Select Committee on Trade and Industry Minutes of Evidence



Examination of Witnesses (Questions 41-59)

DR TONY JACKSON, JENNY KIRKPATRICK, PAUL CUTTILL AND JILL HARRISON

TUESDAY 7 MAY 2002

Chairman

  41. Good afternoon. Mrs Kirkpatrick, perhaps you could introduce your colleagues. Our note says just Jenny Kirkpatrick, EA, but I think you are the head honcho in the operation now. Is that correct?

  (Mrs Kirkpatrick) I am afraid so. We are very pleased to be here. I am Jenny Kirkpatrick, Chief Executive Officer, Electricity Association. My colleagues are: Paul Cuttill, Group Corporate Services Director of LE Group; Tony Jackson who is Director for Strategy and Regulation at SEEBOARD and also very kindly chairs EA Fuel Poverty Task Force; Jill Harrison, Head of Consumer Services at Centrica; hopefully bringing both industrywide and energywide experience and some particular experience of very particular schemes.

  42. We have had your evidence and in it you say if the Government's target (of ensuring that by 2010 no members of vulnerable households need risk ill health due to a cold home) is to be achieved, it will require the "fullest co-ordination . . . better identification of the fuel poor . . . more resources". Innogy, one of your members, is even more downbeat, saying that it will be difficult to achieve. Could you perhaps give us some indication of how you feel about the Government's targets. Are they realistic, given the measures they have also set in place?
  (Mrs Kirkpatrick) The view across the piece here is that the answer is yes, the target is achievable, but that has around it a number of dependencies. For instance one of them would be that the energy efficiency industry itself is actually properly equipped, trained and has a skilled enough workforce to be able to meet the kind of escalating growth in demand which we are trying to create, let alone which we ought to anticipate. For instance, there is a need for an holistic approach. It strikes me that one good example is to say hospitals have their part to play in so far as discharge packages, particularly for the elderly, are concerned. How is it we can let elderly people out of a hospital to a home and in fuel poverty without using that opportunity to make and create a link with the available resources. Holistic in that sense and in others. We have the issue of identifying where these people are and we say later that many of the numbers associated with the issues are based on statistical probability, not on an accurate knowledge of where these people are. In order to meet the target, getting to those people is terribly important. We think that we as an industry would be able to spend another 75 million a year if there were a more inclusive approach and also if certain really rather odd things did not happen, such as targeting those in receipt of benefit but excluding those who are eligible for benefit who are not claiming. We would look for greater flexibility and greater inclusivity in order to be able to meet those targets and to say we will meet them. Yes, they can be met, if these sorts of things are done.

Linda Perham

  43. You mentioned the NHS but the evidence we have from the LE Group talks about the NHS in a couple of areas, through two different hospital units. They were supportive of the principle, but they felt they did not have enough resources to allocate time to patients' health related energy needs. Are you still finding that, or are you hopeful that they will be able to carry this forward?
  (Mrs Kirkpatrick) LE Group must answer for itself. My own personal experience elsewhere in the country is that these sorts of issues can remain unaddressed and unrecognised for the health benefit they bring. It was simply an example of where we are not joined up in our thinking and delivery.
  (Mr Cuttill) We were investigating links with the NHS sector through our work with Ofgem in a project contained within their social action plan called Identifying Vulnerable Customers. LE Group operates across the UK but has a large number of customers in the London area and also a large number of customers in the South West territory, Bristol down to Lands End. We identified NHS facilities in both. One of the difficulties is overcoming the use of data, what they are allowed to use their data for in terms of telling us that X lives at Y and has an issue surrounding either the treatment they have just had or they have established that they have an issue around fuel poverty. Data protection is one of the trickiest areas for us to try to overcome because clearly sometimes vulnerable people find it quite difficult to sit down and specifically authorise the NHS unit to pass their information on to us. Jenny is right that the willingness of both units we looked at is absolutely there. Have they got the time and resources to devote more attention to this? No, they have not. Even if they had, they had an issue with regard to data protection. That is what we found in the two small snapshots that we did under the guidance of Ofgem.

