Clause 18 - Power to modify energy supply licences to make provision as to default in green deal payments

Energy Bill [Lords] – in a Public Bill Committee at 3:30 pm on 9th June 2011.

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Photo of Tessa Munt Tessa Munt Liberal Democrat, Wells 3:30 pm, 9th June 2011

I beg to move amendment 111, in clause 18, page 14, leave out subsection (2).

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Commission, Chair, Public Accounts Commission

With this it will be convenient to discuss amendment 112, in clause 18, page 14, line 46, at end insert—

‘(2A) The modifications made by virtue of subsection (1) will, in particular—

(a) have particular regard to the interests of consumers who are one or more of the following—

(i) disabled or chronically sick individuals;

(ii) individuals of pensionable age;

(iii) individuals on low income;

(iv) individuals with one or more resident children aged 16 or under;

(a) prevent disconnection of the supply to a Green Deal property where—

(i) the bill payer is in financial difficulties and is complying with an agreement, or reduced repayment plan, of which the Green Deal is part;

(ii) the Green Deal charges were not disclosed to the purchasers or tenant by the seller and/or landlord and/or their agents;

(iii) the bill payer is in a legitimate dispute with the Green Deal provider;

(iv) a failure in the metering system, including pre-payment and smart-meter systems, results in a consumer being unable to make Green Deal payments; or

(v) other circumstances as specified by the Secretary of State.’.

Photo of Tessa Munt Tessa Munt Liberal Democrat, Wells

We have already discussed some of the issues that I want to raise, but I would still like to cover them briefly. Clause 18 covers the power of the Secretary of State to modify gas and electricity supply licences. The amendment would remove subsection (2), which, according to the explanatory notes, limits those powers so that they may be used only

“for the purpose of making provision for: the steps that must be taken by the holder of the licence following a bill payer’s failure to make green deal payments; the circumstances in which a licence holder may disconnect the supply to a green deal property; and enabling, in certain circumstances, a licence holder to use a security deposit paid by the bill payer to pay green deal payments to the green deal provider.”

Amendment 112 would replace that subsection and deals with the interests of individual consumers who are disabled, chronically sick, of pensionable age, on low incomes, or with one or more resident children aged 16 or under. It would also prevent the disconnection of the supply to a green deal property where the bill payer is in financial difficulties and complying with an  agreed reduced repayment plan, of which the green deal is part. I will not go through the proposed new subsection in detail, but the purpose of the amendment is to ensure that the Secretary of State cannot amend the licensing conditions to allow energy companies to disconnect vulnerable customers for failing to keep up their green deal repayments.

At present, suppliers can only disconnect a household for failure to pay the charges associated with the supply of energy and metering costs, such as standing charges. It has been long established that debts for which one might lose one’s home, liberty or supply of essential goods and services, such as energy, should be prioritised over other debts. To allow disconnection for the non-payment of green deal repayments simply as a result of the mechanism through which the loan is repaid would subvert that principle.

Consumers may face situations in which they cannot afford to pay the green deal charge, but can afford to pay for their ongoing energy consumption, or they may wish to dispute elements of the green deal package, which we have already discussed. I am particularly concerned that, although disconnection is rare, the National Association of Citizens Advice Bureaux has evidence that indicates that customers, including those vulnerable customers whom I have already listed, may be threatened with disconnection for fuel supply arrears. Where customers are in financial difficulty, threats of disconnection can lead them to make repayments at an unaffordable or unsustainable rate, or behave in a way that is contrary to their best interests, for example by seeking loans through less formal arrangements than usual. I am particularly concerned about that.

The Energy Retail Association, which is made up of the six largest energy suppliers, offers a self-regulatory framework. ERA members state that they will not knowingly disconnect vulnerable customers, including older people, sick people and disabled people and their carers. They also have arrangements for those with young children. However, the energy supply licence conditions with which all energy suppliers must comply prohibit suppliers from disconnecting households occupied solely by people of pensionable age, or those people and children, only during the winter months. They also require suppliers to avoid disconnecting households that include any occupant who is disabled, has a chronic illness or is of pensionable age, but only during the winter.

Although those conditions were strengthened recently to ensure that suppliers take all reasonable steps to examine their customers’ circumstances before disconnection, if suppliers are permitted to disconnect households for failing to pay green deal charges, those mandatory protections must be strengthened further, for example by extending them to families with young children. I am particularly keen for the Minister to clarify that the secondary legislation will cater for that.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Energy and Climate Change)

