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The Business Committee has agreed to allow up to one hour and 30 minutes for the debate. The proposer will have 10 minutes in which to propose the motion and 10 minutes in which to make a winding-up speech. All other Members will have five minutes in which to speak. One amendment has been selected and published on the Marshalled List. The proposer of the amendment will have 10 minutes in which to propose and five minutes in which to make a winding-up speech. All other Members who wish to speak will have five minutes.
I beg to move
That this Assembly calls on the Department of Enterprise, Trade and Investment and the Department for Social Development to bring forward a proposal to the Utility Regulator, NIE Energy and Phoenix Gas to introduce a Social Tariff System to help people who are most vulnerable to fuel poverty.
I welcome the opportunity to debate the motion. Fuel poverty has been widely discussed inside and outside the Chamber for some time. We have listened to the debates and have heard all the parties’ perspectives on the issue, yet fuel poverty still exists. We must seek innovative new initiatives to alleviate fuel poverty. That is why I tabled the motion.
At the outset, I am not indicating that any one Minister or Department has full responsibility for tackling fuel poverty. The two Departments that are named in the motion are those responsible for energy and for social policy. I call on the Assembly to send out a united message that its Members are really trying to find innovative ways in which to tackle the problem and to help the most vulnerable people in society before we enter another winter. We all remember the hardship that low-income families and the elderly went through last year as a result of fuel poverty.
In the North of Ireland, the Government are responsible for payments that help those vulnerable people to pay their energy bills. Customers here do not have access to any form of social tariff, or affordable tariff, or whatever people want to call it. We do not receive that luxury from either of the two main suppliers of energy to households, which are NIE Energy and Phoenix Natural Gas. Let me make it clear that I am not asking for other domestic customers to pay for that social tariff; we want the energy companies to pay most of it, with some costs being met by larger commercial businesses.
That there is no competition here means that we are in a unique situation. NIE Energy and Phoenix Natural Gas have market monopolies. An independent review commissioned last year following huge electricity price hikes recommended changes in how the system is regulated. The Department of Enterprise, Trade and Investment’s draft strategic energy framework 2009 consultation provides an opportunity to ensure that the system is changed to become more transparent and fairer to customers, particularly NIE Energy customers.
Members know that Douglas McIldoon’s report sets out a number of recommendations, including extending the two-month purchasing period for electricity and reviewing whether to continue payments to backup power stations. That raises generation costs, which are passed on to the customer. The report also identifies other issues, such as the guaranteed profit margin of NIE Energy and the impact of using dual currency for the single electricity market, both of which contribute to the customer’s paying more. More public debate is needed on those issues.
We have heard in debates that three factors cause fuel poverty: a home’s energy efficiency; the cost of heating fuel; and family income. I am also conscious that most households here — I think that the figure is 70% — use oil for heating. However, we must also take a particular look at electricity, which almost every household uses.
Does the Member agree that omitting oil from the motion is detrimental to the energy strategy, because closing the competitive gap between gas and oil will not encourage people to move away from oil? Any social tariff that puts up the price of gas, which, as everybody knows, is much more energy-efficient and environmentally beneficial, will dissuade people from moving from oil to gas and could harm our energy strategy.
I did not mention oil in the motion because the regulator is not responsible for it. As I said in my opening remarks, I am not asking for household customers to pay for social tariffs; it should be the energy companies, which make huge profits here.
(Mr Deputy Speaker [Mr Molloy] in the Chair)
At present, 34% of households here with children live in fuel poverty, compared to 16% in the South of Ireland and only 7% in England — although even 7% is too many. In addition, up to 40% of people who live in fuel poverty are elderly.
Although the introduction of social tariffs for all vulnerable groups would be most welcome and is, indeed, necessary, does the Member accept that the elderly are most at risk from fuel poverty? Between 2001 and 2007, 1,997 older people in the North died from cold-related illnesses.
I accept the Member’s point. In addition, the money to alleviate fuel poverty would be saved in other areas, such as services that deal with people’s health and well-being.
The sectors that are most vulnerable to fuel poverty are the elderly and low-income families, particularly lone parents, many of whom have to work part-time due to their need for flexible working hours. Furthermore, the recent rise in unemployment will result in more families becoming vulnerable to fuel poverty.
In the North, the Government are responsible for payments to assist vulnerable customers with their energy bills, mainly in the form of one-off winter fuel payments to the elderly. Customers do not have access to social or affordable tariffs from either of the two main local energy suppliers, NIE Energy and Phoenix Natural Gas. In addition, customers cannot switch suppliers, so they do not have the choice that customers have elsewhere.
In the South, the Government operate a system of free gas and electricity units as part of a household benefits package, which is available to low-income and elderly households, all people over the age of 70, carers and people with disabilities. Recently, the amount of gas and electricity that is provided free of charge there increased. As part of the welfare system in the South, the Government fund a national fuel scheme, which is a means-tested benefit that provides a weekly fuel allowance to low-income households that are in receipt of certain qualifying payments. The allowance is payable for 29 weeks, from the end of September until the middle of April.
The scheme that operates in the South has been highlighted by organisations such as National Energy Action, which used the scheme to bolster its campaign for the Government to become more involved in regulating social or affordable tariffs. The National Energy Action campaign is based on its concern that the matter is being left to the discretion of the energy industry, and that is why I have asked the two Ministers to take this matter forward.
The Government must be more proactive in developing social or affordable tariffs, which should not be left solely to the energy companies. Some of the energy companies in Britain have admitted that even the extra £225 million that they have pledged for social assistance is inadequate. Organisations that represent the elderly, such as Age Concern, have called for the introduction of a mandatory social tariff to help the most vulnerable households.
Given that energy companies make huge profits here and that energy prices here are higher, those companies have a corporate social responsibility to offer social or affordable tariffs to the households that need them. Whatever Members want to call such tariffs, we need to ensure that, this winter, those who are most vulnerable to fuel poverty are given the help that they need. Although I would like to see that assistance being given this winter, it might take some time. I want to see negotiations with the energy companies start now.
I want to stress that individual Ministers who have the responsibility for identifying vulnerable households, such as the Minister for Social Development, and for energy policy, such as the Minister of Enterprise, Trade and Investment, must enter into negotiations with NIE Energy and Phoenix Natural Gas to take this forward. That is why I singled out those Ministers in the motion.
