§ 6.53 p.m.
§ Lord FERRIER rose to ask Her Majesty's Government whether they will take steps to ensure that the electricity supply industry reviews, as a matter of urgency, its policies regarding off-peak tariffs especially in respect of domestic space-heating. The noble Lord said: My Lords, I beg leave to ask the Un-starred Question standing in my name on the Order Paper. I first put down a short debate Motion on the subject on 14th December but, having failed in the ballot for both January and February, I converted it into this Unstarred Question because I realised the urgency of the matter. But I do not mind confessing that my plans have been upset—and not unpleasantly upset; we shall go into that later—by the publication by the Central Electricity Generating Board of its tariff proposals to come into force on 1st April. This I saw only the day before yesterday, and so what I say must be based on a preliminary consideration of the matter because it calls for a great deal of thought.
§ My Lords, what it shows is that our anxieties have been shared by the authorities. Such hurried study as I have been able to give to a long and complicated technical Paper—which I have here—confirms the fact that, first of all, the growth of load has slowed down in the last year or two; and, further, the load factor has been beginning to fall. I think that it is fair to attribute both these facts directly to what we can call consumer resistance. The graphs in the Paper are most interesting and, I imagine, will be published in the financial papers. They show that the cost of production of electricity has gone up—everything has gone up—and in this case mainly due to the cost of fuel superimposed upon inflation. I need to assure your Lordships that I am an enthusiastic advocate for electricity as the best means of converting energy to domestic usage. However, my Unstarred Question is primarily about its application to domestic space heating which, apart from being an essential part of our lives, is, when it is provided by night storage electric heaters, a valauble and most efficient factor in balancing the load on the system because it uses plant which would otherwise be idle during the night and in that it contributes to the economical operation of the whole system.1823
Turning to this publication, I should like to quote a few words from it, where it says:
In 1962/63, a low night unit rate was introduced to encourage load at night when there was always adequate plant available. In fact, this was the take-off base for the storage heater campaign which the Area Boards mounted with enormous success in the sixties and with a dramatic effect on annual system load factor.
§ I assure noble Lords that this takes us right back to the debates and Questions in this House in March and July 1959, in October 1960 and again in February 1961. Those deliberations, now some 15 years ago or more, resulted in the removal of purchase tax from night storage heaters which brought about the dramatic effect referred to in this Paper. Manufacturers of these sturdy and almost indestructible heaters expanded their production; new factories and companies to make them sprang up; and the attractive night-rate tariff, combined with the intense encouragement by nation-wide advertising campaigns to which this Paper refers, brought several million such heaters into Britain's homes and whole all-electric housing estates, especially in smokeless zones, were equipped with them as a method for heating homes.
I cannot do better than quote again:
The substantial improvement between 1960/61 and 1972/73 resulted from the storage heater campaign which followed the introduction of the] night rate in…1962/3 BST"—
to which reference has already been made.
Although there was no movement of comparable scale between 1972/73 and 1975/76, this does not mean that the message was not acted upon by area boards. The year 1972/73 was the last before the competitive position of electricity in the central heating market was gravely weakened by spectacular increases in the price of power station coal and oil, whereas there was no comparable movement in the price of natural gas supplied to consumers.
§ The reference to gas is important because there are large areas of the country where gas is not available. We must give our thoughts to those, in view of the fact that they are denied a competitive and, at the present moment, a very economical alternative to electricity for space heating.
§ Something akin to disaster followed. Electricity tariffs rose until many consumers switched off and turned to other forms of heating. The production of British storage heaters declined and then ceased. Bottled gas heaters, many 1824 imported, came widely into use. At least one large manufacturing company of heaters in the North-West, which produced its millionth night storage heater unit in 1969 and at one time had a third of the total market, ceased. The labour-force involved all over the country was desperately reduced, contributing to unemployment. One well-known manufacturer told me the effect was a reduction in their labour force from 1,200 to 600.
The fact that something drastic had to be done influenced me in raising the matter. Therefore it is very satisfactory to read that the authorities have been thinking along the same lines. Incidentally, I did not appreciate until I read this Paper how much excess generating plant is still available due to the fall in overall load, and also to the future purchase arrangements of machinery on order. But—and I quote again from the Paper—
The implications of this experience for 1977–78, which is the period for which these tariffs are to apply, are that to achieve further improvements in daily load factor, an increase in the pressure exerted by the unit rate differentials will be required.
Noble Lords understand the extent to which the unit rate for all-night services is below that for peak load.
§ Something has to be done to improve the load factor, and it must be done now. I will come to differentials later. The Central Electricity Generating Board's reduction for off-peak bulk supply amounts to 14.36 per cent., which is a step in the right direction. This is a bulk figure and it is not possible to work out from this document what the Area Board's rates are going to be. Indications are that the area boards will be unwilling—and perhaps unable as things are at present—to pass on this reduction in full; but, in my view, in terms of differential, in terms of percentage reduction, nothing less will do. Perhaps when the noble Lord who is to reply comes to the matter, he will be able to let us know what he feels about the ability or otherwise of the area boards to pass on the reduction to consumers.
