HC Deb 27 January 1999 vol 324 cc309-15 12.59 pm
Siobhain McDonagh (Mitcham and Morden)

I am grateful for the opportunity to raise a matter that is important to a number of my constituents and, I hope, to the House. As this is my first Adjournment debate, I should like to thank the officers of the Speaker's Office and the Table Office for their assistance.

Hon. Members could be forgiven for having thought, when they saw the title of the debate, that we would be in for half an hour of worthy but dull academic dispute about pricing mechanisms, double recoveries and distribution price controls. Although I must warn the House that such terms will feature in my speech, they are not what the debate is about in essence. Rather, it is about some of my elderly constituents who are trying to heat their homes; the lengths to which the provider—London Electricity—has gone to thwart them; and the inability of the regulator to do much about it.

To explain the background, I have to give a brief chronology of events. The affair has been going on for more than two years, so my explanation will become quite complicated, but I shall distil the key events so as to describe them as briefly as possible. I have provided my hon. Friend the Minister for Energy and Industry with a much fuller background briefing.

In my constituency, there is a small housing charity called Mitcham Garden Village, which is a lovely development of 86 dwellings, comprising flats and maisonettes, reserved for elderly Mitcham residents. It is owned by Mitcham Garden Village trust, which is a registered charity and a company limited by guarantee. It is neither an old people's home nor a sheltered housing development.

The houses and flats were built in the 1920s and have no fixed heating other than one gas fire in the living room, as was standard in that period. As I am sure the House knows, such poor heating would not easily be tolerated in this day and age. That is why, when the opportunity came for the residents to install off-peak electrical space heaters, partly through grants provided by the local council, they took the chance to get some decent heating at last.

Now comes the pivotal point: every single resident of Mitcham Garden Village is an individual customer of London Electricity, receiving personalised bills and being entirely responsible for his or her own account. As the residents are elderly—the average age is between 75 and 80—the trust undertook to co-ordinate their applications to London Electricity to get the new heaters connected up to the mains.

To cut a long story short, London Electricity told the trust that the existing network could not support the new load and that, to connect up the heaters, the company would have to build a new substation and carry out related upgrading works. The company quoted various prices, ranging from £28,000 to £75,000, for which, to this day, it says the trust is liable. "Why are we liable?" the trustees asked, "We are not the customer. It is the 86 individual residents, each of whom is a registered customer of London Electricity, who want the electricity, not the trustees."

If 86 residents of Acacia avenue required individual modest load increases, one would not expect London Electricity to roll up the cost and try to bill the whole street for a new substation. Such costs are provided for in the five-yearly price review, when the utilities are given hundreds of millions of pounds to carry out such upgrading. To try to charge residents for the same work is clearly a double recovery.

The trust submitted a complaint to the regulator—the Office of Electricity Regulation—but Offer replied, naturally enough, that the trust was not the customer and that the regulator could only settle a dispute between an individual customer and London Electricity. However, London Electricity maintained that the trust was the customer. At that point, the trust contacted me and asked for my help. In February last year, I wrote to hon. Friend the Minister for Energy and Industry asking for his advice. He replied on 4 March, saying:

The problem here is that it is not Mitcham Garden Village who is the customer of the company". That left London Electricity completely isolated: the trust said, "We are not your customer," the residents said, "The trust is not your customer," the regulator said, "The trust is not your customer," and the Minister of State himself said, "The trust is not your customer." Yet London Electricity continued to dispute that fact, and I have to tell the House that it still continues to do so.

In his letter of 4 March, my hon. Friend the Minister made an excellent suggestion, saying: Perhaps the Secretary of Mitcham Garden Village might be able to co-ordinate an arrangement, whereby a small sample of the village residents, (say one or two), seek a quote from London Electricity, as this would clarify the picture on whether it was determinable and what the Director General's determination might be. I hope this is helpful Indeed it was, for that was exactly what was happening: one resident, Mrs. Dolly Elnaugh—who desperately wanted to attend today's debate, but who, quite suddenly, had to be taken into hospital—had embarked on exactly that course of action. Needless to say, she got very short shrift from London Electricity, which refused to connect her until the trust paid for all the upgrading work, even though she was only one customer making an application for one set of heaters. Indeed in its evidence to Offer, London Electricity called Mrs. Elnaugh's inquiry—which we must not forget is the course of action suggested by the Minister of State—