All of us have a social responsibility to help those most disadvantaged in society. Energy companies and the larger commercial customers should pay for this, rather than other domestic customers. Social tariffs, taken in isolation, will not eradicate fuel poverty, but as part of an overall package they will definitely help vulnerable households this winter.
I beg to move the following amendment: Leave out all after “Assembly” and insert
“, being mindful of the alarmingly high levels of fuel poverty in Northern Ireland and the negative impact high energy prices have on the fuel poor, calls on the Minister for Social Development to work with her Executive colleagues to obtain an accurate assessment of actual need in respect of fuel poverty; notes that social tariffs could result in higher prices for a significant number of households and businesses; and urges consideration of a range of options to assist people most vulnerable to fuel poverty.”
The motion calls on the Executive:
“to help people who are most vulnerable to fuel poverty.”
It is hard to disagree with that sentiment. It is only right and proper that we do all we can to help the most vulnerable members of society. Fuel poverty is a problem throughout the United Kingdom, but it is a particular problem in Northern Ireland. High energy prices adversely impact on thousands of householders, with resultant damage not only to incomes but to health. Last winter the Executive sought to do what they could, and in his December monitoring statement my colleague the former Finance Minister Nigel Dodds announced £15 million to alleviate fuel poverty. A £150 payment was made to 100,000 households in receipt of income support or pension credits.
The motion may be well-meaning and superficially attractive, but it is fundamentally flawed. There is a danger that, in seeking to help those caught in the fuel poverty trap, we adversely impact on other sections of society. In short, we are in danger of robbing Peter to pay Paul.
If we introduce social tariffs, it will cost £76 million to provide a £300 payment to the 34% of households in Northern Ireland that are estimated to be fuel poor. How will that cost be met? How can the Government, faced with ever-increasing pressures on already-limited resources, find that sort of money to subsidise the fuel poor? If the Government cannot pay, do we turn to the energy companies? That is not a realistic proposition either. The energy companies are already limited to a profit margin of 1·5% and do not have the scope to subsidise customers directly. If pressure is applied to the energy companies to encourage them to pay, it will merely be a disincentive to further competition in the Northern Ireland energy market. The only other option is to pass on the cost of the social tariff to other consumers. Hard-pressed and hard-working families along with local firms and small businesses, already struggling in a recession, will face higher energy bills in order to subsidise the fuel poor.
My colleague has shouted it out before I got to it.
Energy companies make substantial reinvestments. The Member also sits on the Committee for Enterprise, Trade and Investment, which only last week was told that all energy companies were limited to a profit margin of 1·5%. Therefore, a substantial amount of money is reinvested.
I believe that the motion is a dangerous option. Let us look at the broader picture and consider the likely impact of such a move. It would plunge other families below the fuel poverty line. It could push businesses over the edge and into closure, with the result that more workers will join the dole queue and add to the fuel poor. Surely the proposers of the motion do not want that outcome. In seeking to correct one social injustice, we must be very careful not to create others. In seeking to cut off the head of the fuel poverty monster, we could enable it to grow more heads.
We need a full and accurate assessment of actual need in relation to fuel poverty. We urge the Minister for Social Development, in co-operation with her Executive colleagues, to conduct such an investigation urgently. There are cases in which circumstances dictate that it is almost inevitable that a person or household will find themselves in a fuel poverty trap. For example, a single pensioner, a lone parent, or a household with an annual income below £7,000 could easily slip into fuel poverty. However, for all the cases that are black and white, there are many that are grey, where the issue is less to do with income than with energy efficiency. In other words, throwing money at fuel poverty is not always the answer.
I commend the hard work that has been done by my colleagues the Minister of Enterprise, Trade and Investment and the Minister of Finance and Personnel to introduce and encourage energy efficiency initiatives; that is one of the main keys that will help us to unlock this problem. Ideas such as enhancing the fuel efficiency of homes; converting homes to use more efficient fuels; encouraging more use of pay-as-you-go and keypads, which offer the lowest possible price; and reforming a system that favours electricity generators over consumers need to be explored and encouraged.
At the start of my comments, I mentioned the high energy prices in Northern Ireland, but it is worth remembering that, in January, electricity prices fell by 10·8% and gas prices fell by just over 22%. A further review resulted in prices falling again this week, which is good news for all families and businesses.
Whatever way we address fuel poverty, and it must be addressed, let us not fall into the trap of undoing the progress that is being made. Knee-jerk reactions, as Members opposite never tire of telling us, are not the best sort of reactions. The motion has a hint of a knee-jerk about it, and that is the reason for the amendment. I commend the amendment to the House.
I speak as Chairperson of the Committee for Enterprise, Trade and Investment. This is my first opportunity to address the House as Chairperson.
The Committee agrees that there should be some mechanism to assist those in fuel poverty to ease the burden of energy costs. However, I emphasise that the Committee has not rushed into proposals for how that should be achieved in practice. Part of the reason for that is that the issue is not as simple as it might first appear.
Stephen McCully, the managing director of NIE Energy, speaking on ‘Good Morning Ulster’ on 15 September, said that the 2·5% discount offered by the keypad pay-as-you-go system represents a very good social tariff.
When such statements are made, it is important to define what is meant by a social tariff. Ofgem defines it as a tariff that is at least as good as the lowest tariff offered to customers in an area. DSD defines it as the lowest possible tariff offered by suppliers to vulnerable or low income consumers, regardless of the payment method.
Direct debit customers receive a 4% discount from NIE. Therefore, the pay-as-you-go system is not as good as the lowest tariff and is not the lowest possible tariff offered to customers. In fact, it represents a 1·5% surcharge over and above that paid by direct debit customers. To describe it as a social tariff might be considered as misleading by some. Under Ofgem and DSD’s definitions, a 4% discount for keypad pay-as-you-go customers, similar to that enjoyed by direct debit customers, would represent a social tariff.
As I said, the issue of social tariffs is not as simple as it might first appear, and there is a number of reasons for that. Not least of those reasons is the issue of who pays. We have had some discussion about that. DETI officials have told the Committee that social tariffs are not a means to reduce NIE Energy’s profits, but operate by spreading the additional costs among other consumers. On the other hand, the Consumer Council believes that the energy companies must make a valid and significant contribution to social tariffs. Suppliers, however, believe that they should not have to pay. Should companies, such as NIE Supply, Phoenix Gas and Firmus Energy have a role in paying for some social tariffs? That is a reasonable question.
