Select Committee on Trade and Industry Minutes of Evidence



Examination of Witnesses (Questions 1-19)

MS ANN ROBINSON AND MR SPENCER CLUBB

TUESDAY 30 APRIL 2002

Chairman

  1. Good afternoon, Ms Robinson. You are accompanied by Mr Clubb. We are very pleased to see you again. We have come upon this investigation because we were dealing with security of supply issues and we felt that there was an area related to consumption which should be addressed separately. It was self evident that, because of badly insulated houses, badly constructed houses and social disadvantage, a number of people were either using too much energy or not enough and certainly they were not using it effectively, so we felt it would be worthwhile looking at this and we are very pleased that you are able to join us this afternoon. We are here not so much to promote the need for something being done about fuel poverty, because we are conscious that a number of initiatives are taking place. The argument might well be advanced that too many are taking place, but your evidence suggests that the government's fuel poverty strategy is an excellent summary. It sounded a bit like the comments I used to write on essays, which were, "This is a good description but there is little analysis and little prescription." We wondered if that was a fair summation of your views on the matter?

  (Ms Robinson) That sums it up quite well. We are absolutely delighted with the fuel poverty strategy. We think the objective, to take the most vulnerable people out of fuel poverty by 2010, is terrific, but what we are concerned about is whether it will be achieved with the existing policies and schemes. We are now something like 18 months into the fuel poverty strategy. I wonder how many people have been taken out of fuel poverty in these first 18 months. We only have eight and a half years to go. I suspect, with rising gas and electricity prices, we might find that fuel poverty has gone up. There is a lot of emphasis—the right emphasis—on the physical aspects of fuel poverty, energy saving measures and all of that, but on their own we do not believe that they are going to be enough to take people out of fuel poverty. There are other measures that are going to be needed as well as those. We need to track and monitor the effect when we reduce the level of fuel poverty as a result of that and learn from those experiences and continue to move the programme on in the light of what works best for different groups of people.

  2. You are perhaps one of the tzars, the tzarina, in the Fuel Poverty Advisory Group. Do you think that you and your colleagues will be able to focus on the areas that need effective action or have you already got the impression this is just a talking shop?
  (Ms Robinson) No. It is early days. There has only been one meeting so far. We have a very good chairman in Peter Lehmann and there is a pretty broad representation on that group. I am sure that the group is going to be looking, in a very open ended way, at all the options that we should be considering. I have had some private chats with Peter and I know he is of this mind. The real test is going to come when we come up with some recommendations that mean action by either the government or the regulator. At that point we will be able to make a judgment.

  3. There is a bit of a problem with the government targets. We have had the 2010 target but we also have the government's acceptance of the Private Members' Bill, the Warm Homes and Energy Conservation Act. One sets a target of 2010; the other, 2015. Do you think there is any danger of them falling between the two stools?
  (Ms Robinson) It is important to have a consistency in target. We have a view as to what kind of target might be the most effective but, as far as I am concerned, sitting where I am now, when we are talking about three or four million, there are a lot of vulnerable people in fuel poverty. I do not want to spend a lot of time talking about targets at the expense of getting on with the action. What I do think is important is, however we define the target for achievement, it is defined not by inputs like how many energy efficiency assessments there will be. It is defined by outputs, tracking the number of people taken out of fuel poverty.

  4. Can we clear up what you consider to be fuel poverty? You have said that you are concerned that future official eradication of fuel poverty may mask continuing but unaddressed problems because of the definition the government is using. Does this concern relate to the inclusion of housing benefit in the calculation of available, expendable income? What definition would you prefer the government to use?
  (Ms Robinson) Our preference would be to exclude housing costs, so we are talking about expendable income and a percentage of that.