a contrivance designed to circumvent the consequences of the true situation. Having got nowhere, Mrs. Elnaugh complained to Offer. In its determination on her case, Offer ruled again that Mitcham Garden Village was not the customer—a fact already grasped by everyone from the Minister of State down, except, of course, London Electricity—and stated that London Electricity had a duty to supply Mrs. Elnaugh, cognisant of its normal charging principles". In subsequent letters, the regulator stated that it thought that its determination would mean that Mrs. Elnaugh would be connected up at no cost to herself.

After many tortuous months, Mrs. Elnaugh was eventually connected up, but she was landed with a bill for £500 plus VAT for the privilege. "How could it possibly cost £500?" we asked. "Because," replied London Electricity, "that is about one eightieth of the amount needed to upgrade the network". "But you haven't upgraded the network," we replied, "Mrs. Elnaugh is plugged in to the existing infrastructure." London Electricity had previously said that it could connect around a dozen residents without having to upgrade, so why on earth was the company charging for work that it had not done? Furthermore, when the next resident asked to be connected—this took place a matter of days ago—London Electricity simply refused, saying that she would have to pay £500 up front.

As I said, this is my first Adjournment debate, and I suspected that, once word got out, there would be a flurry of activity; I was not to be disappointed. On Monday, I received several faxes from London Electricity which, sadly, represent a mere reiteration of the company's case. Of the key points sent, the first states that: London Electricity has no desire to leave the residents of Mitcham Garden Village unable to use their new night storage heaters". Well, I am glad that we agree on something. However, the company goes on to say: The residents now have efficient heating installed in their homes which, because the full implications of the scheme were not checked at the outset, they are unable to make use of. That is simply not true: Mitcham Garden Village approached London Electricity in February 1997, almost two years ago and almost six months before the first heater was installed.

The real reason for the heaters not being connected is London Electricity's bizarre refusal to accept that the 86 residents, who are all registered customers of London Electricity, who all receive individual bills from London Electricity, and who are all personally responsible for settling their accounts with London Electricity, are in fact customers of London Electricity. That is despite the determination of Offer and the judgment of the Minister. In its fax to me this week, London Electricity called the decision to settle the matter with reference to individual customers "unreasonable".

Only one party has behaved unreasonably during this prolonged period. I have been shocked by the high-handed and arrogant way in which London Electricity has conducted itself. My constituents have spoken to me of the distress caused to them by London Electricity's insensitivity. I have no idea whether Mrs. Elnaugh is in hospital for other reasons, but I am concerned that her distress about this matter may have something to do with it.

When I spoke to a senior manager at the company in an attempt to reach some compromise, I too experienced London Electricity's unique brand of customer care. I pointed out that these were elderly people, we were in the middle of winter and there was a flu epidemic on. I was told, "It is not that cold and anyway you don't get the flu from cold weather." I had not realised that one of the benefits of privatisation was that London Electricity now dispenses weather forecasts and medical advice. Would that it dispensed electricity as readily.

Mr. Deputy Speaker, these are the facts of the case. I believe that my constituents have been the victims of a wrong decision by London Electricity, but the case also raises some important issues surrounding the effectiveness of Offer in protecting vulnerable customers. I fully accept that my hon. Friend the Minister is not responsible for the behaviour of London Electricity and I do not expect him to judge the merits of the dispute here and now. None the less, I should like my hon. Friend to answer five key questions, of which I have given him prior notice. I hope that I will get them in within the time available.

First, in this instance, a private utility has acted with an arrogant disregard for the needs of my elderly constituents which deserves to be exposed on the Floor of the House. Furthermore, London Electricity continues to dispute my hon. Friend the Minister's clearly expressed view that it is not Mitcham Garden Village who is the customer of the company. I wonder how my hon. Friend feels about his judgment being so clearly rejected by London Electricity.