Should other organisations that are contributing to the electricity tariff, such as the generators and those claiming network system costs and supply costs, have a role in paying for social tariffs? Should the Government or councils have a role in paying for social tariffs?
There are higher levels of fuel poverty here than in Britain. What will a social tariff system cost here? Electricity prices are already 12% higher here than in GB. If ordinary consumers have to pay, how much will such a tariff add to their fuel bills? I know that some Members are resisting that imposition, and that is a fair position to adopt.
If someone uses more electricity than their neighbour because, for example, they have a family or because they are a carer, will they have to make a higher contribution to the social tariff through a flat-rate system, or will there be a fixed-rate contribution from all consumers? What about those in fuel poverty who do not have access to gas and who rely on oil or coal for heat? Will they be excluded from this aspect of a social tariff? What will the administration costs be? Would it be less costly to provide help to those in fuel poverty through the benefits system, so that there is already clarity around who would be entitled, rather than to set up and administer a whole new system?
The Committee supports the introduction of a mechanism to ease the burden of those in fuel poverty. However, the questions that I have asked today are reasonable, and it remains for the Committee to make its mind up fully on the issue.
The motion deals with a subject that is of great interest to many thousands of people in Northern Ireland who are affected by fuel poverty and the high energy prices. The Ulster Unionist Party is committed to tackling those issues. In 2004, 23% of households in Northern Ireland were in fuel poverty, and that rose to 34% by 2006. The cost of domestic electricity increased by 36% between January and October 2008, and, in the same period, the cost of domestic natural gas increased by 19%.
The rate of fuel poverty in Northern Ireland is almost three times the level that it is in England. We must focus on what we are trying to achieve and ensure that the lowest possible tariffs are provided to vulnerable or low-income consumers in Northern Ireland, regardless of their payment method.
Currently, no supplier in Northern Ireland offers social tariffs to customers. Although social tariffs may be part of the solution, they are not the entire solution. Indeed, the Northern Ireland Fuel Poverty Advisory Group has said:
“Social tariffs offered in isolation will not eradicate fuel poverty.”
Several initiatives have already been introduced by various bodies in an attempt to combat fuel poverty in Northern Ireland. Those initiatives include schemes from the Housing Executive, the Department for Social Development’s warm homes scheme, winter fuel allowances and the Assembly’s one-off fuel payment of £150.
The Minister for Social Development established a fuel poverty task force in May 2008, and among its recommendations on how to tackle fuel poverty, which were published in September 2008, was the need to examine the feasibility of the introduction of social tariffs. In light of that, the Minister of Enterprise, Trade and Investment has confirmed that the Utility Regulator has been working internally in that area and has employed consultants to undertake a policy analysis for the implementation of a social tariff in Northern Ireland. That analysis includes an examination of the potential positive and negative impacts that are associated with different options, and the Minister has also stated that the next steps in that process will include a public consultation on the report.
Therefore, work is in hand, and, consequently, it would be wise to await the outcome of that consultation. At that point, we can make an informed decision.
I welcome today’s debate, because as the Chairperson of the Committee for Social Development said, the Committee has been dealing with the issue of social tariffs for some time.
Fuel poverty is higher in Northern Ireland than in any other part of the UK, with 34% of the population living in fuel poverty. Research has shown that a reduced tariff, based on personal circumstances — a social tariff — is the most popular type of financial support that can be offered to those who have trouble paying their energy bills.
In other parts of the UK, energy providers have offered social tariffs to help their most vulnerable customers. Indeed, all energy providers in GB must offer social tariffs to help their most vulnerable customers to cope with the high costs of gas and electricity. Those companies also offer a range of other services such as free insulation, boiler checks and advice to fuel-poor customers, particularly elderly people and those on low incomes.
British Gas’s Essentials tariff is the UK’s largest social tariff, and it aims to reduce the gas and electricity prices of 75,000 of the company’s most vulnerable customers. Those customers’ energy bills will drop by some £307 a year. The tariff also provides extra help to vulnerable customers, particularly those who use pay-as-you-go energy meters, which, despite helping those on low incomes to budget, are often a more costly way to pay for gas and electricity.
E.ON’s social tariff, StayWarm, is specifically designed to help vulnerable customers who are over the age of 60. It is a fixed price tariff that keeps costs the same for 12 months after a customer has signed up to it. E.ON also offers free loft and cavity wall insulation to anyone over the age of 70 or to those receiving certain benefits, such as income support, housing benefit, council tax benefit or income-based jobseeker’s allowance, whether or not they are customers. E.ON customers who are over the age of 60 can also switch to the Age Concern tariff, which could save them an average of £69. Those customers also receive safety and energy efficiency gadgets, such as energy-saving light bulbs and carbon monoxide detectors.
It is not just a question of refunding money; it is also about making customers more energy-efficient, and that is an issue that we need to address in Northern Ireland.
EDF Energy’s assist tariff is aimed at those customers who have to spend more than 10% of their household income on gas and electricity or those receiving income support or pension credit, giving a 15% discount on EDF’s standard energy prices. About 57,000 customers benefit from that reduced tariff, which is applied directly to those customers with standard or economy 7 meters, while those with prepayment or complex metering will atomically receive a rebate each year.
ScottishPower’s carefree plus social tariff offers eligible customers a saving of up to £112 a year on their energy bills. Customers on the new tariff will also be able to have free insulation work done on their homes and receive a benefits health check to ensure that they receive all the help to which they are entitled.
I am sorry; I do not have the time.
A considerable number of consumers in Northern Ireland still use household coal, domestic heating oil and liquefied petroleum gas, and there is no control over the distributors of those fuels. The point was rightly made that some mechanism should be developed to bring the sale and distribution of those energy products under control.
I support the amendment in the names of my colleagues David Simpson and Simon Hamilton. By securing the amendment, they have injected an important element of common sense into the debate on energy in general and on fuel poverty in particular.
