Select Committee on Trade and Industry Minutes of Evidence


Examination of Witnesses (Questions 640-655)

ANN ROBINSON, LESLEY DAVIES AND ANDREW HORSLER

TUESDAY 4 DECEMBER 2001

  640. On the other side of cost reflectiveness other witnesses argue that if you are a heavy intensive energy user who is willing to optimise the use of your plant to minimise stress on the network, should you not get some kind of reward for your contribution?
  (Ann Robinson) Let me put it this way. The industrial and commercial as a large sector use a lot more energy than domestic users. They use 70 per cent of all gas and something like 60 per cent of all electricity; they are huge users. It would be an absolute total disaster if you produced a system that rewarded people who behave well at the expense of domestic users. The second thing I would say is that a lot of the large intensive users do negotiate their contracts and those contracts do take into account predictability of use and all of that. I am not saying it is a bad thing. It might be a good thing to look at some of those things to see whether there are not even more improved ways of encouraging good behaviour on the part of industrial and commercial users, but not at the expense of the domestic sector. If you talk about good behaviour and the domestic sector, things like predictability . . . The National Grid know, if Coronation Street or a big match are on television, that at half time everybody is going to go out and put the kettle on. They can predict that to an extent. There is a more fundamental question than this. If you start thinking about some sort of charging tariff for domestic consumers which depends on this sort of good behaviour, using energy at certain times of the day or to a certain extent, then it is cloud cuckoo land because not many domestic consumers will be interested or wanting to know about that. What is even worse about that is that you are then in a situation where you disadvantage elderly people, disabled people, people who spend a lot of time at home, who cannot switch off their heating system at certain times of the day, otherwise they will suffer as a consequence.

  641. Though have we not for years had the system of off-peak heating for optimising the use of the electricity system?
  (Ann Robinson) It all depends on whether you thought that was a very good way of keeping warm and whether in fact you did keep warm.

  642. On this accessibility in rural areas, have you made any assessment of the possible scope for new technologies to be applied to bring rural customers a choice of fuel?
  (Ann Robinson) Some new technology will have to be supplied because, with the best will in the world, it might not make any kind of sense at all, it just would not make sense, to try to extend the gas network to everybody everywhere. There are new things which are being looked at like liquid petroleum gas and more effective and efficient ways, and CHPs too could have quite a major role. There are new technologies which will have to be brought into play if we are actually going to achieve a good arrangement for people in these remote areas.

  Sir Robert Smith: If you get any good ideas . . . In my constituency all the gas from St Fergus comes rushing past us but most people cannot access it.

Mrs Lawrence

  643. In your paper you say that your mission is to be an independent consumer champion. You have talked primarily about gas and you have talked about nuclear because of your concerns about the dependency on imported gas. This morning I asked a question about the green tariffs which electricity providers are advertising. A comment was made that they are not really being promoted properly. With your interest being particularly in poorer consumers, have you done anything to try to encourage the more environmentally aware, perhaps the wealthiest customers, to increase take-up on those tariffs, to encourage investment, so that the benefits of renewables will be available to those who are poorer users?
  (Ann Robinson) No. And I shall tell you why we have not done that. We have only been in business as energywatch for about one year. We have been busy building our organisation, our infrastructure, getting the people in place. We have had to recruit and train half our staff. We are just getting our systems in place and we put most emphasis on things like improving the price comparison information, beginning to build the advice and information in relation to giving people energy efficiency measures of one sort or another. We have concentrated particularly on the issue of fuel poverty. We are looking at things like debt blocking and to be perfectly honest it is very difficult for us to campaign or educate on a number of issues at once. What we are doing is looking at the things which we think are going to help people to navigate their way around this marketplace, become very conscious and very aware and very informed consumers, very confident consumers and particularly what is needed to protect the people who will still need protecting.

  644. So you have not.
  (Ann Robinson) We have not. I am not saying that this is something we shall not do; I am not saying that at all because we shall want at some stage to be able to tell the consumers so they can make a real choice about what they get from going for this tariff or that tariff and that it is not just a matter of price, there are other things they might want to sign up for. I said no, because it was a straight answer, but it is not off the agenda. It is something we shall probably want to return to when we have got on with some more pressing things.