Dr Kumar

  5. In your submission to our Committee, you mentioned that ending disconnection in all its forms should be a fundamental commitment in the government's fuel poverty strategy. How would this as an idea work in practice and how much would it cost? Who is going to pay for it?
  (Ms Robinson) I recognise that calling for all disconnections is not an easy thing because we are not just talking about company disconnections. There has been a deal of success in getting down company disconnections. What we are equally concerned about is self disconnections or disconnections by stealth because people cannot afford to keep the meter topped up. We ought to have disconnection of all kinds outlawed. That will put tremendous pressure on companies to do something about the prepayment meter problem. At the moment, with price controls having gone, the danger is that companies will just increase the tariff for people on prepayment meters to recoup all the costs of prepayment meters so the problem for people on prepayment meters is going to grow, which probably means more disconnection by stealth rather than less disconnection by stealth. What we are looking for are incentives to make companies address some of the issues that give rise to the need for prepayment meters in the first place. One of the ideas that we are floating—and it is only an idea; we have not thought through the depth and detail—is the idea that we could have a social obligation, rather like the Renewable Obligation, where people will benefit who have done things like reduce the number of people on a prepayment meter, on debt and increase the number of people on the Priority Services Register. There are several key things that we could do to encourage good behaviour by having a social obligation. I have no idea what it will cost. In this area, we cannot say on the one hand, "Let's take people out of fuel poverty who cannot to pay for their fuel" and, on the other hand, say, "Never in any circumstances should there be any cross-subsidy." The two do not mix and we have to decide what is our prime objective. I think an element of cross-subsidy is perfectly justified.

  6. Do you not see a danger in this strategy that you are suggesting? It is an invitation for individuals to run up bills in the future and there is even a serious danger of some form of criminal activity.
  (Ms Robinson) Spencer has done quite a lot of work on this. We have to tackle the debt issue and find ways of avoiding people getting into debt in the first place. Companies themselves know quite a lot about bills and energy usage, and they should be in a position to act at a much earlier stage to prevent the debt occurring in the first place. Inevitably, there are always going to be people who get themselves into debt in rent arrears and other ways. Maybe there is more that can be done by using, for example, Fuel Direct when people are on benefit. We need to look at approaches to avoid people going into debt. One of the important things about the social obligation is, while we need the criteria there, it is around the number of people in debt, so there is again an incentive for people to work together to ensure that as few people as possible do fall into debt.
  (Mr Clubb) Energywatch believes most people cannot pay if they get into debt rather than will not pay. If somebody is on a credit meter and they are falling behind with their payments, moving them to a prepayment meter means they are paying more for each unit of electricity. Plus, they are paying back a debt so they are much worse off. They are going to be much harder to bring out of fuel poverty. If we can prevent that happening through more accurate meter readings, through targeted energy efficiency and through using suppliers' information on usage and payment, we can spot these problems and work together on a variety of objectives so that we can outlaw disconnection.

Richard Burden

  7. On a personal level, when there was the argument around the water industry about disconnection at a time when I was involved with it, suggesting that disconnections could be outlawed was greeted with a rather strange look and, "You cannot actually do this, can you?" Clearly you can but it does raise issues. Are you saying that you do want to outlaw disconnections?
  (Ms Robinson) Yes.

  8. It would follow from that that you outlaw prepayment meters altogether.
  (Ms Robinson) Yes.

  9. In some of your documents, at one level you seem to be saying you want to outlaw it and at another level you are saying that you want to narrow things like the tariffs and the discrimination against people on prepayment meters.
  (Ms Robinson) There is not a conflict. It sounds like there is but, being realistic about this, you cannot outlaw prepayment meters and expect it to happen overnight. It is going to take some time. It would be totally unreasonable to expect companies to deliver this in a very short period. There has to be a reasonable period of implementation to do it and, in the meantime, we will be wanting companies to make real efforts to narrow that gap. One of the great things about appearing in front of you today is that we have been constantly revising and reviewing and thinking about our position on fuel poverty and, appearing today, we have put a lot of work into reviewing it and having a look at what matters. As far as I am concerned, in a sense, what has happened on water has almost been my personal inspiration because I do fundamentally believe that water, shelter and health care are fundamental rights and, if you do not have any of those, your health suffers as a result. I think it is unacceptable to ever put people in that situation.