Fuel poverty concerns us all, as it has a serious financial and health effect on too many households in Northern Ireland. We all agree that it must be tackled robustly, but how? A social tariff is not the answer. Indeed, there is a danger that we could make a bad situation worse by suggesting that we throw money at the problem without properly analysing the issues. That is why the amendment urges the Minister for Social Development to work with her colleagues to assess fully the extent and nature of fuel poverty.
We must examine a range of options to help those who are worst off. We also need to ensure that in helping the worst off, more people and businesses are not adversely affected as a result. Since last winter, as Mr Simpson said, the price of electricity and gas has fallen twice. That is good news for all customers, and we need to see more of that, as it should help to reduce the number of homes caught in the fuel-poverty trap.
Go raibh maith agat, a LeasCheann Comhairle. I welcome Minister Foster’s presence in the Chamber.
I have listened to the Members who have spoken so far, and I understand why Members on the DUP Benches referred to getting a more refined definition of fuel poverty. Sinn Féin’s motion provides that opportunity in the best circumstances. There is confusion around fuel poverty. Are the right people targeted and are the most vulnerable identified correctly? As my party colleague Jennifer McCann said, we have these debates from time to time. However, we must get clarity on the issue and we must take it a step further.
I am not a member of the Committee for Enterprise, Trade and Investment, so I am not privy to all the detail and nuances of the debate, but it is important that the social tariff get an airing. I will be disappointed if the House divides on the issue.
I thank the Assembly’s Research and Library Service for providing an information pack on the issue. It refers to ‘The Utility Regulator’s Social Action Plan 2009-2014’, which, I understand, contains a proposal, as part of the regulator’s forward work programme, to produce a scoping framework document in 2009-2010 that will refer specifically to introducing a social tariff system. It is significant that that suggestion will be made by the regulator.
The information pack also contains a replication of the joint paper commissioned by the Consumer Council and the Utility Regulator. The research in that document comes out in favour of the social tariff system. I took some statistics from that document. It mentions three options, but the option that is favoured by 64% in a particular age group is the social tariff.
I think that Mr Maginness referred to people on benefits and the fact that there is clarity on their position at the moment, but the document that I mentioned contains statistics showing that 66% of those not on benefits favoured the social tariff for those in financial difficulty and fuel poverty and that 60% of those on benefits also favoured it. Almost the same percentage of those who are on benefits favour the social tariff as of those who are not on benefits.
I wish to make another point about who pays for it all. As my party colleague said, our position is that the consumer should not pay for it, and I am fully in agreement with that. Other Members also mentioned that.
The Consumer Council, in its response to the Utility Regulator’s social action plan — again I refer to the information pack — said:
“Social tariffs are potentially an important tool with which to tackle fuel poverty. The Consumer Council is strongly of the opinion that social tariffs must not be solely funded by other consumers but that energy companies must make a valid and significant contribution.”
My party is proposing the social tariff system, and I am prepared to take the views of the Consumer Council on board. Go raibh maith agat, a LeasCheann Comhairle.
I support the amendment, as it is the best means of addressing fuel poverty.
First things first: as any good auditor acknowledges, we need to know the extent of the problem if we are to tackle it effectively. In this case, an accurate appraisal of what is required is the order of the day. I encourage the Minister to be proactive in response and to use the expertise and knowledge base of her Executive colleagues and the intelligence and data in their respective Departments to deliver a computation of need that can be stood over with a high degree of certainty.
All of us note the high energy prices that we in Northern Ireland pay. That, coupled with poor energy efficiencies and low income, creates in many cases a negative situation, which leaves many of our households fuel poor and living with the difficulties and complexities of fuel poverty. We cannot afford to ignore the high level of fuel poverty. It is a red flashing light that rightly alerts and warns public representatives that something must be done. I reiterate that high energy prices have a detrimental impact on the fuel poor. That is a fact that we cannot afford to ignore.
Many tools can be utilised to tackle fuel poverty, and we would be well advised to consider all options. The amendment is essentially correct in that a one-size-fits-all approach is the incorrect response to the complexities of fuel poverty.
I strongly contend that the research base showing that a social tariff system will act as some form of panacea to the woes of fuel poverty does not exist. In my analysis, there is no evidence base to justify a social tariff system as a mechanism to adequately address fuel poverty. We certainly do not wish to introduce a measure that, in seeking to address one problem by tackling fuel poverty, creates further harm by placing higher bills on the budgets of a significant number of other households. That would be a false economy. We must be careful, because many households that are taking a prudent approach to the household purse in difficult economic circumstances are genuinely fearful of increased bills leading to debt.
If the social tariff model is followed blindly, it should be anticipated that many households and the business community, which is taking the difficult economic strain, would be put in the position of facing mounting bills. We do not wish to take that direction or go down that route. Rather, like any good general, we should consider using all the weapons in our arsenal that have the capacity to minimise the number of households that have to live in fuel poverty. The public would, rightly, look aghast at us if we were to do otherwise.
We must look to energy efficiency. Too much energy is lost, and the energy resource is drained by poor housing and inadequate insulation. That is a key area, which, if effectively tackled, will reduce the number of households living with fuel poverty. Therefore, that and many other options must be further explored. Lead responsibility lies with the Department for Social Development, and many factors cut across other Departments. The issues of proper and effective insulation, to which the amendment speaks, will not only drive down costs and place fewer people in fuel poverty but will prove to be the environmentally friendly option. People do not wish to throw good money after bad because their boiler is underperforming. The amendment aims to address that, and it speaks to all the positive environmental benefits. I recommend it to the House.
The issue is an important and emotive one, and I thank the Members who tabled the motion and those who tabled the amendment.
Fuel poverty is a real and persistent problem. Between 2004 and 2006, an additional 60,000 households in Northern Ireland entered fuel poverty. In light of rising fuel costs and increases in unemployment, there are concerns that the number of people who are fuel poor has reached unprecedented levels. Fuel poverty is caused by a combination of factors, including poor household energy efficiency, low income and expensive fuel.
Therefore, numerous potential solutions and ameliorating policies are open to us, of which a social tariff is one. I note and commend the actions that the Executive have already taken: the warm homes scheme, Housing Executive programmes and the one-off payment of £150 to people who are on income support and pension credit. It is obvious that the Executive and the Assembly are taking the issue seriously.
