Clause 177 - Prepayment meters

Energy Bill [Lords] – in a Public Bill Committee at 10:00 am on 22nd June 2004.

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Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Health) 10:00 am, 22nd June 2004

I beg to move amendment No. 34, in

clause 177, page 133, line 26, at end insert—

'(1A) The cost of gas supplied through a pay meter shall be supplied at no more than the average unit cost for gas supplied to customers by other means of payment.'.

Photo of Mr Jonathan Sayeed Mr Jonathan Sayeed Conservative, Mid Bedfordshire

With this it will be convenient to discuss amendment No. 35, in

clause 177, page 134, line 16, at end insert—

'(2A) The cost of electricity supplied through a pay meter shall be supplied at no more than the average unit cost for electricity supplied to customers by other means of payment.'.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Health)

The amendments represent an attempt to air an issue that causes me concern in relation to the cost of energy. Amendment No. 34 deals with gas, and amendment No. 35 is a mirror amendment, dealing with electricity. It has been said many times that cost savings can be sought through cheaper gas and electricity deals, but many such deals are not available to those sections of the population that buy energy through prepayment meters. Since the introduction of the new electricity trading arrangements in England and Wales, there have been various claims about the reduction in the cost of electricity to consumers, and similar claims have been made about gas. However, there are at least arguments as to whether domestic consumers have benefited to the same extent as the industry from lower electricity prices.

I draw the Committee's attention to page 44 of the Library notes, which state:

''The tariff paid by domestic electricity consumers depends, in part, on the method of payment used. Broadly speaking there are three distinct options: standard credit, direct debit and prepayment. Standard credit is, in effect, the default method of payment for most electricity consumers. Choosing to pay by direct debit confers a discount, while prepayment involves a surcharge.''

Therein lies the rub. Those who can afford to pay by direct debit can make significant savings on their electricity and gas bills, either by changing suppliers or by taking advantage of deals offered by their existing supplier. Those on the standard method have the option of doing so but those on prepayment meters have no realistic chance of achieving lower energy costs as they are penalised because they pre-pay for electricity.

I draw hon. Members' attention to Energy Review, a recent publication from Energy Action Scotland, which mentions the impact of lower energy prices on fuel poverty. It accepts that the number of households in fuel poverty has fallen, mainly due to lowering the costs of energy and states:

''Focusing on the impact of fuel price on fuel poverty, the price of electricity fell by 1.9 per cent. and gas by 1.2 per cent. from 2002 and 2003. Further savings were made by switching suppliers: average saving for electricity (direct debit) was £22 and for gas £27. It is expected that prices will rise in the period to 2010, but energy will still be cheaper in real terms than 10 years ago. The report states that changes in prices highlight the importance of sustained improvements in energy efficiency.''

That is all true.

I raised the matter on Second Reading with the then Energy Minister who, when asked about the benefits to the consumer from BETTA—the British electricity trading and transmission arrangements—mentioned the possibility of making savings by switching suppliers. That is right up to a point, but how easy is it for someone on a prepayment meter to swap suppliers? The bulk of those on prepayment meters are people on low incomes who have had difficulty paying for energy supplies in the past. I shall be blunt: it would be difficult, if not impossible, to switch to another energy

supplier who is prepared to give those people a better deal. They would certainly find it impossible to switch to any attractive deals on offer that are dependent on payment by direct debit. I suspect that many of them do not have bank accounts. That is important because in the north of Scotland, for example, the average proportion of fuel-poor households is 4 percentage points above the Scottish national average and in some areas, particularly the islands, it is considerably above that. It is a serious problem.

Those who are already energy poor are likely to benefit least from a drop in energy prices. As the Library notes bluntly put it, ''Prepayment involves a surcharge.'' It is fair to say that in some areas, although not in all, there is a premium on the standing charge rather than on the electricity itself; that is a separate matter that needs to be tackled. Utility companies say that they are required to have prepayment meters because otherwise some customers would never pay, which is the same argument that they use about disconnections. They also say that there is a considerable problem of fraud in respect of meters, and many are considering new ways of using them—rechargeable keys, for example, rather than coins or tokens. It would naive to deny that there are problems, but those customers who struggle to pay for their energy through meters get a bad deal simply because they are poor. Those who are more able to pay benefit disproportionately from the available measures.