Linda Perham

  645. I was interested to see that you are proposing a strategic energy authority in your submission to reconcile the social, environmental and economic objectives and also get some coherence from the eventual proposals from the PIU. How would that work? What would be the remit of the SEA? Play with that one.
  (Ann Robinson) I would not have been so brave as to suggest a strategic energy authority although obviously we have been thinking about it. What we said in the evidence was that we wanted one body; and I do not need to rehearse the arguments for having one body in front of you, you are pretty well aware of the number of departments and the conflicts between those three objectives which have just been mentioned. There are difficulties. It is important. Let me put it this way. PIU with the advisory committee now has a lot of key people together but on the advisory committee we have six government departments. Having got people together and started marching them up the hill and perhaps with a lot of effort getting some sort of proper strategic approach or a strategic brain work, what we do not want is them all falling off in different directions. It does need one body to see this strategy through. The difficulty is what that body covers. I do not have any clever answers for that because you can make very good arguments for it to include things like housing and transport, yet housing has connections with other aspects of Government policy which are quite outwith energy; so has transport for that matter. There are some really big boundary issues and the biggest issue on which I do not have an answer at all, but I am sure you are likely to have a better argument than I have, is that such a body would have to be independent and would have to have quite a capacity to do the work. Having said that, you cannot have something in an area as important as this, where we have said there has to be a clear government framework and signals operating, without any political direction. How do we wrap the politics around it? What would be the Minister or group of Ministers to whom it might report and does that still allow World War III to break out occasionally?

Chairman

  646. At the moment we have several Ministries responsible for energy policy. Do you think there is a case for putting them all under the one umbrella? I realise that in previous incarnations you have been a civil servant and probably things you have been in charge of have now gone back to where they were before. Do you think there is a case for reshuffling the cards or putting them back, playing different hands?
  (Ann Robinson) To be honest, if we do not do it, no matter how much effort and work goes into the strategic framework, then the special interests of different people will come into play. It will be very, very difficult to sustain and develop an energy policy. I do think that the cards have to be shuffled some way to bring a number of key things together and it needs to be a high profile and it needs to be transparent and accountable. The other thing on this is that whatever comes out of this energy policy review is going to be based on some assumptions which are yet unproven which need to be tracked through. We need to have a clear and transparent way of tracking whether some of those assumptions are being realised or not. We do not want anyone fudging it or anyone thinking maybe we ought to package this. We just need absolute transparency and it is too important to mess around with.

Richard Burden

  647. Let us assume that the Government says they agree and they will set up a strategic energy authority and they look at your submission and what you think the priority is, and it is to provide safe, secure and affordable energy. That is the objective and that is the priority. Of course some of those things can conflict sometimes, can they not?
  (Ann Robinson) Yes, they can.

  648. Particularly the issue of security on the one hand and affordability on the other. It is putting you on the spot to some extent, but if it comes down to a choice between those two which do you think has the higher priority?
  (Ann Robinson) Security and affordability strangely enough are in many ways much the same thing. If we do not have a secure energy supply, but one which goes off or is intermittent, then industry, consumers, public services will suffer. If they begin to suffer then they become less competitive. We need to have that security of energy supply to keep us on track. We also need for it to be affordable. I choose my words very carefully here. The important thing about affordability in this context is what it does to British competitiveness. We know there is a lot of heavy industry. There are global players and they have to compete and energy is a huge part of their costs. But there are some other players who are not quite of that ilk, but nevertheless energy is an important part of their costs. If our costs go up too much in relation to other people then we could find that we are in a position where we are losing jobs and all of that. Affordability is important in that respect. The other thing which is important too is, if we see, and it is likely that energy prices are going to rise between now and 2050, so as we see that happening we need to address those issues properly and see what that does in relation to people in fuel poverty and how best to mitigate it. We might need stronger programmes, more resources, we may need to put a lot more effort into a number of key things. The one thing I will say very much about the regulator is that if you look at the fuel poverty figures, the fuel poverty figures in numbers have gone down something like 6.5 million in 1996 to four million in the year 2000. Although energy efficiency has played its part, the biggest part is what is happening to fuel prices. If fuel prices start going up again, it does not take a genius to work out what the impact is. There is a real issue about what we pay for energy, a big pressing issue in relation to industry and not handicapping industry in the competitive sense, but also recognising that it could have a very negative effect on the Government's commitment to take people out of fuel poverty and look again at what needs to be done there.