At first glance, the proposition to introduce a social tariff is attractive, because it reflects our desire to help the people who are most in need. However, given Northern Ireland’s energy market, the make-up of the energy supply and the pricing system, such a proposition must be given careful scrutiny and thought. I note that the Fuel Poverty Task Force recommended that a study into a social tariff be carried out and that the Utility Regulator has undertaken investigations that he plans to report to the Minister of Enterprise, Trade and Investment. That is the correct way to address the issue. No guarantees or decisions should be given until we have all the facts.
The DUP amendment recognises those concerns. I note that an NIE briefing paper estimates that the cost of introducing a social tariff could lead to an increase of between 8% and 12% in electricity prices for all other users. In light of pressures that families already face due to increases in energy prices —
A couple of Members have suggested that households will have to pick up the bill for social tariffs. That does not have to be the case. Energy companies and larger commercial businesses should pick up the bulk of that.
Does the Member agree that passing the cost on to big business, however that is defined, will act as a disincentive to attracting that type of business to Northern Ireland and, indeed, could put people in those businesses out of work and thus create a vicious circle in which more people are trapped in fuel poverty?
The Member is quite correct. Now, to get back to my point, for which, I am sure, Members are all waiting — [Laughter.]
In light of pressures that families already face due to increased energy costs, rising unemployment and the ongoing recession, such an increase could be detrimental, not only to the people who are involved, but to the entire economy. That point has just been made by Mr Hamilton.
Social tariffs exist in Great Britain. They were introduced initially to enable customers to access electricity at the lowest available rate, regardless of the method of payment. That issue arose from the fact that pre-payment customers in GB paid around £100 per annum more than those who paid by other means, such as direct debit or credit card. That situation is not as prevalent in Northern Ireland.
In addition, it must be recognised that the virtual monopolies that exist in Northern Ireland’s gas and electricity markets have resulted in much tighter net profit margins, greater regulation, and much smaller scope for companies to subsidise customers directly, or, indeed, for customers to shop around for the best deals.
Fuel poverty is a major issue. It is a top priority for the Ulster Unionist Party. The strategic energy framework provides an opportunity to address some of the structural and underlying problems that create fuel poverty and which can limit the Assembly’s options to solving it.
The Assembly looks forward to the findings of the Utility Regulator on the potential for a social tariff and the possible ramifications of introducing one. In the meantime, efforts must continue to reduce fuel poverty by increasing energy-efficiency measures in the home, ensuring maximum benefit uptake, and ensuring that all people who are eligible for the £150 one-off payment take it.
I support the amendment.
The debate is worthwhile because the social tariff is an important, though not an easy, issue. The Chairperson of the Committee for Enterprise, Trade and Investment made a number of good points. Incidentally, it is clear that if the motion were carried, the matter would be DETI’s responsibility.
To set social tariffs is a worthy concept, but a difficult one to carry through. There are considerable difficulties in realising that, which the Assembly needs to be mature enough to recognise.
Everyone recognises that three broad factors affect fuel poverty. They are energy costs, household income and household fuel efficiency, which has two elements: insulation standards and the efficiency of the heating system. Any programme to tackle fuel poverty must involve measures that deal with all three of those factors, not just one.
Measures that are already in place include the warm homes scheme, which is one of the Executive’s key responses. The scheme is operated by the Department for Social Development. It has been hugely successful and very popular. Since 2001, more than £118 million has been spent on the scheme and, as a result, about 71,000 houses have been made warmer.
Members will be aware of the new warm homes scheme, the managers of which are H&A Mechanical Services Ltd and Byrson Charitable Group. That scheme will better target resources so that those most in need get the most assistance. We should welcome the fact that for the first time, young families that are in receipt of working tax credits can benefit from improvements to their home-heating systems and that people over 60 can also benefit from the scheme.
We all know about the budgetary pressures on DSD in respect of housing. Despite that, £20·5 million has been allocated to the warm homes scheme this year, and that should assist 10,000 households. Therefore, good work is being done in that area.
DSD also looks after the public housing stock, one element of which is the conversion of houses to natural gas. More than 29,000 home-heating systems in Housing Executive properties have already been converted; however, DSD wants that conversion to be extended much more widely. That, of course, depends on the extension of the gas network, the need for which we are all starting to recognise. New social houses are being built to a very high standard and with a minimum code level 3 environmental rating, which makes them 25% more energy-efficient than before. Those are all relevant measures.
Maximising income is important. The focus on the economy and on getting more and better-paid jobs has its place in tackling fuel poverty. Of course, many of those who suffer fuel poverty are dependent on social security benefits. DSD’s measures are extremely important in making people aware of the role of child tax credits, working tax credits and pension credits.
Benefit uptake is also extremely important, and DSD has run successful campaigns that have given a great deal of money to families and brought extra money into Northern Ireland.
DSD also administers the winter fuel payment. Although we want that payment to be increased, it makes a significant contribution to household budgets. The Executive’s household fuel payment gave out no less than £24·5 million in April by distributing £150 payments to 167,000 homes.
To tackle the issue, we must look at the measures already in place to make each one better by being open to new ideas. The concept of a social tariff certainly deserves study. I am uncomfortable with the amendment, because it is too sweeping in its rejection of the social tariff concept. As I said, although the concept is difficult to realise, it is definitely worthy of examination.
I welcome the opportunity to discuss the issue, and I congratulate the Members who tabled the motion. This discussion is timely because the strategic energy framework is the subject of a consultation process, which a number of Members pointed out. That framework acknowledges the high levels of fuel poverty in Northern Ireland and emphasises my Department’s continued commitment to work with the Department for Social Development on areas of mutual policy development to ensure that fuel poverty issues can be addressed.
I noted with some amusement Mr O’Loan’s comment that if the motion were carried, the issue would be mine and mine alone to address. He then went on to tell the House about all the things that DSD does to address fuel poverty. I am not sure where all that sits. Nevertheless, he will be glad to know that Minister Ritchie and I work together to address those issues, and that that is recognised in the strategic energy framework.
The framework acknowledges that the Government are, as the Member pointed out, already working hard to ensure access to secure, competitively priced and sustainable energy supplies, while — and this is important — supporting economic growth as well. The framework also acknowledges that the era of cheap energy is over — something that we are all acutely aware of — that we must be more energy efficient and that we must seek to reduce our energy consumption.