§ Today the load factor, which is much too low, is all important. But tomorrow it will be more so. When, as seems likely, an increasing share of the base load is generated by nuclear power—which, as your Lordships know, does not permit variations in load, or not economically so—then the load factor of the fossil fuel or hydro-generators, which must carry 1825 the peaks as well as the lows, will be of even more importance than it is today. It seems to me to follow that the use of night storage heaters must be restimulated. It had already been stimulated but, alas this stimulation has been followed by severe disappointments.
§ Immense damage has been done by the policies of the past few years. Wherever one turns, one finds disappointed people saying, "We have been 'conned'". They have purchased houses with night storage heaters in them or they bought heaters. These heaters are fairly costly. I say "costly" because they are not expensive. They are extremely efficient, call for very little maintenance and are almost indestructible. Thousands of these articles have been disposed of. Some have been thrown out, some given away and some broken up. One constantly sees them advertised for sale. One advertisement I have from the Newcastle area offers to deliver some heaters free of charge if anybody will accept them as a gift. This means the misuse or lack of use of valuable property, and the matter calls for urgent steps to re-encourage users to regain their confidence in electricity as a space heating agent and in electricity generally, because electricity has suffered through this disappointment which has been registered by so many. I will not mention the question of house insulation because the efficiency of every form of heating depends on that, and is not connected with this debate.
§ As for a sales force and the question of public relations, there are a lot of wrinkles which can be straightened out so that consumers are going to be encouraged to expand their usage of electricity. I refer to things like the notice on my electricity bill which says: "No reminder will be sent". That seems a "Your money or your life" notice; yet we know that there is strong objection to disconnection of electricity supplies, particularly to the homes of the aged and poorer people. And so, that has no threat to a number of consumers.
§ Many mistakes are made in the submission of estimated bills. I had an estimated Bill for £93. When I read the meter it should have been for £32. I complained about that. I said that it was all very well giving that to a tough old "egg" like me who has been in the electricity business for years, but what if I 1826 had been an old age pensioner? It would have been a frightful shock. The computer, or something like that, had gone wrong. The greatest care should be taken in ensuring that consumers feel that they are being served rather than bullied.
§ I cannot conclude without a reference to the recent injudicious use of the fuel surcharge as applied to power and domestic heat charges. This was the increase which caused the exchanges which took place in this House in 1974. I am sorry that the noble Baroness, Lady Burton of Coventry, is not able to be in her place tonight. Noble Lords will remember what happened and will have read about the serious way in which the other place approached the use of the fuel surcharge. Credit arrangements had to be made. A simple calculation of what I mean has been sent to me by one of my most valued correspondents to illustrate the point. In his area, the surcharge of .26p per unit was imposed across the board as a fuel surcharge. On the domestic rate that worked out at an increase of 11.9 per cent. but on the off-peak tariff it was 26.3 per cent. That is the sort of difficulty I feel should be ironed out in working out the tariff for off-peak power.
§ At one time the authorities said they would hold the off-peak tariff at 50 per cent. of the domestic rate. I do not think that is a large enough differential. The Central Electricity Generating Board informed me that the national average rates are: domestic, 2.45p per unit and off-peak, 1.17p per unit. In other words, there is a 44 per cent. differential: the off-peak tariff is 44 per cent. of the domestic one. If that is an average rate, there must therefore be some higher rates and some lower. I know that in my own case—I have night storage heaters—my last bill showed an off-peak rate which was 61 per cent. of the domestic tariff. That was in Scotland, and this Paper does not refer to the Scottish side of the industry. Therefore I shall not say any more about it, but I should like to express the hope that the principles which apply in this document to England and Wales will apply also to Scotland. Again, perhaps the noble Lord can tell us whether, and to what extent, the differentials will be maintained or, as my hope is. widened. It has been suggested in one quarter that instead of making up the difference by perhaps increasing the peak rate, a "gas depletion tax" might be worth considering. 1827 I shall not go into that at the moment: it is something which perhaps we might discuss later.
§ Thanks to this document, if I had been drafting this Question yesterday I should have worded it quite differently; but so encouraged am I by the revised policy which has been indicated that it is worth going on with a statement of what we feel, because this is not nearly the end. Drastic reductions in night use tariff must reach the consumer. When I say "drastic reductions", of course I am all the time appreciating that prices are rising; but it is mainly the comparison between the night rate and the domestic rate which is important—the differential. That policy in electricity, as part of our way of life, must be restored. Every effort must be made to attract other off-peak loads; in industrial and commercial uses, for example. I remember that in one commercial undertaking with which I was concerned (a pharmaceutical company) we used night storage heaters for all our large storage depots. Then there are agricultural uses, the de-watering of mines, horticulture, church heating, underfloor heating—though that of course means a different tariff because of the mid-way boost—and the night lighting of historic houses. One noble Lord has mentioned to me that he would like to see a special tariff for that. Then there is night traction. One such potential outlet could affect our crowded city streets. What about a special low tariff between, say, I a.m. and 4 a.m. for charging batteries for electrical vehicles? Of course I appreciate that the milk trade use night rates for charging the batteries of their milk floats.
