Select Committee on Trade and Industry Appendices to the Minutes of Evidence



APPENDICES TO THE MINUTES OF EVIDENCE

APPENDIX 1

Memorandum by British Gas

 

EXECUTIVE SUMMARY

  The commitment to eradicate fuel poverty amongst vulnerable households will be a challenging target to achieve without changes to the eligibility criteria and targeting of the fuel poor. We would recommend that the criteria for EEC and Warm Front be reviewed, together with the most effective methods for identifying fuel poor households based on the evaluations of the Warm Zone pilots.

  Other important factors which will influence effective delivery of the target include effective co-ordination and funding of schemes and the expansion in the energy efficiency industry. Quality should not be compromised as a result of expansion.

  It is likely that a combination of factors has led to the fall in the number of fuel poor households including Warm Front investment, falling energy prices and benefit/income changes. However, we believe that the single most important influence in the eradication of fuel poverty will be housing improvement and the installation of more energy efficiency measures in homes.

  To maximise the impact of energy suppliers, the design of schemes such as EEC, associated supplier scheme approval processes and reporting mechanisms must be as flexible as possible with minimal barriers.

  With the wide range of energy efficiency schemes in operation, effective co-ordination between agencies is considered critical in maximising the delivery of benefits to fuel poor households. It is essential that those agencies in day to day contact with fuel poor households are aware of the help available, sources of funding and the funders of schemes. In addition, the various energy efficiency programmes should be reviewed to ensure that they are complimentary and enable effective integration.

  In developing new technologies, it is important that a cost benefit analysis is undertaken to ensure that scarce resources are invested in the most effective and efficient solutions.

1.  INTRODUCTION

  British Gas is the leading supplier of energy to British homes with 13.4 million residential gas accounts and more than 5.4 million electricity accounts. In addition, over 3.3 million homes rely on British Gas for home heating cover.

  British Gas recognises that fuel poverty represents a very real problem for a significant percentage of our customers. As a major customer service provider, we are committed to playing a leading role in alleviating fuel poverty in the UK. We are contributing to the implementation of the fuel poverty strategy through our membership of the Government's fuel poverty advisory group which has been set up to "look at issues relating to the delivery of measures to tackle fuel poverty". In addition, we are a member of the Electricity Association Fuel Poverty Taskforce, and are playing a major role in a range of other groups and initiatives such as the Stockton Warm Zone. Under our Energy Efficiency Commitment (EEC), British Gas will be spending around 65 million per annum on energy efficiency schemes with a signficant amount of this targeted at disadvantaged and vulnerable customers. The company has also introduced other initiatives and reviewed relevant policies for their fuel poverty impact.

  British Gas welcomes the Trade and Industry Select Committee inquiry on fuel poverty particularly given the current debate around issues raised by the fuel poverty strategy and the PIU review. Our submission specifically addresses the questions raised by the Committee.

2.  ISSUES FOR CONSIDERATION

2.1  Is the Government's target of ensuring that by 2010 no members of "vulnerable households" need risk ill health due to cold homes adequate? Can it be achieved?

  The commitment to eradicate the burden of fuel poverty amongst vulnerable households will be a challenging target to achieve. Whilst we recognise the need to tackle the problem amongst the most vulnerable first, there are a number of factors which we feel need to be considered and addressed if the target is to be achieved.

Eligibility criteria and targeting of fuel poor

  We are concerned about the eligibility criteria and targeting of fuel poor households and schemes. For example, the eligibility criteria that have been applied to vulnerable households within the EEC and Warm Front are targeted purely at households in receipt of qualifying benefits, but it is not clear whether there is a direct match between receipt of benefits and fuel poverty. Recent evidence indicates that this is not the case. There are a large number of households qualifying for EEC and Warm Front measures who are not in fuel poverty and a large number of households in fuel poverty who do not qualify for help because they are not on benefit. Equally serious, those that are entitled to benefit but do not claim will not be eligible for EEC/Warm Front assistance. On this basis, it may be difficult to achieve the target without changes to the qualifying criteria for the schemes.

Effective co-ordination

  The UK Fuel Poverty Strategy identifies poor energy efficiency (including poorly insulated housing stock), low incomes and cost of energy as the main causes of fuel poverty. It is essential therefore that policies and activites in each of these areas are effectively co-ordinated and integrated to ensure that households receive a holistic package of measures that will remove them from fuel poverty.