Given the publication today of a report by Invest NI, it is appropriate that DETI’s role, and my primary focus as economy Minister, is on business competitiveness. My Department’s goal is to grow a dynamic, innovative economy, and the Programme for Government states that growing a dynamic, innovative economy is the Executive’s top priority for the period 2008 to 2011. A key element in supporting that priority is ensuring that there is a fit-for-purpose energy policy in Northern Ireland. We are very much committed to ensuring an efficient, diverse, competitive and sustainable energy market that offers economic opportunity to businesses in Northern Ireland. We will work to ensure that energy costs are as low as possible for all consumers, consistent with maintaining adequate incentives for investment in energy assets for security of supply, irrespective of the investment being provided from equity-based or mutualised company models.
What has caused the high prices in energy? As elsewhere, the main driver for retail gas and electricity prices in Northern Ireland is the global price of wholesale gas. In 2008, global increases in the price of wholesale gas increased the price of gas, oil, coal and electricity for all energy consumers, including those already in fuel poverty.
I am pleased that, in late 2008, the Utility Regulator initiated separate reviews of the natural gas tariffs of Phoenix Supply Ltd in the greater Belfast licence area, and the electricity tariffs of NIE Energy throughout Northern Ireland. That led to the gas and electricity tariff reduction of 22·1% and 10·8% respectively in January 2009. A further tariff review resulted in an announcement by Phoenix of a 19% reduction in gas prices, and in a 17·7% price reduction for domestic consumers with Firmus Energy. From 1 October 2009, NIE Energy’s 5% reduction in domestic electricity prices will come into effect. Those price reductions for consumers are particularly welcome given the significant economic difficulties that are being faced by many at the present time. I think that that needs to be acknowledged.
I welcome the debate on possible measures on electricity prices that would help hard-pressed customers. That said, I think it is important that we continue to focus energy policy on improving business competitiveness and on ensuring that we have a secure and sustainable energy future for all consumers. For example, as was mentioned, the Department supports the continued expansion of the natural gas network to provide additional fuel choices for consumers. The Department and the Utility Regulator are looking at the potential extension of the natural gas network in Northern Ireland, and I am very much looking forward to that vital piece of work being completed. I think that that will be welcomed across the Chamber, and I know that people will look forward to receiving it.
The Department plans to undertake a study to determine the economic cost-benefit analysis of implementing smart metering in domestic properties and micro-businesses in Northern Ireland. We have consulted on better billing and metering in Northern Ireland. The Electricity and Gas (Billing) Regulations (Northern Ireland) 2009 requires suppliers to provide 12 months’ worth of historical consumption data on energy bills. That will allow consumers to be better informed about their usage and to make more informed choices about energy use and energy efficiency.
As has been recognised by a number of Members, DSD works to address fuel poverty, too. In particular, the House will recall the one-off fuel payment of £150 that was made to vulnerable homes, which we heard about earlier in the debate.
It is important that we have an evaluation of how that scheme was rolled out. The House will then need to consider whether the action that was taken was the best way to deal with fuel poverty last winter or whether there are more appropriate measures to help vulnerable households.
Other Government initiatives were mentioned in the debate, including the warm homes scheme, through which DARD has provided funding to specifically target rural homes; the Social Security Agency’s benefit uptake campaign; and, as I said, the winter fuel payment. All those initiatives help with fuel poverty.
There has been a lot of talk about the profit made by energy companies, but Members need to acknowledge that those companies are doing things to help. For example, the vulnerable customer programme, which is called For Your Benefit, is managed by NIE Energy. That programme assists vulnerable customers with identifying and claiming the various publicly funded benefits to which they are entitled. There are also customer-care registers operated by electricity- and gas-supply companies, which aim to keep a record of vulnerable customers so that the appropriate level of support can be offered.
There has been a lot of talk today about prepayment meters. It is important to say that Northern Ireland prepayment customers do not pay more than other customers, unlike their counterparts in GB. That is the result of a voluntary agreement established by the electricity- and gas-supply companies, working with the Utility Regulator. NIE Energy prepayment customers are offered a discount of 2·5% compared with standard credit customers, and natural gas customers are offered a prepay tariff that is equivalent to the standard-credit tariff. In other words, NIE Energy customers who prepay get a 2·5% reduction.
The Chairperson of the Committee gave us definitions of a social tariff, and I would expect nothing less from him. He said that, because direct-debit customers receive a 4% reduction on the standard tariff, the prepayment method was not, in effect, a social tariff. I acknowledge that, but he must acknowledge that we have a better system than the one that is available in GB, because there is at least an incentive to prepay. Other schemes include Firmus Energy’s firmuscare scheme and the Phoenix Supply Ltd energy care scheme. The latter is aimed at the over-60s, the disabled and the chronically ill.
The aim of social tariffs in the energy sector is to enable low-income and vulnerable customers to access competitively priced energy tariffs. Given the level of fuel poverty in Northern Ireland, I empathise and understand that the concept of social tariffs merits further investigation as an appropriate policy response.
The proposer of the motion talked about the need to innovate. The concept of social tariffs has come to prominence in Great Britain, and it has been the subject of debate there for quite some time. In GB, many low-income customers use prepayment meters and, because they are vulnerable and need to use that method, they pay more for their electricity and gas, which seems perverse. That is not the case in Northern Ireland, where prepayment meters give a 2·5% reduction on the standard tariff.
Gas is the dominant form of heating for domestic customers in GB, but, as we heard from Mr Hamilton, that is not the case in Northern Ireland. Here, 70% of households are reliant on oil for home heating. As oil is not subject to economic regulation, there is relatively little information available on customer purchasing patterns in the oil industry. The Member for East Antrim Mr Neeson mentioned that both the LPG and oil industries are not regulated, but he will acknowledge that regulation of those industries would add to the cost of oil and LPG, although LPG represents a small proportion of the market. We need to recognise that adding regulation to the oil industry will add to costs for the consumer.
Some information suggests that customers who can afford to buy only a small amount of oil at a time are offered higher rates per litre compared with those who can afford to order in bulk. That, too, concerns us, because those in fuel poverty are being charged more for smaller amounts.