Very briefly, I not only have a great deal of sympathy for but agree strongly with the sentiments expressed by the hon. Member for Wells. My question to the Minister, however, is slightly differently phrased. Can he assure us that the safeguards for vulnerable customers that currently apply elsewhere will also apply to the green deal? I am doubtful about stipulating and listing. Although I agree with the individual categories of vulnerable potential consumers that the hon. Lady  discussed, I have some difficulty with the idea of listing them on the face of a Bill. As a Minister, I always resisted putting lists in a Bill. However, I seek assurance from the Minister in a slightly different way in that the current protections will apply to the green deal in the same way that they apply in other spheres of the energy market.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I am grateful for the opportunity to thrash out these important points. The amendments concern the steps that can be taken if a customer defaults in paying green deal charges. It is a key component of the green deal model that green deal payments should be treated in the same way as charges for the supply of energy. That should mean that the risk of non-payment of the green deal charge will be broadly the same as the risk of non-payment of energy supply charges, keeping the expected default rate for the green deal equivalent to the historically low default rate for energy supply. That is crucial. In order to get the low-cost finance necessary to make the green deal as competitive as possible, we must ensure a low default rate and low-risk cost of capital. Amendment 111 would remove the possibility of introducing equivalent collection methods via energy supply licence modifications, and would therefore greatly increase the cost of finance for the green deal. That is my concern.

Amendment 112 concerns vulnerable consumers and the prevention of disconnection of energy supply in certain circumstances. Energy suppliers are already obliged to offer particular services to domestic customers experiencing difficulties in paying their energy bills. They must offer a means by which payments can be deducted from a social security benefit such as Fuel Direct, made through means other than a pre-payment meter or made through a pre-payment meter where that is safe and reasonably practicable. It is absolutely our intention that the green deal should be entirely consistent with those existing practices.

The safety net agreement between the big six energy suppliers ensures that suppliers will never knowingly disconnect energy supply to vulnerable consumers at any time of the year. That will apply across the board to the green deal as well, as part of those energy bills.

Where the disclosure and acknowledgement obligations contained in the Bill have not been complied with clause 16 provides for a customer to seek redress. We will set out in the green deal regulations the detail of how that will work in practice, having engaged in the type of consultation and stakeholder engagement that I am sure my hon. Friend the Member for Wells will be able to play a meaningful part in. Redress could include cancelling the customer’s liability to pay green deal instalments. Clearly, more detail will need to be fleshed out in secondary legislation, but I hope that she has found my explanation reassuring and on that basis will feel able to withdraw her amendment.

Photo of Tessa Munt Tessa Munt Liberal Democrat, Wells

I do not wish to repeat the arguments, because I know that I have brought this issue up with the Minister before. However, it concerns me—not a little—that if somebody moves from an ordinary bill payment arrangement to a pre-payment meter arrangement their energy charges increase. The basic unit of energy is more costly if people use a pre-payment meter and it seems desperately unfair that that should be the case. I  wonder if there is some opportunity for the Minister to set out his thoughts on what seems to be an appallingly unfair situation.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Energy and Climate Change)

This is the benefit of Committee proceedings. In her discussions with the Minister, will the hon. Lady explore what incentives there could be for people on pre-payment meters, including the potential negation of the additional charges that currently incur, which could be an incentive to inspire the take-up of the green deal among those customers? Would she consider exploring that issue with the Minister?

Photo of Tessa Munt Tessa Munt Liberal Democrat, Wells

The Minister will have heard what the hon. Gentleman has just said. I am very happy to talk further about this issue. Perhaps I could do so outside the Committee; I am happy to talk outside the Committee. But I want to know what the Minister’s thoughts are on this situation. It is hugely disadvantageous to people who are already vulnerable, because of their financial situation. That is particularly true of people in my constituency who do seasonal work and part-time work for long periods of the year, and for whom the average salary is only £18,000. If someone is put on a pre-payment meter, there is no way that they should ever have to pay more for their energy just because of the misfortune of their circumstances, which could go on for years and years. Indeed, it may be a lifetime situation for people who live in rural areas and other areas of seasonal work.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

The hon. Lady makes a very good point. I do not think that it detracts from anything that I said in my earlier remarks. However, the point that she is making really relates more to tariffs and the iniquity that they can impose on the most vulnerable rather than to the green deal per se. There will be an opportunity, later in our proceedings in the Committee, to talk specifically about tariffs and then we can perhaps explore the concerns that she has expressed and perhaps elucidate further on this important issue specifically in relation to tariffs.

Photo of Tessa Munt Tessa Munt Liberal Democrat, Wells

I will bring up the issue whenever the Minister wants and as often as he wants. It is something that I care about deeply and I am always trying to find a way of wedging in discussion of it.

Photo of Claire Perry Claire Perry Conservative, Devizes

May I associate myself with this interest in reaching out to the most disadvantaged households and trying to ensure that they benefit from the green deal? Perhaps the Minister could tell us, in his closing remarks on this clause, that as much as possible will be done to communicate with debt-counselling agencies and citizens advice bureaux. We are not necessarily talking about households who read all the stuff that comes through their letterboxes and realise what steps they can take if they feel that they are in some way being disadvantaged with a potential shut-off of electricity. We really ought to reach out to those people on this important issue.

Photo of Gregory Barker Gregory Barker The Minister of State, Department of Energy and Climate Change

I fully take on board the points that the hon. Lady has made and I am very receptive to them.

Photo of Tessa Munt Tessa Munt Liberal Democrat, Wells

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 18 ordered to stand part of the Bill.