Secondly, the case raises important questions about the effectiveness of Offer. There is no doubt that Offer has consistently ruled against London Electricity and has met with repeated obfuscation when trying to uncover simple facts. What is an elderly customer to do when a privatised utility simply ignores the determination of the regulator?

Thirdly, the matter raises further important issues with regard to the future regulatory framework. The response to the consultation on the Government's Green Paper, "A fair deal for consumers", clearly states: Economic regulation does not occur in a vacuum. Ensuring that the services provided by these industries are available to all members of society, including the most vulnerable, on fair terms, is important to the Government's wider objectives of creating a fairer society. The terms offered to my constituents are by no stretch of the imagination fair. How can we regulate the fair treatment of elderly customers?

Fourthly, the response to the consultation further states: It will also be important to ensure that the needs of disadvantaged customers—many of whom lack the resources, knowledge or power to argue their cases directly with regulators, companies and the Government—are fully understood. I am aware of the huge legislative agenda that the Government are steering through the House and that we have had to prioritise our manifesto commitments on constitutional reform, modernisation of the national health service and improving the welfare system, but in the absence of a new utilities Bill, how can we guarantee that the needs of disadvantaged customers are fully understood?

Lastly, as I said at the outset, this is not an academic dispute about pricing mechanisms, double recovery and distribution price control. It is about old and vulnerable people who lack adequate heating. I am extremely proud that the Government have cut VAT on domestic fuel and helped pensioners greatly with their winter fuel bills. The residents of Mitcham Garden Village are not installing swimming pools, power showers or electronically controlled garages that would require massive amounts of new electricity supply. They simply want to connect up the small heaters that they need to warm their homes.

In the two years that the dispute has been dragging on, with still no end in sight, London Electricity has received £232 million to spend on upgrading its infrastructure. In the next financial year, it will spend an additional £116 million. Yet it still wants to charge individual pensioners £500 plus VAT for the privilege of consuming more electricity. There is no competition in domestic electricity distribution so my constituents have no choice. They must pay up or go cold.

I intended to finish my speech here, but just under an hour ago my office was faxed a letter from Offer. I have not had the chance to study it in depth, but it appears that Offer has once again ruled against London Electricity and told it that it should not charge Mrs. Elnaugh. I await the response of London Electricity with keen interest.

1.16 pm
The Minister for Energy and Industry (Mr. John Battle)

It is traditional in the House to compliment the hon. Member who wins an Adjournment debate on drawing a matter to the attention of the House. My hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) said that this was her first Adjournment debate. Judging by the quality of her speech, which demonstrated what an Adjournment debate should be, I suspect that there will be a capacity crowd the next time she wins one.

I deeply regret that my hon. Friend has been forced to bring the matter before the House, but her diligence and tenacity in following the case through and—I do not know where she gets it from—the sense of humour with which she has presented her forceful case this afternoon is remarkable.

We are judged as Members of Parliament, Ministers and as a Government by the effects of our decisions—taken in this Chamber about laws and budgets—on our constituents' lives. It is when I get home to my constituency in Leeds and attend my advice surgery that I find out the effects of our decisions and learn what is really going on. My hon. Friend has listened to a constituency case, followed it through and highlighted what I deeply believe is a breakdown in the system. If elderly people cannot get basic justice in simply obtaining a supply of electricity, we need to sharpen up the act somewhere.

My hon. Friend mentioned that her constituent, Mrs. Elnaugh, had been taken into hospital. We wish her a speedy recovery. I hope that this carry-on has not contributed to her distress.

I understand that a series of determinations has been made in this episode. In October 1997, the housing trust asked Offer to reduce the cost of the upgrade. In December 1997, Offer ruled that it could not determine because the housing trust was not the customer. As my hon. Friend kindly acknowledged, I made the suggestion that Mrs. Elnaugh ask Offer to determine on her behalf and that of the other residents who exactly the customer was. On 26 November, Offer determined that Mrs. Elnaugh was indeed the customer.

Offer was asked to make three separate determinations. I emphasise that Offer has strong powers to make determinations once it has been formally asked to do so. That seems to be part of the problem. One has to package the request for determination and then Offer will take a decision. Offer's decisions are then subject only to a judicial review.

