HC Deb 13 July 2004 vol 423 cc1344-51

`(1) The Secretary of State shall, within six months of the coming into force of this section and from time to time thereafter, make regulations prescribing the procedures to be followed in the event of a proposed disconnection of supply by an electricity company, in particular in relation to households with—

  1. (a) customers of pensionable age,
  2. (b) adults or children who are disabled or have a long-term illness, or
  3. (c) children aged five or under.

(2) Regulations under this section shall, in particular, make provision about the role of the Social Services Departments of local authorities in relation to proposals for disconnection.

(3) Regulations under this section shall, in particular, set out the administrative procedures to be followed as part of suppliers' final licence obligation.

(4) Before making regulations under this section, the Secretary of State must consult such persons as he considers appropriate.

(5) Subsection (4) may be satisfied by consultation that took place wholly or partly before the commencement of this section.

(6) The duty to make regulations containing provision authorised by this section is subject to the affirmative resolution procedure.'.—[Miss McIntosh.]

Brought up, and read the First time.

Miss McIntosh

I beg to move. That the clause be read a Second time.

Madam Deputy Speaker(Sylvia Heal): With this it will be convenient to discuss the following amendments:

No. 48, in page 132, line 26 [Clause 173]. at end insert— '(1A) It shall be a duty of every supplier of gas to ensure that the standing charge, if applied, and the unit cost of gas supplied by means of a pre-payment meter shall be no more than the standard charges applied to customers purchasing gas by means of quarterly bills.'.

No. 49, in page 133, line 16 [Clause 173], at end insert— '(2A) It shall be a duty of every electricity supplier to ensure that the standing charge, if applied, and the unit cost of electricity supplied by means of a pre-payment mete r shall be no more than the standard charges applied to customers purchasing electricity by means of quarterly bills.'.

Miss McIntosh

It gives me great pleasure to introduce the new clause; it is a timely proposal and one on which the Under-Secretary will, I think, look favourably—if he can drag his attention back to the business of the House for a moment. The consultation process undertaken by the Government threw up several ideas, and we have drawn on them. The National Consumer Council and some other non-governmental voluntary organisations, notably Age Concern, expressed concern about the rate of disconnection, which continues to grow unacceptably.

Our proposals would give the Secretary of State power to make regulations setting out procedures to be followed in the event of a proposed disconnection. The National Consumer Council, Ofgem and the Energy Retail Association are in agreement that such procedures should apply in particular to households where there are customers of pensionable age…adults or children who are disabled or have a long-term illness, or…children aged five or under". Ofgem and the Energy Retail Association should be invited to revise the proposals to prevent the disconnection, at any time, of households where anyone is in those categories.

Our new clause also sets out the role of local authority social services departments in relation to proposals for disconnection. That would offer the Government a good opportunity to set out in the Bill those provisions of the Data Protection Act 1998 relating to disconnections, bearing in mind the tragic case of the elderly couple whose electricity supply was disconnected. Rightly or wrongly, the social services department used the provisions of the Act so as not to intervene.

We have set out what we believe is the best definition of the term "vulnerable customer". It would be interesting if the Minister were to say what definition his Department currently uses. Our understanding is that there is no statutory definition. I understand that the Energy Retail Association proposes to use a definition along the following lines: A vulnerable customer at risk from disconnection will be unable to safeguard his or her personal welfare or the welfare of any children in the household, and will be in need of care and attention by reason of age or infirmity, or suffering from chronic illness or mental disorder, or substantially handicapped by being disabled.

I could go on much longer, but mindful of the other sets of amendments that we have yet to consider, I simply propose the new clause in the hope that the Minister and the Government will see it as a helpful response to the excellent points made in the consultation process by the National Consumer Council and others. It would enable the Government to draft regulations so that there is less scope for disconnection, which leads to tragic consequences, and to set out what the role of local authority social services departments should be.