Mrs Lawrence

  44. Could the data issue not be overcome by educating NHS trusts throughout the UK? When people come to hospitals, they have to sign forms, admission forms, etcetera. There could be a simple paragraph in there which would allow that information to be passed on without having to go through a separate procedure to do so. Would that not be the answer?
  (Mr Cuttill) Yes; sure. I am not an absolute expert on the Data Protection Act, but the principle is that if you sign to authorise the release of specified data then that can be achieved. Whether the NHS units have sufficient scope within their signing-in procedures to allow for that, I am not aware and we did not pick up that that was a possibility from them. Perhaps it is something that can be pursued centrally with NHS Executive.

Chairman

  45. At the moment the industry, off its own bat, seems to do quite a lot. Could you indicate to us where you think more could be done by yourselves if there were incentives of encouragement or if you were required to? Where do you think you could be doing more?
  (Mrs Kirkpatrick) The issue we have just raised, about the identification of people and the barriers to doing that and creating the incentives to get that right, is very important. A lot of the experience which Centrica has had with Warm Alive will be helpful in informing you in relation to your question.
  (Ms Harrison) Within British Gas we launched a programme last year called Warm-a-Life which was specifically targeted at the most vulnerable groups in our customer base. We targeted particularly those who pay by pre-payment and also those who have to budget to pay their bills. We netted into that a high number of pensioners. The way in which we targeted was looking at different household types across the country. We looked at things like flats for the elderly, solo pensioner homes as well as houses in deprived areas which we knew would be at risk of not having effective energy efficient measures in place. We tried to take an holistic approach, which is very important, and deliver sustainable forms of help to those people. We combined energy efficiency measures with a discount on the bill, which was paid after the measures had gone into the home, plus a free benefits health check, where we checked the income level of people through a fairly robust process to see whether or not they were claiming all the benefits they were entitled to. Some of the benefits we have seen are completely integrated warm front and energy efficiency measures into the home. In some homes we have been able to do central heating as well as loft and cavity wall insulation; in terms of sustainable reductions on energy bills, those have been flowing through. In terms of benefits health checks we see a number of people coming through the benefit health check process, realising an average of 950 a year in increased income. We are tackling not just the energy bill, but also the disposable income problem. That is a complex process and it is not without its issues in that trying to take people through a health check is quite a complex problem, particularly over the telephone. Actually getting people from the point of saying they are interested to the point of receiving benefits takes a long time and there is quite a high drop-out rate. That is an area which needs to be given a lot more attention because we have seen from our own evidence that people who go through the whole process see significant benefit.

  46. How many people have you had going through the Warm-a-Life programme?
  (Ms Harrison) Last year we put 25,000 through the whole Warm-a-Life programme. This year our target is to put at least another 75,000 through it. So far we have had over 50,000 apply for it. In terms of benefits health checks, last year we did 2,000 out of the total population we targeted. This is a process where people have to opt to go into it and then go through the whole process. Interest was expressed by 2,000 people who were put through the process. Of those, 336 qualified for extra benefits and the average they realised was 950 per year.

  47. Over the piece, how effective are industry-led initiatives? How do we really measure them? We have figures which suggest that half a million households have been removed from fuel poverty since 1996. According to Ofgem this is not attributable to falling energy prices. How many of them would you claim as your own? Do you have any figures to suggest what proportion of that half million since 1996 would have benefited from your initiatives to the extent they could be said to have been taken out of fuel poverty?
  (Mrs Kirkpatrick) Tony Jackson will be able to help us with some of the numbers of measures which have been achieved. My only reservation about the Ofgem figures is that they are statistically hugely probable, but this is a statistical probability and our issue in fuel poverty is the early and effective targeting of people who are genuinely in fuel poverty to be able to get to them. Statistically, I am sure this is right, but it is better knowledge that we ask for. We do have some figures on measures taken under EESoP and EEC.
  (Dr Jackson) It is actually a very difficult question to answer.