Sufficient funding

  It is essential that there are sufficient funds and activities to deliver the target. British Gas would recommend that a full analysis be undertaken to ensure that activities proposed within the UK Fuel Poverty Strategy will deliver the target and that sufficient funds exist across all sectors to fund the proposed activities. This work can be usefully co-ordinated through the Fuel Poverty Advisory Group.

Learning from experience

  The strategy should be reviewed based on experience of Warm Zone Pilots. The Warm Zones have a key role to play in identifying what works best in terms of targeting, referrals, integration and measures. The findings from the pilot Warm Zones evaluations will be critical in assessing whether the target can be achieved and in determining and shaping future activity and associated budget requirements to deliver the target.

Enery efficiency industry capacity

  All areas of the energy efficiency industry will need to expand to meet the growth in demand created by the Government's fuel poverty targets, particularly when combined with the improvements in home energy efficiency recommended in the PIU review. However, it is essential that adequate controls, such as accreditation schemes, are put in place to ensure that quality and standards are maintained amongst new entrants to the industry eg insulation installers. In addition, it is important that the skills base within the industry is effectively developed in order to exploit new technologies.

  At British Gas, we have recently announced plans to create around 3,000 engineering jobs by 2005 supported by a 2 million investment in new training and assessment facilities, including two new purpose-built training centres. We are specifically looking to widen recruitment to those who may not have considered a career as a gas engineer, such as those looking for a second career, single parents and women.

Other obstacles

  There are also a number of other specific obstacles where effective solutions will need to be found if the target is to be achieved. These include fuel poor households which do not have access to the gas mains and hard to heat homes (solid walls or no loft space). It will also be important to secure high levels of energy efficiency in social housing and the effective engagement of local authorities, registered social landlords and private rented landlords in the delivery of the strategy.

2.2  Why has the number of fuel poor households fallen recently? Can this reduction be sustained?

  It is likely that a combination of factors has led to the fall including Warm Front investment, falling energy prices and benefit/income changes. However, sustainable initiatives are the only solution to achieving a reduction in fuel poor households and negating any short term fluctuations in numbers caused by changing energy prices and availability of income. We believe that the single most important influence in the eradication of fuel poverty will be housing improvement and installing more energy efficiency measures in homes.

2.3  What is the relevant significance of factors such as poor energy efficiency, low incomes or the cost of fuel?

  Whilst competition in the domestic energy markets has delivered significant reductions in the cost of energy for consumers, recent events have demonstrated that prices can increase as a result of economic influences outside of the control of energy suppliers. Therefore we do not believe that further downward pressures on fuel prices can be relied upon to provide a significant contribution to the eradication of fuel poverty.

  In our view, efforts must be focussed on providing long-term sustainable solutions to fuel poverty, improving housing conditions through energy efficiency measures and increasing income by ensuring that households are claiming all of the benefits they are entitled to. Our Warm-a-Life scheme has demonstrated this, with household energy consumption being reduced by around 25 per cent through free insulation measures and identifying potential increases in income of around 950 per annum for households qualifying for additional benefits, through a free "benefits health check".

2.4  How effective are the industry-led initiatives?

  Energy suppliers have a key role to play in supporting the achievement of the Government's fuel poverty target and are making a significant contribution through their EEC programmes and other innovative fuel poverty schemes. However, it should be noted that EEC has both a fuel poverty and environmental objective and that around half of the activity will be targeted at households which are not on benefits.

  It is also important, to provide energy suppliers with the right framework and environment in which to invest in creative and innovative solutions to fuel poverty. To this end the design of schemes such as EEC, associated supplier scheme approval processes and reporting mechanisms must be flexible as possible with minimal barriers.

  For example, in setting the EEC targets the emphasis has been placed on achieving maximum energy savings at minimum cost. This places restrictions on the design of energy suppliers' fuel poverty schemes encouraging the lowest cost solutions.

  The benefits criteria for priority group customers under EEC also seriously hinders opportunities to effectively integrate funds with other schemes such as Warm Zones. Under EESoP 3 where there was greater flexibility around the restrictions, British Gas were able to provide gap funding for free energy efficiency measures in fuel poor households which did not qualify for Warm Front grants. However, under EEC we are unable to do this which could result in significant numbers of fuel poor households missing out.

2.5  How can government promote the take-up of energy efficiency measures in households whose income is just above benefit level?