§ I do not seek to disparage the ingenuity of some of the tariffs which are divised for special loads. I have a whole bunch of them here, but it is no use examining them now as this change of policy makes them all out of date. Talking of ingenuity in tariff formulation, one of my Scottish neighbours has a special tariff from the South of Scotland Electricity Board for grain drying. It is not off-peak but applies only during the harvest season when, of course, in Scotland there are many hours of daylight and the electricity load is consequently low. The fact remains that the marketing staff will have to go for increased off-peak sales. One hopes 1828 the authorities recognise the importance of their tariff experts and that they take their advice at every stage of decision making.
§ Noble Lords will notice that I have not mentioned the white meter tariffs. That is a very useful element, again now falling to be revised in terms of this major document. However, I think I have said enough. Tuesday's publication has so completely altered my approach that I trust I have made some sense to your Lordships of the problem. I have detained you long enough but, since I shall have no right of reply, I should like to thank in advance those speakers who are taking part in this debate. I look forward with the greatest interest to what the noble Lord the Minister will say in his reply.
§ 7.16 p.m.
My Lords, the hour is late and I am sure that some of your Lordships will be anxious to get home to make sure that your night storage heaters are functioning efficiently. Others, like me, may have trains to catch and so I shall be brief. For me, this is like a trip into the past. It seems no time at all since I took part in discussions—perhaps I might say arguments—in another place on this very topic. Therefore, In am most grateful to the noble Lord, Lord Ferrier, for giving me a second, or perhaps even a third, bite at what for some people has now become a rather unpalatable and even bitter cherry.
On those earlier occasions in another place the argument was about the differential and the reduction in price as between off-peak power and electricity in general. Night storage heaters at that time were sold with advertisements stating that the cost of power would be half the normal charge. But the differential, as your Lordships will remember, became eroded. It seemed to many, and certainly to me, that by being eroded the advertisements for night storage heaters had been brought into breach of the Trading Standards Act. With that in mind, I wrote at that time to the Chief Trading Standards Officer regarding the advertisements for the sale of these night storage heaters. The advertisements had claimed that power would be supplied at half the normal cost, when clearly that was not so. I said it seemed to me that that was a breach of the Trade Descriptions Act.
1829 My letter was passed to the Minister for Prices and Consumer Protection. He wrote to say that since my complaint concerned a possible breach of the Trade Descriptions Act I should have written to the Chief Trading Standards Officer—the chap I had written to in the first place. Just to make quite sure that the correspondence did not go round and round in circles for ever, I then wrote to the Director-General of Fair Trading. He replied to me—and I quote:I see no reason to doubt that Electricity Boards will carefully reconsider the manner in which they promote the sale of night storage heaters following the recent price increases.He went on:Any statements they make will be subject to the provisions of the Trade Descriptions Act.That seemed to make the matter entirely clear—that there was, or would have been, a breach. At least it made things clear as regards future purchases. But what about the past? What about those people who had already bought night storage heaters in response to advertisements which were now shown to be false? Fortunately, the matter was resolved at that time, satisfactorily and honourably, by the then Secretary of State for Energy, Mr. Varley, who gave an undertaking in another place to restore the differential. That undertaking he very promptly fulfilled.
I mention all this ancient history because it is my belief that it is the uncertainty which was aroused at that time which has, in part at least, since bedevilled the subsequent progress of this whole venture. At that time the facts were quite clear. The Electricity Boards went into the central heating off-peak market in order to reduce the growing demand for on-peak current by persuading customers to switch to off-peak consumption. There were good reasons for that. First, it produced a reduction in the need for new plant to meet the peak load and thus brought about a saving in capital investment. Secondly, it would bring in a return which would not otherwise have been obtained from electricity generated during off-peak periods by plant which was cheaper to run continuously than to switch off during off-peak periods when consumption falls substantially.
What I want to know—and I am sure other noble Lords want to know—is this. Do those considerations still apply and, 1830 if so, will something be done at least to make it worth while for customers to transfer from peak to off-peak use of electricity? We are not going to get the public to do this unless it is made worth while; and, having been made worth while, what can be done to restore confidence that it will remain worth while? It is no good saying "Yes, buy this and the price is so much", if people believe that the price will change again in a few weeks' time. I hope tonight to get the answers to those questions, but there is one other point that I should like to add.