  48. That is one of the reasons we asked it.
  (Dr Jackson) It is clear that various factors which have led to reductions in numbers in fuel poverty over the last few years include lower energy prices, some benefit from increased income benefits and also particularly energy efficiency measures which energy companies have been introducing over the last eight years or so. The problem with energy efficiency measures is that they go to a whole variety of individuals and we do not track them by whether they are fuel poor or not. To give you an illustration, under EESoP, the energy efficiency scheme which was in place until April this year, it is estimated about 70 million was directed towards the disadvantaged. Looking forward under EEC, where the funding goes up quite considerably, we are talking probably annually of something of the order of 80 million going towards the disadvantaged. In terms of energy efficiency measures under EESoP, just to give you an idea of the size of them, between 1994 and 2002 the sorts of measures which were introduced ranged from cavity wall insulation, loft insulation, condensing gas boilers, those sorts of things. In terms of numbers of measures, one is talking just on those alone around about one million measures. CFLs, energy efficiency lighting, go up into millions.

  49. Let us be honest about the lighting. I get my bill from my local electricity supplier in London and I am offered energy saving lighting. I do not really regard myself as one of the fuel poor, either by income or by insulation or by dwelling. There is a scattergun approach, is there not?
  (Dr Jackson) There is a number of objectives. There is the energy efficiency objective which is targeted at everyone to improve the use of energy. In terms of targeting other people who are in most need, then one has to focus on people with very poorly insulated properties, some of whom will be fuel poor, not all. That is where the messages such as cavity wall insulation, loft insulation, are particularly effective. Nobody knows exactly who the fuel poor are. We know roughly the numbers, but in order to get the right measures to the right people you have to be able to identify the individuals. That is why on a local basis we need information, particularly from local authorities, who know a lot about deprived areas, those properties which have very poor energy efficiency levels. Somehow if we can join all that information up to improve our targeting, that would be much more effective.

  50. Mind you, it is not as though you are working in a vacuum here. Regional electricity companies under previous competitive systems knew who the bad payers were, they knew the areas of greater difficulty, they knew the postal codes. Do you not think that there is a tendency here just to go for low-hanging fruit and then claim the credit? I am simply going on the light bulbs thing. You know that there are certain postal districts where you could put in additional information. If there is one rule, it is that the middle class are better at looking after themselves under universal schemes. It is a bit like the library syndrome. The people who complain most about libraries closing, quite correctly, the ones who always shout the loudest are the ones who have homes full of books and can afford to buy them but they like borrowing as well. The folk who do not read, who maybe should, are the ones who never bother. That is a bit like the problem with fuel poverty in the way you cast the net a bit widely. Could you not be a bit more discriminating?
  (Mrs Kirkpatrick) The work Centrica has done and the work of other companies—and LE Group can speak for itself—has been very focused. In terms of being able to describe for you as an industry across the piece what has been done—because after all EEC is intended to be quite competitive, it is intended to set company in competition with company—we do come up with figures that I agree are less than satisfactory in helping our understanding of where and who these people are and how much they have been helped.
  (Ms Harrison) If we separate the schemes from those we direct at the fuel poor and those we do not, for those we do not, we then do umbrella schemes and we do mail out to people to try to elicit interest because these people have to pay and there is a degree of engagement. In the fuel poor schemes, then we are very targeted and we do use households and types of households in order to target the schemes. Warmer Life is an example of where we have very specifically targeted the most vulnerable. We have targeted people on the priority service register, targeted people who live in accommodation which is specifically set aside for the elderly or people who live in high rise towers where we know there is a greater likelihood of finding people who are more vulnerable than others. Fuel poor schemes are specifically targeted and light bulbs tend to be part of a package of measures, not things we do in isolation for fuel poverty.

