target and, within that, the 40 per cent target to come from the priority group, it seems clear that considerable difficulties will be created for energy suppliers. Indeed, my inquiries have revealed that they are already facing considerable difficulties, even before this order.
My first port of call to find out what the Government are going to do about this was the Explanatory Memorandum that accompanies this order. To my astonishment, it runs to no fewer than
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but their view that one of the main reasons why it is non-achievable is the difficulty in identifying the target households is completely ignored.
When I started consulting the industry, a different picture emerged. I started with the Energy Retail Association. It provided a valuable brief on the Energy Bill, which has been introduced in another place, entitled Fuel Poverty, Social Tariffs & Vulnerable Customers. Section 8 is headed, Government needs to share data with industry on vulnerable customers, and starts:
Identifying vulnerable and fuel poor customers has always been a challenge for the industry, and it is keen to share more data with Government Departments to help improve targeting.
In a recent press release, the chairman of the Energy Retail Association said:
It is crucial that the support available is reaching the right people. Energy suppliers offer a wide range of help for vulnerable and older people to help them reduce their bills, but they have no information to identify those households.
I find it astonishing that that did not figure among the representations in response to the consultation and does not figure in what the department chose to put in its summary of those consultations.
So we are already facing a considerable difficulty. However, it is not all hopeless. I am told that last year there was a small pilot scheme run jointly by the industry, the Department for Work and Pensions and DBERR. It apparently did not involve Defra; when I asked, I was told that Defra does not seem to have been involved. This pilot scheme in England and Scotland was seen as a special project. Certain limited information about some of the most seriously vulnerable customers, 250,000 of them, was involved. That represents about 0.02 per cent of the 11.2 million that I referred to earlier.
The industry pays for the mailshot, which the Department for Work and Pensions sends out to the target households, including a coupon and a freephone helpline; the industry responds when customers return the coupon or phone in. The pilot scheme was regarded as a success and I think that it was a promising initiative. I therefore ask the Minister whether it will be, in the Governments favourite phrase, rolled out to more than 0.02 per cent of the priority group. If so, when? When will there be a report on that pilot scheme?
Having discovered all that from the trade association, I went to two of the suppliers. I buy my gas from British Gas, which I can tell the noble Lord, Lord Redesdale, passed my boiler the other day as extremely efficient. At the end of its press release after it had to put up its prices by 15 per cent, it made a good deal of what it does for poor customers. It quoted a report from Energywatch that said:
British Gas has and will have made the most significant voluntary commitment to measures to reduce the impact of fuel bills on its vulnerable customers.
I got straight on to British Gas and asked how it did it. Its spokesperson, an extremely capable young lady, immediately responded and I met her yesterday. The main message is that the whole situation has been very difficult since the EEC started. She went on to describe what British Gas in fact does, a good deal of which is just advertising and blanket leafleting. However, it also goes to the local authorities, which can and do give it postcodes where people on housing benefit may be living.
British Gas told me that it tries to work in partnership with local authoritieshousing departments, social services and so onto find areas of local deprivation. Of course, it is not given names and addresses. It sounds rather like a municipal game of hide-and-seek: We cannot tell you where they are, but we can tell you where to look. I suppose that that is better than nothing, but it does not sound to me like a very cost-effective method. Indeed, British Gas estimates the cost of this hide-and-seek and its other measures as £2.5 billion over the three-year period of this order. It has put the cost of its past efforts to find customers at £6 per customer per fuelmany customers take both gas and electricity. Its latest estimate is that this is now going to cost £20 per customer per fuel. That is all customers, including the target customers, so a customer who buys both gas and electricity will be paying £40 for the cost of searching for the priority group.
British Gas also told me that it is in no doubt whatever that the process that it has to use involves huge inefficiencies and that much of the £2.5 billion that it has estimated is simply wasted. One reason for that is that it finds that an increasing number of these target households have already benefited from the Governments Warm Front scheme. That means that this is a complete waste, because the household has already got insulation, or whatever it might be. Will the savings from Warm Front households count towards a suppliers 40 per cent target? If, as I suspect may be the case, the answer is no, is not that likely to make achieving the 40 per cent target even more difficult?
I have also had a brief from Scottish and Southern Energy, whose representatives I met last week. That company is also finding identifying priority group households extremely difficult. That phrase is used over and over again. I found it used by the Energy Retail Association; it is always extremely difficult. It expressed concern that, even with the help that it can offer vulnerable customers once it has found them, the amounts that customers will have to pay towards the cost of the improvements available under the CERT will be beyond the means of many of them.