It seems to me that evidence is gradually accumulating that it has become uneconomical for the consumer to use night storage heaters, despite the differential, because of running costs. That seems to me to indicate a possible need for research into improved design and method of operation. So I end by asking the noble Lord, Lord Strabolgi, two short questions. First, do we still want customers to switch to off-peak consumption? Secondly, if we want them to do that, will we make it worth while for them to do so: first, by preserving the differential; secondly, by giving confidence that that differential will remain and, thirdly, by improving the performance and efficiency of night storate heaters, so that they become more economical? The most important thing that the noble Lord can do tonight is to end the uncertainty in this field. If he does that, he will have done us all a service and, perhaps, done a service, too, for the energy industry.
§ 7.22 p.m.
§ Baroness HORNSBY-SMITH
My Lords, I welcome the opportunity to support the noble Lord, Lord Ferrier, in the most expert case that he has presented to your Lordships' House, and I do so from both a past and a present interest. Before the nationalisation of the industry, I worked for the Central London Electricity Company; and then, just over a year ago, I was privileged to succeed the Dowager Lady de la Warr as President of the Electrical Association for Women. I therefore approach this issue from both the commercial and the consumer's interests, which in this instance are, in my view, identical and not conflicting.
I have not had the opportunity to read this latest statement of the supply industry, to which the noble Lord, Lord Ferrier, 1831 drew attention and if the events portrayed in that document have overtaken the evidence which I collated at the weekend I hope that the noble Lord will forgive me. But daily in the Press and on radio and television, we are being exhorted to save fuel. Desperately the supply industry endeavours to spread its load away from the dangerous peak hours, when in times of excessive demand it reluctantly has to cut supplies. So it is wholly in the interests of the supply industry to make the maximum use of its costly capital equipment, during as many hours throughout the 24 of the day as possible, rather than to have peaks which outrun its capacity and lows when equipment is idle and unused. Off-peak storage heating is therefore good sense, it is good business for the industry, and the bulk of it is domestic.
To this end, and in their own interest and that of the consumer, special cheap rates were introduced and a comparatively new industry boomed, helping the consumer and the supply industry, and providing employment for the supply of off-peak heating systems. On the basis of cheap off-peak rates, installations of off-peak heating systems increased very substantially indeed, the manufacturers flourished and the supply industry rejoiced in a more economic spread of load. But, further, local authorities and private developers rushed to install these systems in their new housing projects, without the consumer having an option, and in many cases people who have taken new houses or been granted council houses have no alternative means of supply.
Then, the industry having sold the public the idea of cheap rates at off-peak, it initially suggested massive increases, which would have destroyed—and, in fact, nearly did—the good will and the market that it had initially encouraged. There was a great public outcry—indeed, I remember the noble Lord, Lord Winstanley, in another place, speaking very effectively on this issue—and the industry had to back down. But it has not fully reverted to, nor maintained, the differential between its bargain off-peak heating and the standard peak level charges, and has got around the issue by an increase per unit, which in several areas constitutes a much higher percentage increase for off-peak of 22 to 27 per cent., as against 11 per cent. on the standard 1832 rate of supply, which is a very great penalty on those who were sold the idea that it would cost them roughly half the standard rate if they had electricity off-peak. In its desire for immediate income, the supply industry is losing sight of its practical and commercial long-term aim of utilising its equipment over the maximum number of hours, and ironing out costly and sometimes untenable peaks.
May I now turn to the consumer. I accept that there is still a great need for education of the consumer in the economical use of fuel, and in the correct use of appliances. Far too many people—and my Association has carried out many surveys—do not read, let alone keep, the instructions and guidance leaflets supplied by the manufacturers. Many people (I think of a most common instance) have small lots of washing up, use gallons of water doing it under a running tap, and pour away the contents of their hot water systems, when by using a much smaller quantity in a basin they could do the same job, and certainly save themselves a percentage of their fuel bill.
I think that my classic example is the lady who complained about garments being soiled in her washing machine. A visit to her home established that for a whole year she had washed every garment, of whatever type and kind, at the same washing machine setting, because it was at that number when the man who installed it left, and this despite the most comprehensive instructions on eight different washes, and what could be done in each, plastered across the lid of her extremely well-made and efficient washing machine.
In relation to fuel for warmth, the Minister's ruling, that consumers were not to be cut off and denied necessary warmth, has had a dual effect. For the old and the sick, this was a welcome and compassionate relief, as to many old people warmth is just as important as food. The conscientious citizen, accepting his liabilities for escalating bills, is economising. But the feckless, fortified with the knowledge that they will not be cut off, make little effort to economise and hope that the taxpayers, through supplementary benefit, will bail them out.