In this case, Offer was asked to make three separate determinations. In December 1997, it determined that the application for determination by the housing trust could not be accepted because the trust was not the customer requiring the supply. In November 1998, it determined that London Electricity had a duty to supply Mrs. Elnaugh and to ensure that its system was capable of supporting that demand. I can confirm that, no doubt as a result of my hon. Friend's pressure as a campaigning constituency Member of Parliament, Offer has today ruled that Mrs. Elnaugh should not have to pay anything for the upgrade of her electricity connection. I regret that it has taken so long for Offer to arrive at that decision. I hope that London Electricity will now heed the regulator's determination in respect of the other customers in Mitcham Garden Village who are in the same position as Mrs. Elnaugh.

This has been a long-running case and, in defence of Offer, I say only that Offer has guidelines for how long it should take to make a determination and each of those three determinations was made within the target time of six months. We may have to consider the process whereby determinations get to Offer in the first place and the ducks and drakes that companies may be able to play to avoid getting to a determination. In the light of my hon. Friend's comments, I shall examine that process in detail to find out if it can be sharpened up. I hope that this sorry business will now end and that the decisions satisfy the residents of Mitcham Garden Village.

Many complaints are resolved without the need to refer to the formal, statutory powers of determination of the Director General of Electricity Supply. Since 1990, only 181 determinations have been issued, and 25 of those concerned connection charges. The vast majority of complaints can be handled without getting as far as Offer, but I regret that, if it had not been for my hon. Friend's tenacity, this case might still have been unresolved. Once a determination has been made, action can be taken. I hope that the determination in this case will be noted by London Electricity and acted on.

My hon. Friend mentioned our White Paper, "A Fair Deal for Consumers". In opposition, we said that we would encourage competition where possible but would have regulation where it is necessary to ensure that market failure does not mean that people get left out of the system. Regulations were clearly stacked in shareholders' favour, and we want to set up a framework of regulation that has the consumer at its heart. We consulted widely and published our White Paper. We are now working to fulfil our commitment to put consumers first. We shall introduce a package of measures as soon as parliamentary time permits.

There will be a new primary duty on regulators to protect and promote customers' interests. There will be new independent statutory consumer councils with powers to deal with complaints that are not resolved by the utility companies. Those councils will have a strong role and people will know where to take their complaints. There will be financial penalties on companies for breaching overall and individual customer service standards.

The regulators' social duties and obligations will be extended to cover low-income and vulnerable consumers, including the chronically sick, the disabled, pensioners and rural customers. Ministers will have powers to issue statutory guidance to regulators on social and environmental matters that are absent from regulation at present.

In the meantime, until we can introduce our legislation, the new energy regulator, who has combined duties for gas and electricity and who took up his post just weeks ago, is reconsidering a social action plan, concentrating on providing solutions to the problems of those who suffer from fuel poverty. It is worth reminding ourselves that households on the lowest incomes spend, as a proportion of their total expenditure, three and half times more on fuel than other households do. The poorest pay the most. Expenditure on electricity alone, as a proportion of total expenditure, is five times as high for low-income customers as it is for wealthier ones.

Competition and regulation in energy policy should be measured against the test of whether they work for the poorest and most vulnerable. My hon. Friend has highlighted the fact that, sadly, the system has failed in the case of her constituents. Perhaps recalling that distressing saga will encourage us not only to introduce legislation but to ensure that practice changes in future. The regulator's determination has been made and I repeat that I hope that London Electricity will take heed of it in respect of other customers. The case should be closed and those customers should not have to pay for that upgrade.

We shall work towards introducing legislation for a system of regulation that puts the consumer at its heart, gives new powers to the regulators and extends the reach of regulation to ensure that the poor and vulnerable are not paying the highest price.

I thank my hon. Friend for raising the matter. The way in which she has followed the case in all its detail and her hard work and diligence are a testimony to how Adjournment debates should take individual constituents' cases and highlight faults in the system's structures and processes. I learned a great deal from my hon. Friend's enjoyable speech. I listened to her carefully and I shall ask my officials to examine the background of the case in greater detail to find out what we can do between now and the introduction of legislation to ensure that no one else experiences the same problems. I would not mind my hon. Friend being my MP if she championed my cause so well.