My noble friend mentioned Ofgem. I looked at the latest Ofgem five-year strategy consultation document, which is for 2008 to 2013. It is dated very recently14 January. Chapter 6 is headed, Helping to tackle fuel poverty. Paragraph 6.6 states:
The challenge remains getting the message across to those who most need the help and ensuring that once identified they can benefit from the full range of help availablethe find and fix approach. This requires a joined up approach from Government, industry and other agencies. It is also dependent on the Government using its sources of information to improve the targeting of the help available.
The CERT is mentioned in paragraph 6.8, but not much is said about the monitoring role. It seems to me that Ofgem has identified this problem perfectly properly and that it needs more joined-up thinking, if I may put it that way, as others are asking for.
My attention was drawn to eaga, the Energy Action Grants Agency, which originally was an agency but is now a very successful private sector company owned by its employees. It has been successfully delivering Warm Front across England for Defra and equivalent schemes in Wales and Northern Ireland. Eaga told me that it cannot identify the costs that it has incurred in identifying constituents who are eligible for Warm Front grants, but it gives some interesting information. I quote:
To which one might say, Well, they would say that, wouldnt they?. I am, however, very impressed by eaga. I did not know about it before, but I have looked at its excellent website and had long discussions with its people, and it is a good organisation. Much more of this scheme might well be routed through it, as it seems to have the experience of doing this. Many of the companies are obviously finding it difficult.
However, whilst we recognise that the absolute number of Priority Group households benefiting from CERT will technically increase, we believe it is very much worth noting that Priority Group customers are likely to pay 100% more under CERT and to receive only 44% of the additional benefits. This is worrying as these customers are the least able to meet these costs.
Would the Minister care to comment on that? I say straightaway that Warm Front has been an undoubted success and that eaga is entitled to much of the credit for the delivery of the scheme, so I regard its anxieties as pretty worrying.
Given the real concern in the industry and in Ofgem, is it not genuinely surprising that in the entire 79 pages of the Explanatory Memorandum put out by Defra the problem of identifying priority group customers is not even mentioned, let alone addressed? Would I be unreal in thinking that this begins to look like a conspiracy of silence in Defra? I hope that that is not true, and todays debate offers the Minister the chance to disprove it. Again, will the Minister say what Defra is doing to help the energy industry to identify PG customers and so help the industry to achieve the challenging 40 per cent target?
In conclusion, and in a lighter vein, I make three suggestions. The first is that the names of all the tax credit claimants are put on to a couple of computer disks and sent in an anonymous envelope to the Energy Retail Association. The second thing might be to arrange for the local authority to put all its information into an unnetted skip and let it fly out over the roundabouts on the bypasses. The third thing is that the Department for Work and Pensions could put all its information on to a laptop computer and arrange for it to be stolen. I say this in a lighter vein, but all these things have happened.
Viscount Brookeborough: I had not intended to say anythingI am here to discuss the next orderbut I felt that I should make a very general remark after listening to the debate. I welcome the order and anything to do with energy conservation and reducing carbon emissions. A number of years ago, we on the European Communities Committee held an inquiry into renewable energy. Of course things have moved on, but much of what the Government are doing now largely involves panic measures. Governmentsprevious Governments, not necessarily this onehave failed to do anything for years.
The European Communities Committee visited Denmark because it has a climate extremely like our own. We found that how little we had done and are still doing was embarrassing in Denmark. At that time, the use of energyelectricitythere had not increased in the previous 20 years, although GDP had gone up as much as ours had. Why? Because Denmark had conservation measures that actually worked. We were informed that our building control regulations were miles behind those of that similar country. The opinion was offered that this was partly because of the power of the construction industry within the wheels of government and everything else. However, our regulations were miles behind for whatever reason. They are still behind those of Denmark, which is so similar to our country. Why are our building regulations not such that we are conserving more energy than we ever did? We are not up to speed with other nations.
Secondly, there is all this encouragement for microgeneration, which I find rather interesting. It was introduced in Northern Ireland about six months before it was brought in here. Denmark went along that route 20 or 30 years ago, which helped it a great deal. Because of the eyesore problems, cost and so on, Denmark is now providing incentives to group microgeneration schemes together so that it is no
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We have heard this evening that the Government have not always given a lead. Without a doubt, that was the finding of our inquiry: the Government were not giving a lead or the correct incentives to the suppliers to provide what was required to meet our targets. We are now at a stage where, although it may not appear like panic, we are rushing everything through. Although I am entirely behind nuclear, it appears that the decision on it the other day was introduced in exactly the same way. I am delighted by the decision because I believe in nuclear, although I do not have a thorough knowledge of it.