5.15 pm
Mr. O'Neill

It would be unfortunate if new clause I were passed. It would not do very much. To rely on anything that the people who sell electricity are prepared to advocate as a means to protect disadvantaged consumers is rather like asking foxes to make the security arrangements for a chicken coop. The definitions that they have provided are in no way valid. They are nothing like as comprehensive as they should be. It is not for nothing that Energywatch—the consumers' energy protection organisation—rubbished the idea. It is also wrong to suggest that the proposal comes from Ofgem—it does not. Ofgem asked the Energy Retail Association to make proposals that would avoid the possibility of the tragedy to which the hon. Member for Vale of York (Miss McIntosh) referred. Ofgem did not sponsor the research or the report; it requested it, and I understand that it has yet to pass judgment on whether to accept it. We have not yet produced our report, but if the hon. Lady had read the Select Committee on Trade and Industry's proceedings on disconnection, she would have seen that the proposal does not enjoy the imprimatur of Ofgem. Ofgem merely asked ERA to produce a report, which it is still considering. As far as I know, ERA does not have too many friends in that area. I am not sure whether the National Consumer Council has a view—it has been cited as having one—but the Gas and Electricity Consumer Council, Energywatch, has a view: it does not regard the proposal as satisfactory.

The new clause certainly bears the hallmark of the kind of legislation that the Tories proposed in the 1990s, when they spoke about those people who should be protected. Indeed, under the Gas Act 1995—I was about to say the Gas Bill—they made provision for age and disability, but not for economic disadvantage. They made no provision for the poor. If one group is just as entitled to claim protection from disconnection as the sick and the elderly it is the economically disadvantaged. Frankly, that group is not addressed by the new clause.

When the Under-Secretary responds—if he will give me a minute of his attention—perhaps he will tell us the actual cost of disconnection. I understand that estimates range from £150 to £450 per disconnection, so there is a lot of uncertainty. It is one thing to have a system with a series of protections for people who are vulnerable because of their income, age or physical infirmities, but it is quite another for disconnection to be simply a first resort for some sections of the community. I am not happy at all with the current provision. Anyone involved with fuel poverty in this country—perhaps I should declare an interest as honorary president of Energy Action Scotland, a Scottish charity engaged in trying to eradicate fuel poverty—has little good to say about the proposal in the new clause. As I said, it was considered by the Trade and Industry Committee, which I am fortunate to have the honour of chairing.

Disconnection is one of the most regrettable and unacceptable manifestations of poverty in our society. We heard pious speeches earlier this afternoon about the lights going out, but if the lights go out for one poor family, that is just as devastating for them as if it happens to the whole country because of the failure of a Government or an electricity company to invest.[Interruption.] Well, one is as bad as the other, but the new clause contains no reference to the poor. It refers only to people who are physically infirm or elderly. It is far too restrictive and represents a piece of irrelevant opportunism by the Tories. It would not clarify the situation or protect the poor in any way, shape or form. The present arrangements are no better or worse than the proposals. If the hon. Lady had given any thought to the matter, she would have realised that the proposal was a sham put forward by those who make a living from selling electricity. It is an attempt to square their consciences with a tragedy for which they were not responsible—other players were involved.

Miss McIntosh

Obviously I am grateful to the hon. Gentleman for allowing me to intervene on his rant. I am mindful of his position in Scotland. Given that he is a Scottish Member, perhaps he did not think that he was in a position to read the comments of the National Consumer Council, which will be disappointed to hear of his complete disregard for people whom it considers to be extremely vulnerable customers. I think that one household that faces disconnection in such circumstances represents a tragedy.

Mr. O'Neill

The people who know specifically about energy consumers, representatives of Energywatch, disowned the proposals before the Select Committee that I chair. They are far more expert than the broad-brush merchants of the National Consumer Council.[Interruption.] The hon. Member for Vale of York can smile and laugh, but the people who have disparaged the proposal are the specialists in the field.

The new clause is similar to provisions put forward by the Tories in the 1990s when they were responsible for trying to protect poor consumers. It is not satisfactory, and I hope that the Government will not accept it because it would set back a debate that is just beginning to be engaged in. We must determine whether it is necessary for failure to pay energy bills to result in disconnection. Such arrangements are no longer in place for water, so why should they exist for electricity? We should outlaw such action once and for all. The ERA is interested not in doing that, but in creating conditions that would make it more difficult.

Mr. Stunell

I must say that I was rather disappointed with the contribution of the hon. Member for Ochil (Mr. O'Neill). Whatever one might say about the Conservatives—I have said some things about them in my time—there is nothing wrong with the new clause, which is why I was happy to add my name to it.

The hon. Gentleman should not look so hard at the messenger but should take a look at the message: we have to tackle the issue of disconnections. I believe that the new clause is a sensible way of moving forward, and it has not come out of the mischief-making cupboard that has been mentioned a couple of times today. It has a good provenance and a good intention, and it seems capable of achieving some benefit for the disadvantaged in society, including those in Hazel Grove, as well as in Ochil. Whatever its merits or demerits, I do not think that he has served the debate very soundly.