I believe that night storage heating was the first major and highly successful 1833 campaign of the supply companies, in the interests of fuel economy, in the period after the emergency cuts in the war. It provided more economical use of the supply industry's equipment, and more, which is welcome, it cut the cost to the consumer. However, as the noble Lord, Lord Ferrier, has pointed out, considerable capital cost was incurred by the consumers. Their investment turned on the understanding that such expenditure would be recouped by cheaper off-peak rates, and it is a breach of faith to impose these tariffs upon consumers who cannot afford to rip out their equipment. In some cases they are either tenants of local authorities or tenants in private houses, and they have no option but to use the equipment that is provided. These consumers, who were helping the industry as well as themselves, are having imposed upon them a percentage increase for their off-peak electricity, which in some areas is two and a half times that imposed on the standard charges in the recently published tariffs.
I hope that the electricity supply industry will think again about this. As both noble Lords who have already spoken have outlined, this action is doing great damage to the companies which make night storage heaters and it is adding to the burden of unemployment. It is destroying the confidence of the consumer to co-operate with the supply companies on future projects, which would be in their joint interest. If the gains from the consumer's capital investment and the cost differential in charges are steadily eroded by these disproportionately increased charges which have been imposed on those who had been led to believe that the cheaper rate percentages would be maintained, it will do great damage to the industry. Also I believe that it will encourage people to revert to loading the system at peak times with non-storage equipment, because they do not believe that they are getting a square deal.
§ 7.32 p.m.
§ Baroness PHILLIPS
My Lords, I shall also be brief. If, however, I did not speak, I feel that I should be letting down the noble Lord, Lord Ferrier, who introduced this Unstarred Question, and also the consumers for whom, like the noble Baroness who has just spoken, I hope I work. May I say to the noble 1834 Lord, Lord Winstanley, that while he was conducting his fight in the other place your Lordships' House was conducting another. I will give a catalogue of what has been achieved so that it will be taken into the reckoning when people are considering the possibility that a House of this kind should not remain in existence.
I go back even further than has been mentioned by other speakers. I have been a user of electricity ever since I was a very young wife. I hate to remind the Minister of this, but at that time we were told—shades of the 1930s!—that the more people used electricity the cheaper it would become. Whatever happened to that promise? Now, however much you use, you still have to pay a high price for it.
On the question of night storage heaters, may I underline what all noble Lords have said. The confidence of consumers has been shaken. They purchased these appliances, as I did, partly on the understanding that they would be doing something for the community—that they would be utilising the off-peak load and getting something which was much cheaper. The night storage heater is not an ideal system of heating. At midnight you have to estimate whether the next day is likely to be a warm one, in which case you turn off the heaters. Generally it then turns out to be abominably cold and you cannot quickly obtain any more heating. Because it is not an ideal system of heating it is, therefore, very important to preserve the differential, which seems to be in great danger. As the noble Baroness has said, the result of the previous publicity campaign was that consumers reared up in numbers and prevented what was obviously going to happen—although it was only a rumour that the differential was going to be totally eroded. May I emphasise that it is very important that the differential should be kept even lower than it is now.
It seems that our nationalised industries will never learn one of the laws of economics: that if you push up the price fewer people will use appliances or services, whether it be the Post Office who put up the cost of their stamps and therefore their revenue falls, or whether it be the electricity or gas boards who have done exactly the same thing. There is some magic cost, which has never been quite 1835 determined, that the British people will stand. They will pay and pay, but suddenly they say, "Enough is enough" and the revenue drops. It is ironic that a Minister of Energy is appointed not to find us more energy but to tell us to save it.
It seems that the first function of a Minister who is concerned with either water or energy should be to find ways in which the community can enjoy it. Why should not a woman wash her cup under running water if she wants to do so? Why should we not have a bath using more than five inches of water, particularly if we are willing to pay for it? It is an important matter, and I am sorry that so many of your Lordships have had to depart. This does not mean that those of us who are here are not greatly concerned. We are concerned for the industry: we are concerned for the customer; and we are concerned in particular that the industry should not appear to be going back on its original promise.
§ 7.36 p.m.
My Lords, first may I thank and congratulate my noble friend Lord Ferrier for raising this vital and important question—important because its purpose is to try to establish again confidence between the public and a nationalised industry that suddenly decided to put up its prices on a commodity which was felt to be an economic way of heating. At the end of this debate I hope that the noble Lord, Lord Strabolgi, will be able to regain for the Electricity Council and the Generating Board the confidence of those who use electricity.
The story began in the 1960s with a very interesting and tempting type of heating; namely, night storage heating. I had 11 night storage heaters installed in a very old manor house. They did a great deal of good by keeping the house at an even temperature. Also, it was an economical form of heating. It was economical because no other type of fuel was on the market at that time which enabled us to keep down our overheads. However, like the rest of the public we were horrified suddenly to find that the cost of night storage heating was to be raised. All of us fell for the tremendous advertising campaign which was conducted on our television screens and in the papers. 1836 We were told about this economical way of heating and we were therefore somewhat horrified when the Electricity Council decided to put up its prices.