  As discussed earlier, the criteria that have been adopted for the new Energy Efficiency Commitment and Warm Front are based purely on qualifying benefits which causes a major problem in terms of near benefits fuel poor households. Research undertaken by NEA and evidence from Stockton Warm Zone has identified that there are significant numbers of fuel poor households not entitled to or claiming the qualifying benefits and a large number of households who are on qualifying benefits and receive grants but are not fuel poor. If the purpose of Warm Front and elements of EEC are to address fuel poverty, these issues need to be reviewed.

  To illustrate the scale of this issue, figures from the British Gas Help the Aged Partnership survey, conducted by MORI in 2001, highlighted a potential 272 million of benefits left unclaimed by British pensioners. Department of Work and Pensions highlighted a potential 1.8 billion.

  We would strongly recommend that the criteria for EEC and Warm Front be reviewed together with the most effective methods for identifying fuel poor households based on the evaluations of the Warm Zone pilots.

  In addition, we feel that there is a pressing need for increased investment in the targeted promotion of benefits and benefits health checks to ensure that households entitled to benefits are actually claiming and that they are claiming all of the benefits they are entitled to.

2.6  How much better could co-ordination between agencies or fiscal measures help?

  With the wide range of energy efficiency schemes in operation, effective co-ordination between agencies is considered critical in maximising the delivery of benefits to fuel poor households. It is essential that those agencies in day-to-day contact with fuel poor households are aware of the help available, sources of funding and the funders' schemes.

  Equally the funders of energy efficiency schemes—government, energy suppliers, private and social landlords need to be able to work together to integrate schemes and funds to ensure that all the measures needed are installed in all the households who need them. To this end the individual programmes need to be reviewed and revised as necessary to ensure that they are complementary as opposed to replicatory and ensure that they can work together to provide holistic solultions and avoid leaving gaps.

  Finally, it is hoped that the Warm Zones pilots will provide a best practice model for effective integration. However, it has to be recognised that there are cost implications associated with the partnership management, and household assessment approaches to managing Warm Zones.

2.7  What contribution to the elimination of fuel poverty might be made by technological advances?

  It is important that new technologies are assessed and progressed, particularly where they are able to provide solutions to difficult to tackle cases of fuel poverty such as properties without access to the gas mains supply and hard to heat properties eg solid walled.

  However, the technologies should take into account the end users—the fuel poor householder. Overly complicated solutions could result in installation but lack of use or improper use due to confusion of the recipient. Moreover, it is important that in all cases where new technologies are being considered, cost benefit analysis is undertaken to ensure that they will provide cost effective and efficient solutions to fuel poverty. One of the most promising technologies is likely to be domestic combined heat and power.

Annex 1

 

BRITISH GAS FUEL POVERTY INITIATIVES

  Since April 2000, British Gas has invested over 25 million in energy efficiency and fuel poverty schemes for disadvantaged and vulnerable customers targeting over 2.5 million households. Some 270k fuel poor households have benefited from over 750k free energy efficiency measures.

  Our approach:

    —  Integration with local and national programmes and partners to effectively identify the fuel poor, achieve economies of scale, enabling more households to benefit.

    —  Provide holistic solutions—energy efficiency, income and fuel bills.

SCHEMES:

Energy Efficiency Standards of Performance (EESoP)

    —  free insulation, lightbulbs and kettles distributed through Home Improvement Agencies, Help the Aged and local insulation contractors who can effectively identify fuel poor households;

    —  8 million integration funding with Government's Warm Front Programme subsidising the cost of condensing boilers and cavity wall insulation;

    —  matched funding with 130 local authorities and housing associations.

Stockton Warm Zone

    —  2\8 million EESoP/EEC integration funding of insulation and low energy lightbulbs (October 2001-March 2004);

    —  13k fuel poor households will benefit.

Warm-a-Life

    —  holisic approach for fuel poverty—free energy efficiency measures, benefits health check and one off reduction on fuel bills;

    —  870k households targeted;

    —  25 per cent energy savings through insulation +950 per year average potential increase in benefit income for those qualifying.

Warm-a-Life 2

    —  as per Warm-a-Life plus;

    —  additional 2\4 million households targeted during Q1 2002;

    —  capped price electricity + 10 reduction on gas;

    —  target is to have 100k customers on the scheme (W-a-L 1 and 2).

Community Energy Advisers

    —  national team of fuel poverty and energy efficiency experts established in March 2001 to work with Local Authorities/Registered Social Landlords and community groups to develop local schemes to combat fuel poverty—11 England, 2 Scotland and 2 Wales;

    —  84 local energy efficiency partnership schemes in 2001, 1.7 million spend, 8k households benefitting.

 


 
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