My amendment is an attempt to pass on some of the benefits of lower energy prices to consumers who are on prepayment meters. It would be impossible to frame an amendment that would give them the same deal that is available to those most able to benefit, so it has been drafted to give them an average benefit: that is, the electricity and gas companies will be required to look at all the deals that they are offering to other customers and calculate an average price which would then be charged to those with prepayment meters. That would bring down the price of energy to those on the meters and, in a modest way, contribute to reducing fuel poverty.

The Minister may say that the amendments could be better drafted, and that this is not the right place for them. However, the issue must be addressed and more thought must be given to how we can ensure that those in this situation can benefit from lower energy prices.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

This is a caring amendment, and I welcome the thinking behind it. I see it as an opportunity for equality of treatment of various individuals. The hon. Gentleman's remarks brought back memories of my grandmother, who has long gone from this mortal coil, putting the shilling in her gas meter in south Wales to keep the gas going as there was no electricity in those days. As you will appreciate, Mr. Sayeed, I am so much older than everybody else in this Room, so my relatives are also that much older. I remember the panic when the shilling dropped and the gas went out, and we all had a fumble in the dark. I did not, because I had no money, and I was too young to fumble in the dark.

It would be immensely helpful if, in giving the Minister the line to take in speaking to the amendment—he obviously has no independent thoughts of his own, because he is just reading out what is put in front of him—the officials could put ''Accept'' or ''Resist'' in very large letters upside down so that we can read what the his line will be. We could adjust all our arguments accordingly, either to reinforce his enthusiasm to accept or to argue vehemently why he should not resist.

The hon. Member for Angus (Mr. Weir) mentioned that the amendments have a minor problem in the phrase

''the average unit cost for electricity supplied to customers by other means of payment.''

As we know, different suppliers give a variety of payment incentives, according to their costs of collection. Costs of collection is a considerable sum, which is why a number of organisations have come together for joint collection costs of gas and electricity, and I can foresee that happening to other consumer commodities.

As the hon. Gentleman said, costs through a prepayment meter hit the poorest members of society. He did not pull any punches when he said that they were often poor payers—people who would not be given credit or who did not have a bank account. Equally, a number of elderly people have great worries about going into debt, and if they put their money in the meter, they know that they are not going to be hit with a huge bill at the end of the three-month period. I accept that, for a substantial section of society, we need prepayment meters. The poorest members of society get hit with increased costs because they are poorer, which makes them even poorer, and they get into greater difficulties and trouble.

I am thinking particularly of hire purchase. If one has independent means, one does not need hire purchase, but for people who sign up to such agreements, the loadings are always greater. A person in that position does not go out and buy a brand new Rolls-Royce; they go out and buy a battered 10-year-old used car. The hire purchase rates are so much greater on the older car than on the brand new one. Therefore that person has so many extra costs to meet out of their disposable income that they become even poorer. Some interesting studies have been carried out in the United States about how people get dragged even deeper into debt with increased costs and lower standards of living, purely because they are hit by those extra costs.

I shall be interested to hear how the Minister replies. This is a golden opportunity for him to prove that the Labour party has not forgotten its roots and is concerned about the poorer members of society, and that not all its beliefs have been abandoned. If the Government can load electricity prices in the way that they have loaded prices for renewables for all the good and justifiable reasons, surely they can do exactly the same for the poor people of this country.

Photo of Mr Brian White Mr Brian White Labour, North East Milton Keynes 10:15 am, 22nd June 2004

Is the hon. Gentleman aware of the effect of the Utilities Act 2000, which was to reduce electricity prices for everyone, but particularly for the poorer people?