We had a debate last July on the subject when my noble friend Lord Strathcona and Mount Royal was in my place. As my noble friend Lord Ferrier has said, the public thought that they had been "conned". However, the public had been led to believe that everything was all right and I think that they felt that it went almost to the point of sharp practice suddenly to put up the price when they had no chance to disagree. It is a tragedy that confidence, which is the theme of our debate tonight, is lacking between the electricity authorities and the public. I can assure your Lordships that if it had been an industry run by private enterprise there would have been a great deal more of a row about the putting up of the price.
I am sure your Lordships will understand me when I say that I have a certain amount of sympathy for the Electricity Council and the Generating Board. When the idea of economical heating was introduced, no one had the slightest idea that inflation would roar up so quickly, and it was not only the nationalised industries but all industries which were caught in that inflation. With inflation came the high cost of coal, on which many of the generating plants run. There followed the increase in wages, not only of those who work at the generating plants but also those within the Electricity Council. So the Electricity Council and the Generating Board were caught up in a vast new expense, and I have a small amount of sympathy with them in that regard. But, there I am afraid, my sympathy ends, because I feel that the public were led to believe that this was an ideal form of economical heating but at the last moment they were let down.
However, in order to establish a little more confidence, the Department of Energy stepped in with a subsidy of £25.30 million which was to be given to the old-age pensioners, and I believe I am right in saying that it was only for pensioners drawing supplementary benefits. I should like to ask the noble Lord, Lord Strabolgi, whether this £25 million is to continue and why the Department of Energy was involved in this? Why was it not the Department of Health and Social Security, with which the pensioners are familiar? Was it not a case of robbing Peter to pay Paul? I feel 1837 that it should have been handled by the Department which normally deals with the pensioners and that the pensioners should be able to understand the position.
The price that apparently we are to be asked to pay after April is horrifying. It appears to me that it is based on the maxim, "When in doubt, raise your charges"—and as we have seen from today's papers the charges are to be raised in April. It would appear that they are to be raised by about 11 per cent. and although I am not certain I believe that the high rate tariff is to be cut. Perhaps the noble Lord will be able to impart some information on that. What is more frightening to me is that £170 million is to be added for the expenditure on coal which is necessary to keep the generating plants working, and that also is to be passed on to the public. I wonder about the reason for that sudden rise in the cost of coal. Obviously the cost of ordinary heating will soar still more.
I was interested to hear the noble Baroness, Lady Phillips, refer to the "Save it" campaign. As we know, every night on our television screen there appears a little red ring in the middle of which there are the words, "Save it". I believe that everybody is trying to conserve energy, whether it be oil, coal or electricity, but I am firmly convinced that the matter does not rest there. The pensioners, and indeed the public as a whole, can no longer afford the high cost of electricity. Last weekend I inquired about the cost of night storage heating as against the cost of a two-bar electric fire, and I was told that the cost of a two-bar electric fire for two hours was the equivalent of two days' night storage heating at its lowest setting. Fewer people areusing night storage heating now because they have become demoralised, and I should like the noble Lord, Lord Strabolgi, to try to encourage people to use night storage heating because it is still a great deal cheaper than using ordinary electric fires. It is not as cheap as gas. In 1976 gas was 15.4p per therm as against electricity at 23.3p per unit.
There is one other point which has nothing to do with heating. I feel sure that the Generating Board must always be looking for further business, and it seems rather extaordinary that people cannot arrange to have off-peak lighting. I have not given notice to the noble Lord that I was raising this matter, but it was a point that was mentioned to me during the 1838 course of the day. Many hotels, farms and private houses have to use lighting at night, either for purposes of security, for tourists to look at beautiful architecture or for keeping animals such as deer away from parks, or for the farmer to visit his farm in order to see that the cattle are safe. Yet one understands that night lighting cannot be obtained under the off-peak scheme. Would it not be a good idea for the Electricity Council to try to adapt the scheme to include off-peak lighting? The hotel trade is one of the biggest users of electricity at night, but the other users that I have mentioned would also come into such a scheme.
I have not dealt with the arguments adduced by other noble Lords who have maintained that it is necessary to restore confidence in this market in order to restablish it and to make sure that the public have a need to go back to night storage heating, but I will end by asking whether in fact any new ideas are coming forward in connection with night storage heating in order that the public may feel confident that they have a cheaper form of heating. Old people need heat at night time more than in the day time. If the noble Lord can tell us that new ideas are coming forward, I am sure that this debate will have been useful, and I hope we may all go home tonight warm and comfortable after having heard the noble Lord's remarks.
§ 7.50 p.m.
§ Lord STRABOLGI
My Lords, I think we must be very grateful to the noble Lord, Lord Ferrier, for putting down this Question. It has given rise to a most interesting debate to which I have listened throughout, although I seem to have been under attack from all sides, including my noble friend and old friend, Lady Phillips. I am very glad to have this opportunity to describe the present position because I do fully appreciate that it is causing concern to noble Lords in all parts of the House.