A symptom of how the Government do not provide incentives is the number of projects that have failed in the past five to 10 years, whether for planning reasons or because of insufficient incentives to get the project right in the first place. I am talking about projects such as the Holsworthy biogas project in the south-west, where there was not enough incentive to get the filters right and it did not work. This Government and previous Governments are very much to blame for not giving enough of a lead. There is not enough information out there and not enough incentive for business to come to this in a major way. I hope that we achieve those targets. I welcome the order, but we need a lot more to get down to grass-roots level.
Lord Rooker: I say to the noble Viscount that we have oneI hopeday left in Committee on the Climate Change Bill. I look forward to him participating in our debate on Wednesday. He brings valuable experience.
I have no brief on this, but the short answer to the noble Viscounts point about Denmark is that coal and North Sea oil and gas made us incredibly lazy and inefficient in this country. It made everybody ignore renewables, as there was no pressure. The Danes did not have those resources, so they went down their route. What has happened in this country is an absolute disgrace and, of course, we are making up for it now. As the noble Viscount rightly says, there has been a push in this respect in Northern Ireland because of the former Secretary of State, Peter Hain. That was in the face of some pressure that I know ofI sat at the table with himagainst even the turbine experiment at Strangford Lough. It took enormous pressure to drive that through to see what we could do with renewables.
I entirely agree with the noble Lord, Lord Jenkin, about eaga. I pay tribute to the support that it gave to my former constituents. It is an absolutely first-class organisation, both when it was an agency and since it has been in the private sector. It provides a valuable service, as any Member of the other place would confirm.
I shall do my best to answer the specific questions. I shall take first those asked by the noble Earl, Lord Cathcart. He asked about the CERT, the incentives for innovation and how it would work. We think that there are two key routes for innovation: the market
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The noble Earl asked how the delivery of the CERT will be overseen. The draft order makes Ofgem the regulator responsible for overseeing the delivery of the CERT. I know nothing about the background to why Ofgem was chosen as opposed to any other body. I am giving the position at the moment following the consultations and the approval by the other House. The order makes Ofgem responsible for overseeing the delivery by monitoring suppliers progress towards meeting their obligations. Suppliers proposals for meeting their targets must be approved by Ofgem, which will determine the reduction of carbon emissions that will be attributed to them. In August last year, Ofgem issued a consultation paper on its supplier guidance for the operation of the CERT and expects to issue its final administrative arrangements as soon as this order comes into force.
The noble Earl also asked what happens if a supplier fails to meet the obligation. Ofgem will be responsible for the enforcement of each suppliers CERT obligation. It has the power to impose on a supplier a financial penalty of up to 10 per cent of company turnover if it fails. The Electricity Act 1989 and the Gas Act 1986 are the primary legislation that requires Ofgem to be the administering body. Article 16 requires Ofgem to submit annual progress reports to the Secretary of Statethat goes without saying, but you always have to say these things. Those reports will also be in the public domain.
The noble Earl said that the issue depends on individual consumers taking action. I admit that there will be some difficulties. We are talking about what household consumers in this country can be persuaded or incentivised to do. In the past six years of the energy efficiency commitment, suppliers have shown that they can work effectively and creatively to deliver action from individual customers. The Government are committed to helping individual consumers to overcome real and perceived barriers to action, such as poor information, high upfront costs, apathy and the hassle factor. We intend to build on the successful Act on CO2 campaign with TV, online and press advertising, and we continue to work at local and grass-roots level. In November, the Prime Minister announced that the Government would provide £100
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The level of the target is based on an analysis of an illustrative mix of a balanced selection of possible measures generally regarded as cost-effective. The analysis is informed by information and data provided by energy suppliers, representatives of the industries concerned and experts, including the Building Research Establishment and the Energy Saving Trust. We recognise that the costs to suppliers of achieving their CERT obligations are passed on to consumers through their bills. The Government have sought to ensure that the cost to consumers is kept at a reasonable level.
Lord Jenkin of Roding: The Minister mentioned the Energy Saving Trust, which was one of the bodies I got in touch with. I am glad to hear of the additional grant going to it. I found it quite difficult to get any information. When I started asking it how it thought this identifying would work, it said, Well, working with the local authority and NGOs can give details up to a point. It declined to go any further than that. I wonder whether the Energy Saving Trust is doing all it can to alert people to what is necessary if there is going to be any chance of the industries getting their 40 per cent targets.
Lord Rooker: I shall come to the issues the noble Lord raises separately, in a moment.
The noble Lord, Lord Redesdale, raised the issue of boilers. They are not eligible for the CERT because efficient boilers are required under building regulations. You cannot buy an inefficient boiler today anyway. It would therefore not provide additional activity under the CERT. We are, however, promoting the early replacement of boilers through the energy performance aspect of the building directive. There is an issue with boilers and, as the noble Lord has rightly said, with inefficient ones the energy is going straight up the chimney. More and more are being replaced.
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