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

I am aware of the way in which electricity prices have operated over the last few years, but what has been created in pulling down prices has sown the seeds for increased electricity prices in future. It was a short-term gain that will be at a long-term cost. So often politics works on exactly that basis. Things must be got right for today's election and no one worries about the situation tomorrow. We are looking at relative costs for the wealthy or the reasonably well-off, who can afford bank accounts and to pay by direct debit, and the poor who cannot. What will this Labour Minister do about it?

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry

As the Minister with responsibility for tackling fuel poverty, I welcome the opportunity to discuss the issue. Indeed, it was an issue that first came to my attention when I was a member of the electricity consultative committee in Edinburgh 22 years ago. I have watched the welcome developments in this area. I am grateful that the hon. Member for Angus has welcomed the fact that we have reduced the number of households who suffer fuel poverty by 2 million in the past seven years. I would also be the first to agree with him that we must do more.

George Bush discovered Christianity at the age of 40 and the hon. Member for South-West Hertfordshire (Mr. Page) seems to have discovered fuel poverty after a similar length of time. People may doubt the sincerity of both of them.

Photo of Mr Richard Page Mr Richard Page Conservative, South West Hertfordshire

The Minister must try to avoid stereotypes. Members on both sides of the Committee come from a variety of backgrounds and have a variety of achievements. My training and background fully qualify me to make any remark I care to about the poor and about my concern for them.

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry

The hon. Gentleman made only two mistakes. First, he had a jibe at me about reading from notes. I do not care to be provoked on these things. Secondly, many of us on Government Benches, and other hon. Members, have a long history of fighting rip-offs of poor people by electricity companies. His contribution was less rip-off and more Rip Van Winkle in going back to his late lamented grandmother.

In dealing with the substance of this important amendment, I shall address not the textual problems that the hon. Member for Angus highlighted, but the principle and effect of the amendments. He particularly highlighted the impact of fuel poverty in north Scotland, and we must all strive to narrow that gap. However, I am sure that he will know that fuel poverty in north Scotland is due to a combination of low income and high fuel consumption, which is necessary because of the climate. It is not necessarily related to pre-payment meters. I have not seen figures that demonstrate a higher use of pre-payment meters.

If he has them, I would be pleased to hear them, but I am not sure that they are available—that is not a comment against him if he does not have them.

Around the country, there are concerns about the treatment of the large number of second homes. The Government have moved in the past year to consider the council tax provision for second homes, especially those owned by more prosperous people. I am advised that there is a trend of people in second homes opting for pre-payment meters because their consumption is smaller and therefore, despite the fact that they pay a slightly higher price, their fuel bills work out cheaper.

As Minister with responsibility for fuel poverty, I point out that about 50 per cent. of those who are fuel poor are senior citizens. Only 5 per cent. of senior citizens have pre-payment meters. Therefore, the thrust of the Government's action with the utilities is wider than the issue of pre-payment meters.

Those substantial points lead me to resist the amendment. There are questions about opting for the average price of electricity and whether that will force prices up. However, I hope that the hon. Member for Angus will see that there are arguments against the amendment and other ways of tackling the problem. He will have seen a dramatic drop during his life of what I call the cut-off culture by the utilities—the abuses of the past are no longer tolerated. The pre-payment meter issue is not best tackled by his amendment.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Health)

I hear what the Minister is saying, but I am not convinced. My point about north Scotland was purely illustrative. The problem affects not only the north of Scotland—it is a problem for many urban areas, and rural areas are also affected.

I do not think that second homes are the issue. Many second homes have pre-payment meters because they are let out—that is for administrative reasons. Unless the Government are prepared to take a stand, no change will be made. The issue affects many people, and I shall press the amendment to a division.

Question put, That the amendment be made:—

The Committee divided: Ayes 3, Noes 12.