In Committee, where we discussed the issue only very much in passing, it was pointed out that there are serious considerations in developing this country's energy policy, as it is not simply about demand and supply, but about the protection of consumers. The White Paper made that point, which has been endorsed by all political parties. I took it that the new clause had been tabled in that context and as a step towards filling the policy vacuum arising from the Bill's general inadequacy in fulfilling the obligations set out in the White Paper.

Even if the Minister does not feel able to accept new clause I in its current form, I hope that he will give us some assurances that this gap in the Bill will be filled and that, even if that cannot be done here and now, it will be done when the Bill goes back to the Lords in a week or two.

Mr. Weir

I shall be very brief, as I canvassed the issue in Committee, where we had an interesting debate about it.

The amendments that I tabled in Committee sought to reduce payments through pre-payment meters by a slightly different route from that taken in amendments Nos. 48 and 49, in which I am seeking to ensure that such payments are equal to those paid in quarterly bills.

This is a serious problem. Figures from Energywatch show that 30 per cent. of all consumers on incomes of less than £6,500 and 50 per cent. of all single parent families use pre-payment meters. Energywatch also disclosed that 65 per cent. of gas pre-payment meter users were in debt, which effectively meant that they could not move to alternative suppliers.

The British electricity trading and transmission arrangements have been sold to us on the basis that they will mean lower prices for consumers, but they will not necessarily mean lower prices for those on pre-payment meters—the people who can least afford higher prices. There can be considerable differences in annual costs for those on such meters, as opposed to those who pay by regular bills, and the differences are even greater for those who pay by direct debit. Interestingly, many of those on low incomes who use pre-payment meters will be the same people who do not have bank accounts, which makes direct debit an almost impossible option.

It is perverse that the poorest, who spend the greatest proportion of income on energy, are least able to get the best deals. Those on the lowest earnings spend 9 per cent. of their income on energy, while those on higher incomes spend 2 per cent., yet those on pre-payment meters pay about 20 per cent. more for gas and 6 per cent. more for electricity. That is a significant difference, especially for those on low incomes.

In some areas, but not all, there is a premium on the standing charge rather than the electricity itself; hence the wording of the amendment. It is worth noting that it is perfectly possible for the standard charge to be waived. Indeed, I note that London Electricity introduced a pilot scheme called Powerkey Plus that did just that.

My amendments are therefore an attempt to pass on some of the benefits of lower energy prices to consumers who are on pre-payment meters. It would be impossible to give such consumers the same deals as those who can pay by direct debit, so I have framed the amendments to try to give them some benefit and perhaps contribute in a modest way to ending fuel poverty.

The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths)

This group of amendments draws together two separate issues—the disconnection of electricity supply and the tariffs paid by those with gas and electricity pre-payment meters. I shall deal first with new clause 1, which relates to electricity disconnections. Electricity disconnections represent less than one tenth of all fuel disconnections. In response to my hon. Friend the Member for Ochil (Mr. O'Neill), the cost of disconnection varies from supplier to supplier, but I understand that the evidence given to the Select Committee on Trade and Industry suggests that the whole process, if it leads to final disconnection, costs about £150.

5.30 pm

New clause 1 would directly involve the Secretary of State in the regulation of one aspect of electricity supply by requiring her to make regulations in respect of electricity disconnections. She would be required to prescribe procedures in respect of disconnections of households with customers or residents who were of pensionable age, disabled, had a long-term illness or were under five. She would also be required to make provision for the role of social services departments in disconnections. Disconnections for debt should of course be minimised, and appropriate safeguards should be built into disconnection arrangements, especially for vulnerable customers. Those arrangements should be carefully monitored and, where necessary, improved. Indeed, it is because action has been taken to improve them that the new clause is unnecessary.

This year, Ofgem, with the encouragement of my hon. Friend the Minister for Energy, E-Commerce and Postal Services, has been in extensive discussion with suppliers about disconnection activity. Those discussions focused on improving processes for identifying and dealing with vulnerable customers and on clarifying procedures for notifying relevant agencies where vulnerable customers were in payment difficulties. In April, that led to proposals for improved industry-wide arrangements that will be set out in an industry code of practice. Ofgem published that consultation paper to maximise both the audience and the response. The key elements of the consultation were an agreed definition of vulnerability and guidance on the operation of the Data Protection Act 1998. The proposals were designed to ensure that, as far as possible, vulnerable customers would not be disconnected in future.