  10. Let us assume that you win on that. Disconnections are outlawed over a phased period and, in the meantime, the tariffs are narrowed and there is a social obligation of that kind you have talked about. There will still remain, albeit in a minority, wilful refusals to pay, which have remained an issue in the water industry. How would you go about tackling that and having to lower disconnections, because it seems to me that what has happened in water is an inspiration but there is still that issue.
  (Ms Robinson) To be honest, I do not know the answer to that. It is not the only place where it happens. I used to work for a long time with benefits and we had a problem with benefit fraud. We took people to court and we were fining them and yet we could not leave them without benefits, because people do need money for food etc. There needs to be some sort of approach that makes sense. You cannot leave people without fuel and water or throw people out on the street. There has to be some basic safety net. If you get everything else right, hopefully all you are dealing with is a hard core of problems. The difference between that and where we are now is that we have a lot of people at the moment who are suffering and finding life very tough. Something can be done about that.

Dr Kumar

  11. Would you support a duty to be imposed on suppliers to take customers facing potential disconnection through some sort of arbitration first?
  (Ms Robinson) If you are taking people through some sort of arbitration, that means, at the end of the day, people can still be disconnected because what you are saying is that it is then in the hands of the arbitrator. We are going a bit further, saying there should be no circumstances where people are disconnected.

  12. You would be against?
  (Ms Robinson) Yes.

  13. You said the Competition Act has the potential to require suppliers to increase prepayment meter prices to cost reflective levels if suppliers were charging at less than market rates to reflect social objectives. That is 2.3. Have you any evidence for this?
  (Ms Robinson) No, not as yet. What we do know is that the whole of the legislation and the idea behind competition is to get an effective market place. It does not have attached to it, except tangentially, social outcomes. Effectively, when competition does work, it brings down prices. That is the theory but we have a problem anyway with competition for the most vulnerable people. Competition is not meant to produce social objectives. Here, we have to pay attention to social objectives. That is why the Utilities Act requires both the regulator and ourselves to have concern for people in rural communities, elderly people, disabled people and people who are chronically sick, quite rightly. It is why the minister can give social guidelines to Ofgem and it is part of the recognition that the market does not necessarily look after and protect the most vulnerable.
  (Mr Clubb) With an ex-PES, removing price controls means that the prepayment cap of 15 no longer applies and the cost to serve is likely to be greater than that. We are probably seeing, in, for example, the London area, a London Electricity prepayment meter customer partly subsidised by other customers but having ended price controls that is no longer the case. That supplier could be accused of predatory pricing as it is a host supplier and perhaps it is charging prepayment meter customers less than the cost to serve rate. There may be issues there and we are just flagging it up as a possibility.
  (Ms Robinson) I think it is terribly important to make this point: I agree with competition and I believe in markets. When they work well, they can only benefit consumers, but there have to be a number of things in place for consumers. What we are saying is, for some groups of people, this is not working well. For a fundamental service like energy, it is terribly important that competition is properly underpinned by regulation to protect the most vulnerable. A lot of our actions as Energywatch are designed to support and help competition be more effective.

Chairman

  14. How do you address the problem of people transferring debt? If they were to find that they were running up debts but that there was an alternative supplier who would enable them to pay less for their gas and electricity and if they were appropriately prudent they would then have extra resource to pay back the debt, how do you address that? There is an unwillingness to transfer debt. Members of Parliament know from experience with council houses that you cannot get a move if you have sold a debt on an existing property.
  (Ms Robinson) That is exactly so and that is why we are concerned to see debt blocking removed. At the moment, a trial is going on on debt blocking. One of the things the trial is looking at is mechanisms for assigning debts so people can genuinely move. It is a major problem. I know, from wearing another hat and being a trustee of a credit card service, that once people get into debt they are really stuck in the most awful position. They lose their houses and have to rent accommodation. Their life choices are severely reduced. Wearing another hat, one of the things we tried to do with the building society is, when people have a record of repaying debt on a schedule, we let them be considered for a mortgage should they wish to buy a property, which I think is terribly important. People in debt do need extra help and support to get out of that position rather than getting further and further into debt.