  649. If there is an unnecessary contradiction, and in a sense you do need to hit both targets, it could be argued that NETA, for all its faults—it has all sorts of other problems—pushes down prices. Nonetheless, if you are looking at maintaining security, one thing you do touch on in your paper for instance is CHP and a good contribution to security of supply could be to boost CHP, but the consequence of that down the line could well be an increase in prices. How do you think that dilemma can be mitigated? Would you see the approach as being in a sense keeping prices at the point of payment as low as possible because of the fuel poverty angle, with the cost of having the right kind of security being paid for through some kind of different mechanism which is not actually to the direct price? That has all sort of other implications, has it not?
  (Ann Robinson) If you start tampering too much with some of these demand supply mechanisms then you end up with something which is artificial and unworkable. What you have to do is go off with the right kind of mix, the right arrangement. We do not want gold plated security. Nevertheless there has to be a value on security. Put all of that together and mitigate the worst effect, but just coming on to this issue of CHPs, given what we are facing between now and 2020-2050 when obviously what we have to do is work very strongly and hard on the demand side of that with energy efficiency measures and all of that, the net impact is that we are still going to be importing energy. What begins to matter then is the issues around how we do it in a way which secures supply and does it at an affordable price. This is why we have to weigh the nuclear, the renewables, even coal: all the energy sources as part of that general package, having put a value on security and what it will cost if we did not have that in place. If for example on renewables or CHP—I have no reason to believe this will be the case—we do what we can there but the minute it looks as though it is not realistic or it is going to be very costly relative to another form of energy, which means that our energy overall becomes more costly than our competitors, then we have to think about a different mix. That is why I said right at the very beginning that the important thing from energywatch point of view is that we have a number of these issues absolutely addressed with as much clarity as possible and where we do not have the answer say we are going to find the answers or we are going to track performance or whatever. The kind of trade-offs you have been mentioning are properly worked through and displayed.

Mrs Lawrence

  650. You say you have particular regard for the needs of low income, elderly, disabled, chronically sick and rural customers. You mention the drop from 6.5 million to four million. I think personally one of the contributory factors there must be the Government's winter fuel payment for pensioners must also have made a significant difference. What do you think of the content and direction of the Government's fuel policy strategy?
  (Ann Robinson) On that last point first, I think the winter fuel payments are great; I am almost qualifying myself, but never mind. Seriously, they are very, very important. What has actually happened is that the number of vulnerable people has increased as a percentage of the fuel poor. I cannot get the exact percentages but it has gone up from 70-odd to 82 per cent. The number of vulnerable people, elderly people, has increased relative to others within that. On Government's response on fuel poverty, I must say again that I am delighted that it is a big commitment; that has to be right. I am delighted that attention is being paid to energy efficiency through Warm Front and things like that. What I also have to say is that I am concerned about the amount of money going in, whether it will be sufficient to do the job between now and 2010. The second thing I am concerned about and I am being very critical here, on the fuel poverty strategy, is that again it suffers from too many different departments being involved in it with no clear lead nor clear steer. That kind of strategy does need that. There are so many departments who should be interested, but because it is energy they are not. The Department of Health should be a key player, but it is not. Why not? There is something not quite right about the ability to see that strategy through in the right sort of way. I mentioned the gas pipelines so I am not going to mention them again; the importance of including something like that is a particular bee in our bonnet. Not just extending the gas pipeline but also making it possible for people then to have access to the funds to have new heating systems which they might need. The last point on the fuel poverty strategy which is hardly addressed at all, but which is something we are really going to bang on about is that we do think there is a lot more that companies can do to meet their own social obligations. We need better methods of payment. We do need them to think about different ways of explaining to people that they can benefit from being on the priority services register. A whole range of things which companies can do. There are some significant developments taking place and some companies are doing some good things. I do not see any real hard evidence that the companies are necessarily doing all they ought to be doing if they are seriously going to deliver on those social obligations. I ought to mention that the companies should do a lot more to promote winter fuel payments.