Division number 19 Adults Abused in Childhood — Clause 177 - Prepayment meters

Aye: 3 MPs

No: 12 MPs

Ayes: A-Z by last name

Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

Photo of Anne McIntosh Anne McIntosh Shadow Minister (Environment, Food and Rural Affairs), Shadow Minister (Transport)

I was almost moved by the Minister's remarks on fuel poverty and his rather stinging attack, which I thought was unwarranted, on my hon. Friend the Member for South-West Hertfordshire. I therefore hesitate to commend to the Minister the pleas that have been made on behalf of vulnerable customers by the National Consumer Council. I know that there has been a spate of cases in parts of the UK in which the provisions of the Data Protection Act 1998 were blamed for preventing social services from sharing information with the electricity company concerned. In one particular tragic case that led to the death of two pensioners. Has the Minister seen the rather lengthy, although poignant and pertinent, submission by the NCC? Is he minded to return with a clarification of that area, perhaps on Report? If he does not, perhaps we will return to the matter.

Photo of Mr Brian White Mr Brian White Labour, North East Milton Keynes

The hon. Lady mentioned the Data Protection Act. Is she aware that in many of the cases in which data protection is cited, the problem is that the administrative procedures used by the companies concerned do not take account of the Act? The Act allows people to pass on information, provided that companies' administrative procedures are in order.

Photo of Anne McIntosh Anne McIntosh Shadow Minister (Environment, Food and Rural Affairs), Shadow Minister (Transport)

I am grateful to the hon. Gentleman for his remarks. Whether the 1998 Act is being cited spuriously, or incorrect administrative procedures are in place, it is incumbent on all of us to reach out to people who are in that vulnerable position. In my surgeries, I have been in the situation where we had to feed the meter, in some rather cold public buildings. I am not claiming the same degree of vulnerability, but we are all mindful of the scenario to which my hon. Friend the Member for South-West Hertfordshire referred.

Hon. Members on both sides of the Committee recognise that the administrative procedures are insufficiently clear. I therefore make a personal plea to the Minister to clarify those procedures. Should there be uniform procedures, or should best practice be adopted? The safety net situation should be clarified, because the NCC believes that that is necessary. Moreover, clarification is needed of the role of the social services departments and their liaison and communications procedures with the electricity companies, as well as of the procedures within the electricity companies. I agree with the hon. Member for Milton Keynes, North-East (Brian White) that citing the Data Protection Act 1998 may be a spurious defence—I do not believe that that was an intended consequence of the Act—but it would be helpful to include in the Bill what the standard best practice should be.

Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry 10:30 am, 22nd June 2004

The clause gives Ofgem a general power to consult on and, in due course, propose regulations to extend the range of debt that could be collected from a prepayment meter. I have not had a chance to study the National Consumer Council paper, but I hope that my assurance that Ofgem will

consult before proposing regulations means that the views of distinguished organisations such as the NCC, and those of hon. Members, will be taken into account.

My hon. Friend the Member for Milton Keynes, North-East rightly pointed out the data protection issues, which Ofgem is addressing following discussions with the Department for Constitutional Affairs. It has clarified the application of data protection, which I discussed briefly with Richard Thomas, who is taking a practical approach to the matter, as the Act intended; we do not want people to prevent information from being exchanged for overly bureaucratic reasons. We do not want another tragedy such as the one involving two old people, and I understand that the utility has given assurances in that respect. However, we will never know whether that case centred on a data protection issue and whether anything could have been done about that.

I repeat my assurance that the clause gives Ofgem the general power to consult on the proposed regulations, which will allow informed opinion such as that of the NCC and hon. Members to be taken into account. Such regulations would be subject to the approval of the Secretary of State and due parliamentary process. I hope that that is reassuring enough for hon. Members to support the clause.

Photo of Anne McIntosh Anne McIntosh Shadow Minister (Environment, Food and Rural Affairs), Shadow Minister (Transport)

I am disappointed by the terms of the Minister's general assurance. I plead with him to look kindly on a form of words that would have the support of the NCC and Citizens Advice, and perhaps that of some of his hon. Friends. There are deficiencies in the present procedures, and an appropriate amendment on Report would be an opportunity to close that loophole.

Question put and agreed to.

Clause 177 ordered to stand part of the Bill.

Clauses 178 and 179 ordered to stand part of the Bill.