My Lords, the Electricity Board's policy on off-peak tariffs has from the outset been to provide off-peak electricity as cheaply as possible consistent with costs. In the case of the off-peak rates at which supplies for night storage heaters are taken, this has meant charging virtually only the running cost of the stations used at night, indeed, little more than the cost 1839 of the fuel used to generate the consumers' electricity. Virtually none—this is very important—of the capital costs associated with generation, transmission and distribution fall on the night rates.
The earlier domestic off-peak tariffs were of the restricted-hour type which provided electricity for specific purposes, both during the night, and, of course, a short boost period during the day, as your Lordships are aware. Improved storage heaters enabled the restricted-hours tariffs to be replaced by day/night tariffs, and these, of course, are often called White Meter tariffs, which also gave consumers the ability to use any appliance at night at the lower unit price. However, those consumers already on restricted-hour tariffs were able to continue on those tariffs if they so wished at prices which are still considerably lower than the standard domestic tariff. I shall come to that point, and to the points raised by the noble Lord, Lord Ferrier, very properly, if I may, a little later on.
The policy of the Boards regarding off-peak tariffs has not changed. What has changed is the cost of supplying electricity: above all, as has been mentioned in this debate by Lord Long, the cost of the fuel used to generate it, which has increased three-fold in the last three years. This is a much larger increase than that in the industry's other costs, and because fuel costs are a larger proportion of off-peak rates than of ordinary domestic rates it follows that the increases in fuel costs have meant larger percentage increases for off-peak than for ordinary rates. In consequence, the relationship between off-peak rates and ordinary rates has changed, though, I must say, by less than is sometimes supposed. At the beginning of 1974, before the steep rise in primary fuel costs began to be reflected in electricity prices, night rates averaged 43 per cent. of ordinary rates. Today, they average 50 per cent., and that is still only half the ordinary rate. I will come to the question of the Scottish rate later on.
Noble Lords have made reference to Press reports that the Area Boards' tariff proposals submitted to the Price Commission provide for a reduction in off-peak night rates. The reduction in the bulk supply tariff night rate announced on Tuesday will in fact enable all Area Boards 1840 to reduce night rates in their White Meter tariffs by an average of 44 per cent. calculated on a common fuel price of 2,000p/tonne. This would have the effect of reducing the proportion of night rates to ordinary rates from 50 per cent. to 46 per cent. But, my Lords, I am sorry to say a word of warning is necessary. By the time the new tariffs affect consumers' bills a further increase in fuel cost adjustment may have been necessary, which will tend to offset this reduction. This depends largely on the level and the timing of the next NCB coal price increase, which has not yet been decided, though there have been some reports about it in the Press, to which the noble Viscount referred.
Noble Lords will recall that shortly after the introduction of fuel cost adjustment into domestic electricity tariffs in the summer of 1974 Boards, at the Government's request, introduced a special temporary rebate on off-peak tariffs. This was designed to restore and maintain the previous relationship between off-peak and ordinary rates in order to mitigate the initial impact on the bills of off-peak consumers of the particularly sharp increases in off-peak electricity prices resulting from the surge in primary fuel costs. This rebate, however, represented an additional subsidy to off-peak consumers over and above the general Government subsidy on electricity prices, and it was phased out as part of the general withdrawal of subsidies. The price subsidies had become an unacceptable burden on the Exchequer and they were inconsistent with energy conservation policy. Therefore, the special rebate was finally withdrawn in April last year.
It is sometimes said that because many consumers installed storage heaters at a time when Boards were promoting their use on the basis of advertising about the price of off-peak electricity the Boards have an obligation to restore the old relationship between off-peak and ordinary rates; and indeed it was said in this debate. But, as I have indicated, conditions have changed fundamentally since the advertising campaigns of the late 'sixties referred to by the noble Lord, Lord Ferrier, and the noble Lord, Lord Winstanley, and to restore the original ratio between off-peak and ordinary rates would mean supplying off-peak electricity at a loss and charging more for other electricity in order to make good that loss. This would be impracticable and 1841 unfair to other consumers; indeed, it might be construed as a breach of the Boards' statutory obligations.
§ Baroness PHILLIPS
My Lords, will the noble Lord forgive me for interrupting? I am sure it sounds very interesting, but it really is not good mathematics, because, as I understood the noble Lord, unless you had the electricity generated at night then nothing would have been happening there at all. Surely that would have been much more uneconomic. I do not follow this logic at all.
§ Lord STRABOLGI
No, my Lords; as I said at the beginning of my speech, none of the capital costs associated with generation, transmission and distribution fall on the night rates.
To return to advertising, the Boards continue to advertise the fact that off-peak rates are substantially lower than ordinary rates, as I said, and they have good reason, I submit, to do so. But, as I said, night rates are still no more than about half ordinary rates, and this seems to me to offer a very considerable advantage still to the off-peak user.