  51. Light bulbs are just a bee in my bonnet. You run a variety of schemes; some of them are real winners. Do you ever get frustrated and wish you could put a lot more resource into that, but you are denied by bureaucracy, lack of finance, an unwillingness to persuade your colleagues in the business that they should release more effort into that? Do you think that sufficient appraisal is given of the industry-led schemes either within EA or by the Ministry itself, by the plethora of ministries who find themselves responsible for these initiatives?
  (Ms Harrison) There is a lot of sharing of information across the industry through the fuel poverty task force where we look at what works and what does not quite critically amongst ourselves. If I have one real frustration with the way in which we are trying to move schemes forward, it is that the definitions with EEC about what constitutes a fuel poor or disadvantaged customer have changed quite considerably compared with EESoP and it makes it very difficult for us to target the right people and to be able to identify them. May I give you an example? Under EESoP the definition of disadvantaged was not fixed. Companies were allowed to have some latitude around it so long as we could justify what we did. It talked about people who should be entitled to benefit. Under the energy efficiency commitment it is very specific: people must be "in receipt of". There is absolutely no latitude for us to help people on the fringes. We all know that there are many people who are near benefit but we just cannot help them and I find that immensely frustrating. We are trying to help people we know are vulnerable but because they do not actually have a benefit, even though they might be entitled to one, we cannot help them.

  52. What about those people who are on the working family tax credits or the people who could well come into pensioner credit, who are the ones we used to talk rather lightly and somewhat insensitively about as people in the poverty trap, who were too well off to benefit, but they were not well enough off to enjoy life. Do you think more could be done in trying to tease information out of the Benefits Agency et al on that area?
  (Ms Harrison) Absolutely. Tony already mentioned the difficulty of targeting people. There is a plethora of information out there, but we cannot gain access to it. I understand all the data protection issues around that, but if we could get people working more closely together to look at what we could liberate and use more effectively than we are able to at the moment, then I agree with you that it would be a very good way forward.

Sir Robert Smith

  53. Under the scheme which was more flexible, how did you work out that people were not receiving benefits but were in the category that they should be.
  (Ms Harrison) What we did was to work within the spirit of the way the commitment was written. Some benefits were defined. Through the agencies we work with, we would do some assessment of income so that we could work out whether or not they were vulnerable. Did they have any form of income support, whether it was a listed benefit or not? Were we convinced from our own very limited internal assessment of their accounts that they were a "can't pay" not a "won't pay"? There are some indicators which can be used to help you assess whether the people are near the threshold or not.

Mrs Lawrence

  54. All the questions we have put so far relate to those people who are currently suffering from fuel poverty and the industry's amalgamated attempts to take them out of that. Forward planning. In your memorandum you touched briefly on your relationship with the Government through the fuel poverty advisory group and the role that has. What does the industry do to press for better building regulations and other measures to be incorporated into new build housing because that seems very necessary if we are going to continue to eradicate this problem in the longer term, bearing in mind your earlier comment that one of the major problems is the poor quality of housing stock. Do you take a proactive, thinking ahead line on things such as building regulations and building quality standards?
  (Mrs Kirkpatrick) One of the examples I would hope to offer you is thinking about domestic combined heat and power. As the EA we are currently working with the Energy Saving Trust on trialing this kind of arrangement. One of the things we are doing there is to run the trial in an area and with people in fuel poverty. Domestic combined heat and power has a great deal to offer. There are things which are going on but I would say from my organisation's perspective that you have raised an issue which I want to take back to the ranch with me and find out when we last thought about the future on these issues and what it is we could cogently say which is not said at least as well by other people; what it is that this industry, as an electricity and energy industry, might say on the issues that is different and telling.

  55. The reason I asked that question is that with all these privatised industries that sort of work will have a long-term impact on the profitability. Is there not a certain dichotomy there in terms of that work?
  (Mr Cuttill) That can possibly be overplayed a little. All of our organisations—and you are quite right—we are in a competitive environment and it is curious to be sat together giving evidence in this way. This is an example of how the different elements of industry can actually work together to tackle these things. Inefficient homes are just as worrying for us in terms of potential losses, in terms of the power we are purchasing and then seeking to sell on. There is some evidence which links the condition of the houses with the inherent losses within our system. We have to bear it in mind. It cannot be one of those things where you say a very, very efficient home is going to use more power so that equals good. It just does not work like that because there are so many other different drivers in there. Because we are targeted and measured in terms of our inherent losses in the system, that does cost us money. If we have an inherent loss, we are buying the power, we are simply not receiving the income from it. To have efficient homes consuming less but then being able to pay because of that means that our overall position is certainly no worse than it would be and almost certainly better. The interest is absolutely there for us.

