Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 195-199)




  195. Good morning, Mr McCarthy. Perhaps you would like to introduce your colleagues. We know Mr Neilson but Ms Graham has not been before us.
  (Mr McCarthy) Virginia Graham is the Director of Ofgem whose responsibilities include our work on both the environment and on what we call the Social Action Plan.

  196. We know Mr Neilson of old. Perhaps we could start with the Social Action Plan itself. This was developed by you at the request of Government. It has now been working for two years. How many people would you say have been taken out of fuel poverty through the suppliers' Social Action Plan products other than the Energy Efficiency Standard of Performance commitments (EESoP)?
  (Mr McCarthy) There are three components which we believe are particularly important in the Social Action Plan. The first is the actions we can take either through tough regulation of the natural monopolies or through the promotion of competition to drive down prices. We have been listening to the previous discussion of the Committee and we absolutely accept that energy prices are not a factor which can be pre-determined for all time, but they are an important factor. More than half the people who have been taken out of fuel poverty between 1996 and 2000 came out as a result of those reductions in prices. The second thing is that we have promoted action by the companies on a wide range of fronts to attack fuel poverty in a way which was not being done four and five years ago. We do not do a systematic assessment of that and any response we gave to you in detailing that would be anecdotal rather than statistically significant. I have no doubt that the scale of the attack on that problem by the companies has been substantially increased and we can give a number of instances ranging over a wide variety of approaches where there have been significant movements. The other thing we have done is to try to get a much better understanding of a number of the critical issues associated with fuel poverty: self-disconnection for prepayment meter customers, debt management, issues like that.

  197. Perhaps I could put it a slightly different way. I realise that you can provide anecdotal evidence. On the other hand the companies themselves must have this. Is it just a question of data collection or is it an issue that the timescale is too short so far?
  (Mr McCarthy) It is partly because of the wide variety of approaches. One of the things we were keen to see happen was a variety of approaches because not all these approaches will succeed. The problems of fuel poverty are to a large extent problems of actual delivery and an element of suck-it-and-see is an important element in this process. If it would be helpful, I could give you some examples. Would that be helpful to the Committee?

  198. It might be, if you would give us them in writing. That would be as useful as any way. The point we would make is that there has to come a time when a line is drawn in the sand and we say we have had the experimentation, we have let a thousand flowers bloom—as Chairman Mao would say—and we now have to start counting them and be more precise about it. A lot of time and effort is being invested in this and we should be able to get outcome analysis at some stage.
  (Mr McCarthy) One of the essential things of the Social Action Plan was the number of indicators which we initially set out and which we report on every year in our Annual Report on the Social Action Plan, precisely to deal with the problem you are identifying. The critical question is whether we are making progress in reducing the number of people in fuel poverty, whether we are helping people who have particular problems and so on. We can certainly do you a note about those indicators and the movement against them.

  199. You have said that there has been a change in prices, that they have come down as a result of the initiatives you have taken, as a result of the market. One would imagine that they have also come down as a consequence of the maintenance of price controls. You have now ended the price controls and one would imagine that you have done so because you believe the market will now keep prices down. What is the basis of your confidence for this?
  (Mr McCarthy) Could I be clear that where there is a monopoly which is basically the transport businesses, the network businesses, pipes and wires, we are maintaining and indeed strengthening in some respects those price controls. The place where we have released all price controls is in respect of supply. We have done that because we analysed the evidence very carefully to establish whether those markets had actually become competitive. Having looked at the evidence and listened to the arguments very hard, the Authority took the decision that that indeed was the case.


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