My Department is already working with the Utility Regulator’s office to establish what scope exists for regulatory action to make tariff changes for those in fuel poverty. As Mr Armstrong, and, I believe, Mr Cree, indicated, the Utility Regulator is considering a consultant’s report on the potential options for progressing the development of social tariffs in the electricity sector. The Utility Regulator’s office issued the report as an informal pre-consultation document to allow key stakeholders to comment, including DSD and my own Department, with a view to understanding better the complex issues and charting the most appropriate way forward.
The Utility Regulator indicated that he hopes to release the consultant’s report on social tariffs by the end of November, perhaps with initial suggestions on the way forward. The issues are complex and the theme of social tariffs touches on wider issues of social policy as well as policy and technical issues relating to energy markets. When the report comes out, therefore, it will be shared with the energy industry, voluntary groups, key energy stakeholders and all the other Departments.
However, any move to introduce social tariffs in the energy sector is, potentially, prone to negative knock-on effects. That fact was acknowledged throughout the debate. As I said in my opening remarks, as economy Minister, my priority is to promote Northern Ireland businesses and to guard against damage to economic competitiveness and employment. Businesses here already contribute to the Northern Ireland sustainable energy programme through a levy. We need to acknowledge that. There has been much talk about profits and companies doing nothing, but they do contribute. To expect them to contribute again to a fuel poverty levy would further increase business energy costs.
Many times, I have been lobbied by big businesses about their energy costs in Northern Ireland. The House would be sending a very negative message if it said that big businesses needed to pay more for energy. That would be a difficult message to send out. Indeed, perversely, it could result in the loss of business competitiveness, and, therefore, employment, which could bring associated increases in fuel poverty numbers. That point was made by several DUP and UUP Members.
I welcome the debate, which was measured and informative, and I look forward to the wind on the motion and the amendment. However, I urge Members to bear in mind the complex nature of the issue and to take everything into account when they vote.
Everyone has acknowledged that there is a real fuel poverty problem in Northern Ireland. An estimated one in three households is in fuel poverty, which is a much higher rate than the rate in GB. That has a negative effect on not just household incomes but on the health of those in affected households.
It has been suggested before, and again today, that a social tariff is the solution to that problem. It was a bit of a fad and very much in fashion about this time last year when energy companies were putting up their prices — a bit like trainers with wheels in them or Tamagotchis, it was the popular thing at the time. In suggesting social tariffs as a solution to fuel poverty, however, it is worth posing and examining four broad questions.
First, who should it help? As the proposer of the amendment suggested, it is understandable that single pensioners, lone parents and those on extremely low incomes could get trapped in fuel poverty. When preparing for the debate, however, I read Northern Ireland Housing Executive figures from October 2008 which showed that a noticeable percentage of households with an income in excess of £30,000 were in fuel poverty. Questions then have to be asked about why and how that household is in fuel poverty.
The answer is not so much about income and more about fuel efficiency and energy efficiency in that household. In assessing the accuracy of need in Northern Ireland, we must consider whether the measurement model that we use to assess fuel poverty is correct. Moreover, we must assess the impact of the recent price reductions on those one in three households and the impact of the £150 fuel credit that was paid last year.
The second question is: who should pay? The debate has concentrated on that issue, and it should be foremost in our thoughts. In the current climate, we cannot expect Government to find the estimated £75 million that was mooted by some Members. There is talk that energy companies can pay out of their profits. Energy companies in Northern Ireland — Phoenix Gas and NIE, in any case — are restricted to margins of around 1·5%. Other Members cited examples of energy companies in GB. However, they operate on a margin of 6%, from which they pay social tariffs. Indeed, the cost of the social tariff was one reason that was cited recently for those energy companies’ failure to reduce prices. It is much easier to do that with a bigger margin.
Asking energy companies here to pay out of their existing margin has a disruptive effect on incentivising competition, which we all support in the Northern Ireland energy market. Therefore, the only other option is to ask customers to pay for it. Whether some people should pay more so that others pay less is a legitimate question. It is important to pose that question, but it is extremely difficult to answer. Passing the cost to business, whether big or small, will disrupt competitiveness in Northern Ireland. Businesses in Northern Ireland increasingly cite energy prices as a hindrance to competitiveness; heaping more pressure on them will not be beneficial.
We must also ask what sort of system of social tariff we would put in place. Would people on certain benefits enjoy the benefit of a social tariff? When I examined the role of social housing, I visited some houses and noticed that some of the most fuel efficient houses, through their energy sources and insulation, are occupied by people who, I am sure, would receive a social tariff after a benefits test. However, they live in fuel efficient and energy efficient homes.
No; I do not have time to give way.
Should we consider providing a social tariff on the basis of usage? Single pensioners have low usage, and, under such conditions, second homes and holiday homes could benefit.
What are the other options? Are other options as effective, if not more effective, than a social tariff? When considering increasing energy efficiency, we should consider converting properties that use inefficient fuels such as coal and oil to fuels such as gas. Thousands of houses in the Housing Executive stock do not meet the decent homes standard for thermal efficiency, and many houses that could use gas do not do so. We should consider converting those properties.
I accept the earlier points that were made about encouraging people to use pay-as-you-go tariffs and keypads. I agree with the Minister for Social Development; it is as much an income issue as it is one of fuel costs.
We need to consider a system that benefits generators over ordinary customers. Therefore, more money is not always the answer. As a society, we could take measures to help fuel-poor people, other than social tariffs or giving out more money.
Go raibh maith agat, a LeasCheann Comhairle. We have had a fairly thorough debate, in which we debated the pros and cons of the motion. I thank everybody who spoke. Whether or not we achieve agreement on the motion is another matter.
When my colleague Jennifer McCann brought the motion to the House, she was aware of the concerns about who pays for social tariffs. Other Members asked whether those costs should be passed on to other customers and businesses. Jennifer McCann made it clear that that is not the case and that we live in a society that has high levels of fuel poverty. Some Members, including Sean Neeson, Leslie Cree and even David Simpson, mentioned that levels of fuel poverty here are much higher than in Britain; I think they are three times higher than in Britain. The intent behind the motion was to address that issue.
Members have talked about the definition of “fuel poverty” and about who can afford to heat their homes and have electricity. Is the Member aware that the deaths of approximately 2,000 elderly people over the past six years were caused by cold-weather-related illnesses? People who do not have the money to heat their homes or put on the electricity — when we talk about fuel poverty, that is what we are talking about.
