Select Committee on Trade and Industry Minutes of Evidence



Examination of Witnesses (Questions 247-259)

JOHN WYBREW, RICHARD GRANT AND BECKY BROWN

THURSDAY 23 MAY 2002

Chairman

  247. Good morning, gentlemen and lady. Perhaps you would like to introduce your colleagues, Mr Wybrew. You have been here on previous occasions in varying guises. Welcome.
  (Mr Wybrew) Just to make the point, the Lattice Group, the company I represent, is the parent company of Transco, the provider of the gas transportation infrastructure. On my left is Richard Grant, who is the Group Head of Environmental Affairs for the Lattice Group. He is also Director of our portfolio of fuel poverty initiatives, which generally operate under the banner of Transco's Affordable Warmth Programme. Becky Brown is a senior colleague who has been seconded to the Stockton Warm Zone project, which is a key element of the Affordable Warmth Programme. It is aimed at tackling an area of particularly high fuel poverty. The objective is to eradicate 80 per cent of fuel poverty in this area over a three-year period which would involve removing 10,000 homes from fuel poverty and it involves a particularly innovative approach. It may be helpful to clarify that the reason why of all the companies who are active in this field we are probably the most active. This really stems from 1999 when there was a major restructuring of BG our predecessor company, which involved a change in the special share and as a quid pro quo undertaken to the then Secretary of State to the shareholder benefits we undertook to administer and project manage a major fuel poverty programme over a five-year period. The significance of that is that we simply have the prime motive to accomplish this commitment as quickly and as efficiently as possible, which in turn has been a spur to innovation which we would see exemplified in the Stockton project.

  248. We are going to go onto the Stockton project in a minute or two but just before we get there, the Affordable Warmth Programme in totality, as I understand it, has the potential to remove something like 330,000 households from fuel poverty, but so far it has only reached about 54,000. That is quite a sizeable achievement but could you tell us a little more about the programme and why you still have 276,000 to go. I realise that these things take time but perhaps you could tell us a little about the programme and how you are moving towards your target figure and other problems you feel you need help to overcome.
  (Mr Grant) We set out with the very ambitious target of tackling one million homes and we embarked on this two years ago next month. We have been running this programme now for two years. After year one, if we had been here this time last year, we would have been talking about 3,730 systems installed and we had a handful of applications which we were processing. We were dealing with applications either in the tens or hundreds. As of yesterday we actually had 43,673 systems underwritten in terms of leasings and most significantly we are actually processing now somewhere in the order of 29,400 applications. What we are beginning to see now is that we are moving from a few hundred to a few thousand. What we have seen over the period of a year is an order of magnitude increase in the interests associated with Affordable Warmth. To some extent this was expected. What we were bringing to the marketplace was effectively a new product, it was one which perhaps was not recognised by registered social landlords, but it was one which individually they all wanted to try and to pilot. Now we are coming through that stage, we have done an awful lot of hard work in the last year or so to change the product and to change the way in which that product is being delivered out there to registered social landlords.

Dr Kumar

  249. My interest in the Stockton Warm Zone is partly because it is a neighbouring constituency and it has been a great success story from what I have read and seen on television. Many people have mentioned it to me who have benefited from it. Can you tell us the cause of this great success story? What is it that makes this particular Warm Zone a very good idea. You also emphasise that this pilot scheme should be extended. In your submission you say that it will substantially provide the greatest benefit for any given level of expenditure. Can you outline what is unique about this particular Warm Zone and the efforts to extend that further?
  (Ms Brown) May I briefly outline where we have got to so people know. The aim in Stockton is to visit every single house in the borough; there are 75,000 homes in Stockton. The aim is to knock on every door over the three-year period and to help the estimated 26 per cent fuel poor people in the borough. It is fair to say that we are perfectly on target after nine months. We have visited 29,000 homes and we have completed fuel poverty assessments on 15,000 of those homes. What we are finding is that we are getting 80 per cent involvement rate. We work ward by ward and we are actually managing to get 80 per cent of people in that ward not only to answer the door to us, but to tell us their income, tell us their benefits, tell us their status and tell us a whole range of SAP data about their home so that we can assess whether that home is in fuel poverty or not. That is the key unique feature of this scheme, that we are actually finding fuel poor homes, we are not just using a proxy as many of the national schemes do. We are going to find the fuel poor people. What we are finding through that process is that we believe we are getting to the vulnerable groups because we are obviously getting an 80 per cent hit rate and we are getting to those people. To give you a bit of a feel. We are spending just short of 15 million over the three years on a range of energy efficiency and heating measures. As to the question of why it is working, the absolute key feature here is local co-ordination and local partnership on the ground. We have absolutely everybody who is involved in fuel poverty in any way working with us in Stockton.