Richard Burden

  651. You mentioned pre-payment meters in your opening remarks; 70 per cent of users being in debt. Can you say a bit more about your thoughts on pre-payment meters and what you would like to see done in terms of the way that is approached by suppliers and so on?
  (Ann Robinson) We have some examples out there in the marketplace like the Stay Warm scheme which displays many of the features which people who are on pre-payment meters need. What people on pre-payment meters need more than anything else is to have some sort of security that they can pay for their energy and also to be able to budget. On pre-payment meters a lot of people who are the most vulnerable—and I speak from experience here because I used to do social security work so I do know a little bit about what I am saying here—even budget on a day by day basis, not even on a weekly basis. It seems to be wrong that somehow or other the only way in which we can handle that is by giving them an expensive form of tariff. We were hearing, not coming up with all the solutions but hearing, for instance, about something in Northern Ireland on electricity which is a keypad sort of thing. I am not sure I have mastered all the technical details but it does seem to be a vast improvement on pre-payment meters which have some of the features of allowing people to budget. There is a possibility of doing quite a bit more in harmony with the banks and with the universal bank coming along to find other ways of managing that. There are several things there. All I am saying is that I just do not see the evidence that companies are pursuing some of those things in the same way that they are throwing a lot of money and effort, sometimes undesirably, into marketing.

Chairman

  652. We are considering looking at the Government's fuel policy strategy as a separate issue a little later on, so we shall be having you back on that one. The point was put to us that some utilities, for example BT, already have schemes in place such as low-user bonuses and high-user penalties in the domestic market designed to help people who are low users. I am not sure whether we are encouraging them to use it or not, or whether we are compensating them financially when they do. Do you think that more imagination could be employed by the utilities in their tariff structures?
  (Ann Robinson) There could well be. I should be worried about benefiting low users and discouraging high users, really worried about that, because of course a lot of the high users are people who are disabled or elderly people who are in their homes all day. The rest of us have nice warm offices to go to which are centrally heated by somebody else. I should be worried about that because then you severely disadvantage the most vulnerable people.

  653. You are saying at the moment that you help people when they are shopping around, but will you be beginning to focus your energies now that you are getting into your stride?
  (Ann Robinson) Yes, we shall. One of the things we do want to do and have not been able to do it quite yet—and if I said we were going to do it tomorrow Lesley would kill me because she has more than enough on her plate at the moment—is have a look at the variety of schemes which is out there, do a bit of imaginative thinking ourselves to see what we can do to begin to lead an approach. The answer is yes, yes, yes.
  (Lesley Davies) We recently took over the pricing comparison fact sheets from Ofgem. They give consumers information about the deals which are out there in the market. One of the things we have begun to think about is what information you have to give consumers if what you want them to do is to save money and that it is not just about changing supplier, it is perhaps thinking more about what gives the best value, warmth at best value and light at best value. That is certainly one direction we want to go in as well. I thought it would be helpful for you to be aware of that.

  654. I have a question which I was not going to ask but it came back to me. I remember a regulator saying that they used to give this sort of information to Which magazine, which I always considered to be a bastion of middle class complacency. It never got to the people who read The Sun and the Daily Mirror. How do you disseminate that information? These folk do not go to libraries. They perhaps rush in and out of the post offices.
  (Ann Robinson) On this, only about five or six per cent of the whole population has heard about energywatch so we have a great deal to do to raise our profile and make them aware that we are here to help them. Secondly, we do get a lot of inquiries in for price information and all the rest of it, but the people who need that information most are not going to do that, they are not going to lift up the phone or have access to the Internet. This is why we are paying a lot of attention, putting a lot of effort into communications. We have communications officers in every one of our offices with the intent of taking the message out there; local radio, papers. That is why we are developing what we call our outreach programme, where we take the service out to the people, to where the people are. We go on a sink estate, we publicise the fact that we are there, we work with the tenants' association and get people along. Would you like a better deal? Bring your bills and we will tell you how to get it, all that stuff. There is a lot we can do. The frustration is that we want to do more and more and more, but we have to be realistic about what we can do. All those programmes are really, really important.

Sir Robert Smith

  655. I should know the answer. How are you funded?
  (Ann Robinson) Out of the licence fee. We are not quite so well funded. We have about one third of the level of funding that Ofgem have; maybe we ought to be funded better.

  Chairman: You might only have one quarter of the staff. On that happy note, thank you very much. We shall be in touch with you later.





 
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