I thank the Member for that information. It is startling that so many people in this society are still dying as a result of fuel poverty.
Jennifer McCann mentioned a very good scheme in the South of Ireland that has a social tariff dimension, particularly for pensioners. They get a certain amount of free units of electricity, oil or gas to heat their homes. It is worth noting that there are no concerns down South about elderly people and those on low incomes getting the benefit of social tariffs.
I realise that the issue is a complex one. David Simpson mentioned the £150 one-off payment that was made last winter. That was provided for in the Financial Assistance Act 2009. The Assembly recognises that fuel poverty is a big issue; that one-off payment went a long way towards alleviating difficulties for many people who were facing hikes in gas and electricity prices.
David Simpson also mentioned the tight profit margins on which the energy companies operate. He asked whether social tariffs would lead to reduced profits for those companies. However, the energy companies do have quite high profits. Jennifer McCann said that NIE Energy made a £120 million profit.
The Chairperson of the Committee for Enterprise, Trade and Investment, Alban Maginness, spoke about the use of keypads as a form of social tariff. The Minister of Enterprise, Trade and Investment said that there were concerns that people who pay by direct debit get a 4% reduction in their electricity prices, whereas keypad users only get a 2% or a 2·5% reduction. Mr Maginness also made a fair point about asked whether energy generators should pick up some of the costs of having a social tariff system.
Mention was made in the debate that 70% of households here use oil, the supply of which is totally unregulated. Some Members pointed out that the oil companies bear no responsibility whatsoever to bring in any energy efficiency measures. In addressing fuel poverty, we must think outside the box in determining how people on low incomes, elderly people and disabled people can pay less for their electricity. The Minister mentioned benefit uptakes and check-ups, and energy efficiency measures in the home, such as cavity-wall insulation and loft insulation.
Other Members, including Billy Armstrong, mentioned the warm homes scheme. Declan O’Loan gave Margaret Ritchie a plug when he said that more money has been invested in that scheme recently. Those measures can reduce fuel poverty, but there are still pensioners and people on low incomes who will suffer high levels of fuel poverty. As was said, it is unacceptable that approximately 2,000 elderly people here die every year as a result of fuel poverty.
My colleague Claire McGill asked how the Utility Regulator and the Minister can move the social action plan forward. The Committee for Enterprise, Trade and Investment has also discussed that issue. The Utility Regulator is considering the issue of social tariffs, and how NIE Energy and Phoenix Natural Gas, among other energy providers, can help to alleviate fuel poverty and reduce the bills that people here are paying.
Alex Easton said that we must be more energy efficient in our homes. He spoke about inadequate loft insulation and about how high energy prices impact on the most poor and vulnerable in society. That has been the theme of the debate. Although we may not agree on how to deal with fuel poverty, particularly among low-income families and the elderly, who are dealing with high electricity and gas prices, we all agree that we need to make it a priority for the Assembly to reduce gas and electricity bills.
As the Minister said, we need to examine how we can introduce measures to help alleviate fuel poverty as part of the strategic energy framework. The Minister will have to weigh up the social tariff and decide whether it will form part of that framework. Her main focus in the current economic climate is on helping businesses and driving the economy forward.
The Minister is concerned that businesses should not pick up the tab for any social tariff that is introduced. It has been made clear during the debate that the main thrust of the motion has been that neither other customers nor the business community should have to pay for social tariffs. Energy providers such as NIE Energy, Phoenix Natural Gas and others have a responsibility.
I acknowledge that those companies have some social responsibility; indeed, they have introduced some measures in past years. Controversy surrounds the discounts offered to electricity customers who use the keypad system, but that type of meter has been popular with many customers. Grants have also been provided, but we say that more needs to be done, given the high levels of fuel poverty from which this society suffers.
I hope that I have summed up the debate on what is a very important issue. It is complex and difficult to resolve. Whatever happens today, I hope that the Committee for Enterprise, Trade and Investment and its Minister, as well as the Minister for Social Development, will revisit the issue. Go raibh maith agat.
Question put, That the amendment be made.
The Assembly divided: Ayes 36; Noes 31.
Mr Armstrong, Mr Beggs, Mr Bresland, Lord Browne, Mr Buchanan, Mr Campbell, Mr T Clarke, Mr Craig, Mr Cree, Mr Dodds, Mr Easton, Sir Reg Empey, Dr Farry, Mr Ford, Mrs Foster, Mr Hamilton, Mr Hilditch, Mrs Long, Mr B McCrea, Mr I McCrea, Dr W McCrea, Mr McFarland, Miss McIlveen, Mr Moutray, Mr Neeson, Mr Newton, Rev Dr Ian Paisley, Mr Poots, Mrs I Robinson, Mr P Robinson, Mr Ross, Mr Simpson, Mr Spratt, Mr Storey, Mr Weir, Mr Wells.
Tellers for the Ayes: Mr Armstrong and Mr Bresland.
Ms Anderson, Mr Boylan, Mr D Bradley, Mr P J Bradley, Mr Brady, Mr Brolly, Mr Butler, Mr Dallat, Ms Gildernew, Mrs Hanna, Mrs D Kelly, Mr G Kelly, Mr A Maginness, Mr A Maskey, Mr P Maskey, Mr F McCann, Ms J McCann, Mr McCartney, Dr McDonnell, Mr McElduff, Mrs McGill, Mr McGlone, Mr M McGuinness, Mr McKay, Mr Murphy, Ms Ní Chuilín, Mr O’Dowd, Mr O’Loan, Mrs O’Neill, Mr P Ramsey, Ms Ruane.
Tellers for the Noes: Mr Brady and Mr F McCann.
Question accordingly agreed to.
Main Question, as amended, put and agreed to.
That this Assembly, being mindful of the alarmingly high levels of fuel poverty in Northern Ireland and the negative impact high energy prices have on the fuel poor, calls on the Minister for Social Development to work with her Executive colleagues to obtain an accurate assessment of actual need in respect of fuel poverty; notes that social tariffs could result in higher prices for a significant number of households and businesses; and urges consideration of a range of options to assist people most vulnerable to fuel poverty.
That the Assembly do now adjourn — [Mr Deputy Speaker.]