  250. Who are the people?
  (Ms Brown) The core team is a Transco and local authority team. We are based in the local authority office and we are very much part of the Housing Department and also the Energy Efficiency Department. We have all of the local installers involved, we have the private landlords involved, they are a key group. We have the health authority and social services through secondment of welfare rights workers. It is absolutely right that there is nobody in Stockton working on fuel poverty except through us and that has been the key to the success. We have really created a role there, set this huge target, but we have everybody working with us and we are delivering a lot of success now. We have put in 5,000 heating and insulation systems; we have delivered 5,000 homes in nine months which is on average a three-week turnround time from knocking on the door to delivering the solution. It is getting in there locally, managing it locally on the ground and badgering through to completion, not to put too fine a point on it. The other point to make is that we targeted Stockton because it was a densely populated area with a high incidence of fuel poverty. We have a lot to go there. It was worth putting this amount of effort into the area where you will be investing about 1.2 million in this project over three years, but it will be resolving a huge problem there. In fact it is only a nine per cent cost on the programme we are delivering which is very efficient compared with many of the other schemes.

  251. Are you going to extend it further to other parts of Teesside, bearing in mind that I have a neighbouring constituency?
  (Mr Grant) When we set out with Stockton we set out with a vision to look at the whole of the Tees valley area. We targeted the north east because in a regional context that has a very high incidence of fuel poverty. We really needed to pilot the scheme and the success in Stockton—it is fair to say we are bagging Stockton as a tremendous success—is encouraging us and we are currently undertaking a feasibility study to look at the next local authority. Our intention is to start to set up a programme working with each of the local authorities to identify when we could possibly start to develop a warm zone in each of those areas. If I had a vision, it would be to have done the Tees valley area by 2010.
  (Mr Wybrew) The important point here is to roll across the resources. One of the tight spots is skills shortages. Having gathered the critical mass of skills in Stockton it is important to then be able to redeploy them in the same region and roll them across into comparable schemes.

Mr Hoyle

  252. It is interesting that you have mentioned skills shortages. How is Transco addressing the problem of shortages in skilled gas engineers?
  (Mr Wybrew) As a general point, we have done a lot of work, closely with the Government, through the Gas and Water Industry Training Organisation and indeed through an organisation which I chair called the Gas Industry Skills Task Force, bringing together Government and industry representatives to create a new NVQ based accreditation framework which is much more conducive to allowing people to come into the industry by a variety of routes, including some under-privileged routes, some certainly in the welfare-to-work area and even young offenders, which is enabling us to tap a wider pool from this relatively scarce and shrinking resource. It is fair to say that we have foreseen a skills crisis, we have addressed it, we have pulled out of a decline, we have pulled out of a dive. We are addressing the very real problem of providing the industry's future needs. Richard himself has been particularly active and innovative in the Stockton area with the retraining of people from a declining industry. It is touched on in the paper we have submitted.
  (Mr Grant) As part of our involvement in Stockton and as part of our ambition to take the Stockton Warm Zone across the Tees valley area, we looked at the skills shortages which would exist, which might act as a barrier to us rolling out this programme and early on we recognised that there was a significant shortfall, or there appeared to be on paper, of gas installers. Our figures indicated in the order of 150 to 200 gas installers for the Tees valley area. Coincidental with this study Corus announced their redundancies in Teesside and we looked very closely at the skills matching exercise which would bring some of these highly skilled people perhaps into a whole new industry. That proved successful in Teesside. It has proven even more successful in South Wales and in North Wales and now we are transferring that training programme to Scotland to look at the issues associated with the BAe redundancies on Clydeside and NEC in Livingston. We are currently facilitating and organising training programmes for gas installers and this is simply to support the fuel poverty initiative, I would stress. Transco does not employ gas installers. We are training people for the other parts of the gas industry.