Linda Perham

  56. May I ask about prepayment meters? There is obviously concern about a situation where people who have prepayment meters are being surcharged. A lot of the initiatives listed in your Appendix 1 are associated with the removal of PPM surcharges. Do you know what the best way is to relieve customers of the financial penalties associated with prepayment meters?
  (Mr Cuttill) PPMs are a very interesting subject. If we come from the perspective that they are costlier to service, which they are, they just have a greater administration and management around them, one initiative we are trying within the Newham Warm Zone is our tariff called powerkeyplus, which is a PPM tariff which is the same as the quarterly tariff. We have not quite got it the same as monthly direct debit tariff yet, but it is the same as a quarterly credit tariff. What we have sought to tackle there is that if we can eradicate call-out to the meter, our cost of managing that meter falls dramatically and we are able to not levy the surcharge. Whilst it is a very small trial—probably only about 150 customers at this time—we identified 150 customers in the Newham Warm Zone who in the previous one to two years had a reasonably high level of call-outs to us to say perhaps they had lost their key or the key had jammed or whatever. When we introduced the tariff, we explained that they would move to a tariff which is the equivalent of quarterly credit but that we would charge for a call-out. We have not had a call-out throughout the whole of the 12-month period from any of those customers who had a history of call-outs. If we are able to tackle the management costs, which is what the surcharge is there for, if we are able to limit the additional management costs, then we can eliminate the surcharge and in that tariff that is where we are. We are trying the tariff in the London area and also in Plymouth so we can make sure there is nothing particularly generic within a very, very urban area and a less urban area. The results are pretty much the same at both ends. We now have to continue to work in the Warm Zone in Newham to see whether that has got applicability on a wider scale. That is how my company has been seeking to tackle the issue of the surcharge.

  57. Is it not the case that the schemes you mentioned in Newham and Plymouth have had quite a low take-up rate, about 18 per cent?
  (Mr Cuttill) Yes, that is right. What we have found in talking to the customers—perhaps we have not done a good enough job in convincing them that we are . . . I was going to use the word "believable", but that is a terrible self-criticism—is that there is something of a resistance when you are seeking to explain this to people in their homes; they would rather stay with what they have got. PPMs are very popular arrangements. They have very high levels of customer satisfaction, mainly drawn from the ability to budget in a very, very effective way. It is wrong to assume that they are in some way unpopular; in fact it is the opposite. We are having some difficulty in convincing customers to move from the existing PPM tariff with surcharge to the powerkeyplus. I guess their primary concern is the worry about the charge for the call-out. All we can do is seek to show over time that the call-outs can be eliminated. In the sample we have, although it is small, that is what we achieve 100 per cent of the time; we have not had a call-out.

Chairman

  58. Has there been any evidence of self-disconnection in these sample groupings?
  (Mr Cuttill) No. The customers involved are charging their keys properly. Because it is a targeted area and we have a lot of support in the area because it is the Warm Zone and we are able to interact, I am certainly not aware of any self-disconnections.

  59. One of the things that bedevils a lot of us is the kind of discreet poor, the ones who just muddle along, who never get into debt, but are never well off. The difficulty is that the kind of people who suffer with prepayment meters are the ones who can cope and they cope by self-disconnecting and are not the kind of people who are likely to be part of your 18 per cent. The 82 per cent non-participation rate is pretty high, is it not?
  (Mr Cuttill) Yes, it is, but that does stem from what would appear to be our inability to convince them that what we are proposing is a better solution. Clearly the establishment of the Warm Zone is all about trying things to see what can work. If it indicates that when you can convince the individual that it is a sensible thing and a good thing to do, then the evidence is that they are very comfortable with what is going on. Actually convincing them is proving to be troublesome.

 


 
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