Pre-payment Meters
Debate between Dawn Butler and Stephen Pound
Dawn Butler (Brent Central) (Lab)
There is a prediction that we are about to experience the longest winter in 50 years. Now is the time to consider what that will mean for the most vulnerable in our society. We know that in 2014 there were 43,900 excess winter deaths in England and Wales, and if the predictions translate into a long period of harsh weather, that figure could rise for 2015-16 unless we act to mitigate the effects.
The UK Association for the Conservation of Energy estimated that almost 14,000 deaths over the last winter could be due to people living in cold homes. Therefore, the most obvious area where we can act is energy consumption, and particularly the cost of pre-payment meters and how they are put into people’s homes, especially for those already experiencing fuel poverty. If we tackle that issue, we can alleviate part of the problem of excess winter deaths.
More than 2,000 new PPMs are being installed every day. I would like to put on record my thanks to Citizens Advice for its “fair play for prepay” campaign. It is clear from my constituency of Brent Central how unfairly the costs of PPMs bear on poorer residents. My constituency has one of the highest numbers of people on PPMs in the country—at 26%, it is 10% above the national average—and those on PPMs pay on average £226 more a year than those with the cheapest direct debit deals. We can get an idea of the scale of the impact from the fact that it costs £3 million to the local economy.
What is worse is that 80% of PPMs are used to collect debt for the energy companies. So the energy companies subject poor people to higher rates, and there is also the cost of installing PPMs. It is almost as if these people are being punished again and again and again.
Stephen Pound (Ealing North) (Lab)
My hon. Friend is raising an extremely important point, particularly for those of us in London. She says PPMs are being “put into” people’s homes. Is she stating to the House that the people living in these properties have no say in that, and are being forced to accept these PPMs?
Dawn Butler
That is what sometimes happens. Some people come home, as Mr Hamilton in my constituency did, to find a PPM has been installed without their knowledge, which should never happen. It is a disgrace that the energy companies do that.
The poorest 10% spend almost 10% of their total household expenditure on fuel, whereas the figure for the richest 10% is just 3%. That is why fuel poverty is a recognised term. According to Ofgem, those on pre-payment meters pay on average £80 more than those on direct debit. Although that figure has reduced, the differential can be reduced much further. As the Minister will know, the Competition Markets Authority’s provisional findings on the energy market, released this July, raised concerns about the affordability of domestic energy prices, as they have continually outstripped inflation over the past 10 years. Yet, at the same time, standards of service have dropped and complaints have risen. Under the Labour Government pre-payment bills rose on average by just over £17.50 a year, whereas during the past four years annual bills have risen on average by £63. The Government should make it clear to the big six energy companies that they must reduce the amount that those on pre-payment meters pay for their gas and electricity. After all, these are vulnerable people who can least afford that amount of money and those higher costs.
British Gas has sort of led by way, levelling out the amount its customers on pre-payment meters pay to the same amount as for those on cash and credit, but I have been advised that those paying by direct debit will still be incentivised and pay a little less because of the reflectivity requirements. That is understandable, but more should still be done—all that is needed is the will power of these energy companies.
Stephen Pound
Has my hon. Friend made any calculation about the amount of profit made by the big six energy companies? It seems to me that we have a case of Robin Hood in reverse here: the poorest in our society are having to pay to subsidise the wealthiest. Has she done any work on or made any estimate as to the amount of profit accruing to the big six?
Dawn Butler
I thank my hon. Friend for his intervention. The big six make about £600 million a year in profit, which is an enormous amount, and they can afford to treat the most vulnerable in our society much better than they do.
Dawn Butler
I agree that the standing charges need to be regulated, as does the whole industry. It can do a lot more, especially given that, as I have said, we are about to enter the longest winter in 50 years.
I urge the Minister to encourage energy companies to follow in the footsteps of ScottishPower, which suspends the debt of its customer during the winter months so that anything they put into the meter goes directly on their usage of fuel. Let me put that into context: my constituent Mr Hamilton would put £5 on his meter and the energy company would take £3, so he had only £2-worth of fuel. If the Minister was able to encourage the energy companies, they could do this straightaway and with very little effort, but it would make a big difference to the people in the country.
As the Minister will know, in 2016, we enter the enduring phase, which will ensure that all meters are smart meters by 2020. Therefore, it is important that we help to inform people who are fuel poor. After all, energy companies will be making £12 million-worth of savings with the implementation of smart meters, so surely we can look after the 2.3 million fuel-poor households in this country. The energy companies are making enough money to be able to look after those who are fuel poor.
I expect the Minister will tell us that energy companies are not allowed to disconnect customers during the winter months, but they still install pre-payment meters, which means that people self-disconnect because they cannot afford to pay. They are, in effect, still being disconnected, they are still getting cold and, unfortunately, some still die.
Stephen Pound
I really am grateful to my hon. Friend for giving way. I will try not to trespass on her patience for much longer. On the subject of disconnection, is she aware that, in some cases, there can be long-distance disconnection? People can be disconnected without a magistrate having to sign an order for the company to enter the premises physically to disconnect. In other words, if it is possible to disconnect a power supply without even entering the premises, one of those vital layers of protection for the consumer, particularly the vulnerable consumer, has been removed.
Dawn Butler
Absolutely. The installation of smart meters will make such remote disconnection even easier to carry out. Energy companies have said that they will not do that, but do we trust them enough to believe them? That is why we must safeguard and protect the most vulnerable in our society. It also means that magistrates have to be given clear information. As a magistrate myself, I can tell Members that we normally get lots of warrants to sign off at the beginning of a sitting. Magistrates clearly ask whether the energy company has gone through all the safeguards with regard to vulnerable adults, people with mental health problems or children at the property. On some occasions, I was not always convinced that the energy company did its due diligence when asking for a warrant to enable it to enter a property forcefully to install a pre-payment meter, which will be more expensive for that person who is least able to pay the bill.
I have talked about the high cost of pre-payment meters and the matter of self-disconnection, which happens quite a lot but which is not often mentioned by the energy companies or by this House. Recent research undertaken by E.ON highlighted that seven in 10 people with pre-payment meters had accidentally self-disconnected even when they were not expected to do so. That is a very high number. Over the winter months, we expect that figure to rise.
Pre-payment meters are being installed way too early in the debt plan. Energy companies are supposed to go through a whole plan of what they can do to help their customer to avoid fuel poverty. As we are entering the enduring phase—smart meters will be rolled out by 2020—surely now is the time to slow down and end the installation of pre-payment meters.