The noble Lord, Lord Ferrier, has raised the interesting question of the application to off-peak tariffs of fuel cost adjustment. If I may remind noble Lords, fuel cost adjustment is a means of passing on directly to the consumer changes in the cost of the fossil fuel burned by the generating system in supplying his or her electricity. It takes the form of a flat rate addition—expressed in decimals of a penny—to the basic rate for every unit consumed, whether off-peak or ordinary. What disconcerts some users of off-peak electricity is the fact that any particular fuel cost adjustment increase is inevitably a larger increase in percentage terms for off-peak than for ordinary rates: twice as much, for example, for night rates. The noble Lord, Lord Ferrier, in a Question last November, asked whether it is in fact equitable to apply the same fuel cost adjustment to both ordinary and off-peak rates.
There are two main grounds for arguing that the fuel cost adjustment surcharge should be less at night than during the day. First, as my noble friend said, because the less thermally efficient stations tend to be shut down at night; and, secondly, because nuclear generation is a higher proportion of total generation at night than 1842 by day. I understand that in point of fact on average the thermal efficiency of the generating system is only marginally better at night than during the day but, in principle, both considerations support the case for a differential fuel cost adjustment.
§ Lord STRABOLGI
My Lords, the difficulties of such an arrangement are practical ones. The industry have therefore sought to achieve the same effect more simply by the alternative route of adjusting the basic unit rates in the tariff. In determining these rates, for implementation in April each year, the Boards allow for the additions through fuel cost adjustment they expect to make during the following 12 months on the basis of the industry's forecasts of fuel cost movements. Subject to any forecasting errors, which is a normal hazard of tariff making, the total unit charges will reflect the cost of supplying the units concerned. The effect is the same as if there had been differential fuel cost adjustment; but this is achieved with a simpler tariff than would be needed to accommodate differential fuel cost adjustment.
The question is also sometimes raised about the shorter night periods for White Meter tariffs. This I should like to explain because I think it is germane to the argument. Last April the four Area Boards introduced an optional White Meter tariff with a shorter night period—for example, six hours—than the usual period of eight hours. In some quarters this has aroused the deepest suspicion, but I should like to explain—and I am glad to have this opportunity to do so—that the purpose of this optional tariff was to lower the cost to the consumer of night time electricity by concentrating consumption into fewer hours when it is cheaper to supply. In normal winter weather conditions it was expected that storage heating systems supplied on the optional tariff would perform satisfactorily, but in colder weather some additional direct-acting electric heating would prove necessary. Overall the Boards expect consumers to save up to 10 per cent. on their annual bill by transferring to the optional White Meter tariff. However, those choosing the optional 1843 tariff retain the right to revert to their existing White Meter tariff if the performance of their heating system proves unsatisfactory or if their bills would be lower because of their particular system.
The noble Lord, Lord Ferrier, said that the rates for the off-peak tariff in Scotland were higher, and that is so. The night rate of the South of Scotland Electricity Board is at present 52 per cent. of their standard domestic rate. Their equivalent to the preserved restricted-hour tariffs in England and Wales has a unit price which is 62 per cent. of their standard domestic rate.
§ Lord STRABOLGI
My Lords, the noble Lord, Lord Winstanley, asked about what was being done to improve the efficiency of night storage heaters. Research has been and is still being carried out at the Electricity Council Research Centre, which is near Chester. The noble Viscount, Lord Long, also raised the question of the electricity discount scheme. I am very glad that he did because it gives me the opportunity to answer the point he raised. The recipients of benefit under this scheme are. it is true, as the noble Lord said, certain existing beneficiaries under the social security arrangements; for example, recipients of supplementary benefits and family income supplements.
The help to consumers is, however, given in the form of a discount on bills and it was much more convenient for the scheme to be administered by the Department of Energy in co-operation with the electricity industry. The scheme was designed to provide extra help over and above that provided through social security benefit to those likely to be in greatest need. Those in all-electric accommodation are, of course, likely to have the highest fuel bills. However, I reassure the noble Lord that the cost of the scheme will not fall on the electricity industry as the Electricity Boards are reimbursed by the Government.
My Lords, I apologise for interrupting the noble Lord, but he seemed to be saying that the only Department which is efficient is the Department 1844 of Energy. Is it a fact that the Department of Health and Social Security could not carry out this scheme? Why is the Department of Energy so much more efficient? I do not quite understand why that Department has to operate the scheme.
§ Lord STRABOLGI
My Lords, because they are in touch with the consumers. They know the needs of the consumers and they do it through the form of a discount on the bill. The Department of Energy goes through them to the Electricity Boards—that is how it is channelled. The reimbursement comes from central Government funds.
I hope that I have succeeded in assuring the noble Lords that the boards do not discriminate against off-peak users, nor is it their intention to do so in future. On the contrary, off-peak rates will continue to be very much lower than ordinary rates. They will, indeed, be kept as low as possible, consistent with covering the cost of supplying the electricity to the consumers concerned.