  253. You are telling us that you have turned the tide. How many of them are female? How many females are you bringing into the industry or is it still male dominated? If you are going to Corus you will not be attracting many females, will you?
  (Mr Grant) We have also sponsored a number of other courses, most notably one in London which specifically targeted single mothers, to bring them into industry. We are not turning the tide. The indications are within the industry there are different scenarios but the shortfall in terms of gas installers, the work that is being done by GWINTO would indicate that come 2004 the industry is going to be on a low case basis something like 25,000 short and in a high case scenario something like 41,000 short in terms of gas installers nationwide. Very early on in the whole Affordable Warmth Programme we recognised that this could be perhaps the single largest obstacle to the Government achieving its objectives with regard to fuel poverty.

  254. That slightly contradicts what you have just stated that you thought you had bottomed, but the danger is you have not and there is more to do if there is going to be a further demand.
  (Mr Wybrew) I am using too many analogies here but that is just raising the bar. It has raised the scale of the problem we have to face. We have stopped the loss of skills from the industry, which had taken place over a period of some years prior to that. We are now beginning to see ourselves holding our own, but there is a big task in facing the growing scale of the gas industry and indeed the fuel poverty programme which has added to that. Just to add to the single parent question, that pilot was particularly interesting and encouraging. What it demonstrated was that the time when single parents and single mothers are generally most readily available, weekends and evenings, is the very time when consumers would most like to receive people in their homes to carry out conventional installation work. There is quite often a good match and some very interesting work is being done which would make it more conducive for lone parents and lone women, who are again most sympathetic for particular parts of the community. Companies as they try to improve their brand in competitive markets are beginning to target particular groups of consumers with fitters who will be most readily received by the customer. It is a very interesting area.

  255. Could we have a note on the percentage of females?
  (Mr Wybrew) Yes. In all honesty, the skills shortage that lies ahead of us across the whole of the utility sector is so great that we have to tackle every possible source of skill and talent available to us, which is why we have been innovative in looking at some of these ideas.

  Chairman: I do not want to promote a by-election here but we have a former steel worker from Teesside who is very anxious to ask a question.

Dr Kumar

  256. The case of the former Corus workers is a very good example. Did you approach the Corus management or did they approach you? Could you tell us a bit more about it? It is the first time I have heard about this as such and it seems to me it is quite an innovative model of trying to bring in from one industry into another and maximising our strengths. Could you tell us a little more?
  (Mr Grant) We approached Corus management but I have to acknowledge that the Corus management were extremely helpful in terms of advancing our proposition. We were very quickly able to carry out a skills mapping exercise across the people who were likely to be made redundant.

  257. How many people?
  (Mr Grant) When we initially went to Teesside there was a degree of uncertainty about the numbers who would be made redundant and Corus were very clever at matching opportunities elsewhere in their organisation so that the original large numbers which were anticipated did not manifest themselves. Eventually we trained 18 at Redcar and Cleveland Technical College. We were more successful in South Wales. We were clearly faced with a different situation in terms of large numbers of people being made redundant and very little opportunity to be selective. It worked very well. We are discovering that the people we are bringing onto these courses are very attractive to employers. Our success rate in terms of people starting the course and going into work is currently running at 89 per cent. We have a situation where we can train these people faster, we can expand the amount that we give them on that shorter course and we can train them very, very cost effectively. We have worked with a number of schemes targeting different client groups for training and this in our view is the way, if we are going to tackle this big shortfall, we can start to bring large numbers of reskilled people into the gas industry.