Dr Kumar

  15. In your submission you favour extending the gas network which you have said could deliver tens of thousands of people out of fuel poverty. Could you tell us how many tens of thousands would be assisted and how much it will cost us?
  (Ms Robinson) I was hoping you would ask me this one because it is something I am red hot on. I was part of the DTI working group on extending the gas pipeline and that working group came up with a figure of 1.3 million people in fuel poverty who do not have access to a gas pipeline. That is a very big figure. It also came up with the proposition that two-thirds of the people who were in fuel poverty could be taken out of fuel poverty with access to gas, plus gas central heating systems put in etc. It does not make sense and it is too costly to extend the gas pipeline to everybody in remote, rural communities, but a lot of people live within a reasonable distance of an existing pipeline who could be helped. I am sorry that, despite DTI's best endeavours, 50 million of new money that they asked the Treasury for to pilot some of this initiative was not granted so I am keen to put a bit of pressure on to make sure we get the 50 million next time because potentially it can do a lot. The idea of having the 50 million plus some extra, targeted help to do something like gas central heating systems was to see if it would do what we were assuming it would do, which would be to take between 60,000 and 100,000 people out of fuel poverty. We know it has huge potential. We are not sure how much. Having a pilot and seeing what that can produce is a good way of demonstrating that and yet we have now lost another year and it takes us closer to 2010.

  16. Have you any idea what the timescale would be if you wanted to implement this?
  (Ms Robinson) This is my own, personal view, having talked to Transco. There is one fact I forgot to put in front of you and this is from Transco as well: the people who are not on the gas pipeline are paying something in the region of 40 per cent more for their energy, so you are talking about a huge difference in people's energy costs once they are on the gas pipeline. My own view—and DTI might kill me for this—is that half a million out of fuel poverty over the next, say, eight years, with a real will to do something about extending gas pipelines, is not unrealistic and that is quite a significant number.

  17. You also say that you believe the government must act now to provide rural consumers with a greater choice. What other choices have you in mind?
  (Ms Robinson) I think that is probably the biggest one, doing something about extending the gas pipeline. For those people who are in remote villages, who cannot take advantage of gas pipelines, there are other, more local solutions that might be better than what we have at the moment.

Mr Berry

  18. Could we move on to income measures for dealing with fuel poverty? You rightly stressed the importance of income measures that focus on the need for fuel of consumers and you make the point that while there is a clear link between housing costs and housing benefits there is not a clear link at the moment between fuel prices and benefits. How would that work in practice?
  (Ms Robinson) I am old enough to remember the supplementary benefits days when you had a fuel addition. I would not want to go down that route ever again. It is far too complicated. It messes up the benefit system etc. I think we need an explicit, regular check of the element that makes up the benefit that is reckoned to take care of fuel cost. I might be out of date by now but on income support, for example, there are extra payments if you are a disabled person or whatever. Those extra payments should also reflect the fact that you are likely to be at home; you cannot move around and your fuel costs are going to be higher as a result of being a disabled person. It may be that some of that is taken into account. All I am calling for at this stage is that that ought to be transparent and explicit.

  19. Since you have invited me to comment on what you have said about people who are severely disabled and who clearly do have extra fuel costs because of their disability, you will know that there is a significant campaign at the moment to persuade government to introduce winter fuel payments for severely disabled people which currently is not successful. Are you saying you think there is a rationale for winter fuel payments for severely disabled people on the grounds that—?
  (Ms Robinson) I do. As a former chief executive of what used to be the Spastics Society, yes, I would not say anything else for that reason. They do spend a lot more on fuel. The fuel bills hit them very hard in the winter and they are people who already have lots of problems. If they are cold, they are likely to have increased problems. Their needs are probably as great as anybody's, if not greater than most. I am only sorry that I cannot lead that particular campaign because I would really put a lot into that.

 


 
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