The consultation has now closed, and a range of responses has been received. I expect the final proposals, which should be published shortly, to be improved in the light of those responses. In particular, I expect the definition of what constitutes a venerable household to be widened and more detail to be given on the range of bodies with which suppliers can work in dealing with vulnerable customers and on the arrangements for involving those bodies, whether they be social services or other caring organisations. The new arrangements will then be applied. Ofgem retains the power and the right to propose changes to suppliers' licences if the arrangements do not serve their intended purpose.

Although I understand what the hon. Member for Vale of York (Miss McIntosh) is trying to achieve in the first part of her new clause, that activity is already in hand and is being dealt with by those who should be responsible—the industry, working with the guidance of the regulator.

Let me turn to the second main element of the new clause—the role of social services. It would serve no practical purpose for the Secretary of State to prescribe behaviour or activity as the new clause envisages. The organisation that needs to be involved, be it a social services department or a caring organisation, will vary from case to case, as will what those organisations will need to do. The key is not to prescribe a particular action or role, but to ensure that suppliers are ready and able to involve social services or others. The code provides for that. The consultation paper that was issued in April also provided useful guidance from the data protection commissioner about when companies might legitimately reveal information about customers to social services and others. The code, not a legislative responsibility imposed upon Ministers almost by whim, is the right way to deal with this issue.

As well as being unnecessary, the proposal is flawed in two other ways. The first flaw is a practical one. As I said earlier, the bulk of the disconnections occurs in gas supply, whereas the new clause deals only with electricity. By implementing the proposal, we would create a striking asymmetry between the duties that are imposed on suppliers. Last year, the new clause would have applied to possibly only 8 per cent. of disconnections through debt. In 2002, it would have applied to 4 per cent. The number of vulnerable customers in those small percentages would have been minute.

Although I welcome the hon. Lady's interest in the social aspects of the energy market, there are strong philosophical and practical arguments against legislating in the way she proposes. It is entirely right that Parliament and the Government should be involved in developing and setting energy policy and the role of the regulator in that energy framework. However, that is a long way from micro-managing regulatory activity or interfering in the province of the regulator on the basis of the hon. Lady's current thinking. The new clause would do that. We may not agree with Ofgem's approach on all matters, but we must let it do its job. In the case that we are considering, it has done so. It played a key role in driving the industry to take action without the need for primary or, at this juncture, secondary legislation. That is an example of regulation and self-regulation carrying out is proper function. I urge hon. Members to give it the chance to work.

Amendments Nos. 48 and 49 deal with pre-payment meter tariffs. They would make identical changes to the Gas Act 1986 and the Electricity Act 1989, as amended. They would require the unit cost of gas or electricity supplied through a pre-payment meter to be no more than that of gas or electricity supplied under a standard credit tariff. If suppliers continued to apply a standing charge, it would have to be the same for both payment methods.

The amendments represent an amended version of those that were considered and rejected in Committee. In their revised form, they remain unacceptable. They would be unfair to many of the most vulnerable energy consumers. Although I fully understand and share the concern of the hon. Member for Angus (Mr. Weir) for pre-payment meter customers, some of whom will be on low incomes, it is not true to say that all pre-payment customers are disadvantaged or fuel poor. Indeed, not only are pre-payment meter customers no more likely than standard credit customers to be fuel poor, but pensioners, who make up about half the fuel poor, represent less than 10 per cent. of pre-payment meter users. The amendments would mean that pre-payment meter customers would be subsidised by other customers, many of whom would be on low incomes, and whose bills would rise accordingly.

The cost to suppliers of serving pre-payment meter customers is higher than that of serving other customers, chiefly because of the cost of the meters and the infrastructure required to support them. Some companies have structured their credit and pre-payment tariffs to the benefit of pre-payment meter customers. That is a matter for them, and pre-payment customers may, in a competitive market, choose to be supplied by them. However, companies should be allowed accurately to reflect costs and properly to apportion them between their customers. I therefore regret that I cannot support the amendments, and I hope the hon. Lady will feel able to withdraw them.

Miss McIntosh

In view of the Minister's conciliatory tone and his appreciation of the vulnerability of some customers and Ofgem's excellent work, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

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