  Dr Kumar: It gives a very good confidence in the way you approach that. It is a marvellous model. Thank you.

Chairman

  258. I should like to ask you a question which is not actually your concern, but it would be interesting to get your observations on this. We have been discussing this morning with the Ministers whether we should take a broad brush approach or we try just to go for the vulnerable poor. The essence of your approach is that you are taking an area and saying everybody within it is a potential candidate. Do you think this is more effective? Have you done any work on the degree of fuel poverty that exists within the area and whether this blanket approach is a more effective way of getting to it?
  (Ms Brown) Yes, we have done that. We have done a lot of analysis, a lot with Peter Lehmann's group over the nine months we have been going. I fervently believe that the geographical approach we are adopting is the way to target the fuel poor. I do not want to bombard you with numbers, but for example, of the 15,000 homes we have fully assessed, 28 per cent of those, over 4,000, are people who were eligible for the HEES grant and the EEC grant, but they are not fuel poor. We carry out the work for them, because obviously whilst we are there we do it, but they are not fuel poor households. A further 17 per cent were what you call bang on target, they were Warm Front eligible or HEES eligible or EEC eligible and fuel poor. So great, the scheme is targeting that 17 per cent. But it is only 17 per cent of the people who are being hit by the Government's schemes. More worryingly, most worryingly of all, nine per cent of the people for whom we have carried out work are fuel poor and in some cases very fuel poor, but they are not eligible for any of the currently available schemes. The EEC priority definition does not cover them and the HEES definition does not cover them. We are collecting quite a substantial amount of data which shows that in fact this proxy type system using benefits as a method of targeting the vulnerable actually misses out a huge group of people.

  Chairman: Could you perhaps send us a note on that? It is more a matter that the work has not been done at all. We got the impression that Ministers were saying that because the work has not been done it is not an issue. I think that we think it is and it would be helpful to have the benefit of your pilot study there.

Sir Robert Smith

  259. You said in your own summary that ". . . the extension of the gas network . . . can be justified as part of the Government's strategy. The Government should explore how this can be incentivised to happen". Does Ofgem's moving from the five to 20- year time for paying back make any difference?
  (Mr Wybrew) I do not think so. It would be helpful to those communities who are relatively wealthy. The nub of the problem is that if you have a relatively poor community with a lot of fuel poor, somebody—and it could well be an independent transporter, it does not in any sense have to be Transco, we have no particular desire to be active, although we are certainly keen to solve the problem—has to make the investment and then recover that investment over a period of time. The rule which causes all the problem is that in a competitive market you are not allowed to capture the customer for more than 28 days. They are able to transfer their custom. I suspect a community facing the need for or desiring gas would be happy to be captured provided there are other safeguards to ensure that they are not subsequently then ripped off by the supplier. That is the sort of issue which we really have to pilot. There may be various ways to solve it. Richard has been particularly active in looking at some of this and working with the DTI. Maybe he has some better clues as to the sort of breakthroughs we shall see.
  (Mr Grant) We have been trying to get a better understanding of the scale of this problem across the UK. Obviously we can all quote figures of 4 million households currently not having the choice of gas but we have done some work looking at the numbers of communities, discrete communities which do not have access to gas. They are considerable. There are something of the order of 4,000 discrete communities greater than 150 households which currently do not have access to gas. This figure excludes these islands which exist in some of our urban and suburban areas. We have dealt with an island in Stockton because it was historically fashionable at a time to build estates which did not have gas, even if they were surrounded by gas.

 


 
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