Domestic Oil Purchasing Syndicates

Andrea Leadsom Excerpts

Monday 7th December 2015 Commons Chamber

[Mr Mark Williams (Ceredigion) (LD)]

I am grateful for this opportunity to raise the issue of domestic oil purchasing syndicates in my own constituency and in many rural communities throughout the United Kingdom. This is apparently not the most scintillating of titles for a debate, but I believe that the subject is of significance, certainly for my constituents.

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

indicated assent.

[Mr Williams]

I am pleased to see that the Minister acknowledges that.

The development of domestic oil purchasing syndicates is an important and growing trend in many areas of the UK. [Interruption.] I welcome the hon. Member for Strangford (Jim Shannon) to his place; I was wondering where he was. Those syndicates are helping many communities to save substantial amounts of money by buying their off-grid fuel collectively. This is also helping to tackle the serious issue of fuel poverty in many parts of the country. That issue is not unique to rural areas, but I want to concentrate on those areas this evening.

When communities organise to combine their orders, whether they are communities of single numbers or hundreds, they can negotiate discounts with suppliers by decreasing the number of vehicles that the supplier needs to send to an area, and guarantee the purchase of all the fuel delivered. So there is a gain not only for our constituents but for the suppliers. These arrangements can help substantially to decrease the cost to each member of the syndicate or club, and help to tackle some of the most pressing problems associated with the cost of fuel. Fuel prices represent a serious problem for many rural communities, including not only the scattered hamlets but the bigger towns of my constituency.

In Wales as a whole, 20% of all households still have no access to gas from the grid and are reliant on more expensive forms of fuel, such as oil and coal, as their main source of heating. I have the privilege of representing Ceredigion, a vast tract of rural west Wales with 700 farms and 147 communities. That gives hon. Members an idea of the kind of rurality I am talking about. In my constituency, a majority of households—69%—do not have access to mains gas, and many people are therefore reliant on the more expensive means of heating their homes. This issue is not limited to Wales. Sizeable areas of the United Kingdom, from the west country to the highlands of Scotland—and, I dare say, Northern Ireland as well—have a substantial number of households that cannot access mains gas. The choices available to those households are therefore limited.

The higher cost of off-grid fuel is compounded by other factors such as the age of the housing stock and poor energy efficiency—something that is especially problematic in rural communities with large numbers of solid-wall detached houses. Beyond the image of the beautiful countryside with its thatched cottages and clotted cream, there lies a deeper problem relating to heating houses and keeping our residents warm. There is an attractiveness to many of those isolated rural homes during the summer months, but it belies the reality of living in such old housing stock during the winter. Finding ways to ensure that families and vulnerable people living in rural areas are able to keep warm during the winter months is a major challenge that we must tackle on a cross-party basis.

The huge potential of oil syndicates in tackling fuel poverty was first brought to my attention by the late Jane Wakeham, a constituent of mine from the famous, or infamous, village of Llanddewi Brefi. I should declare an interest, as my home on the clifftops of west Wales is oil supplied and my wife, who manages these things on behalf of our household, actively seeks out syndicates wherever they are.

--- Later in debate ---

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

I congratulate the hon. Member for Ceredigion (Mr Williams). This is an important debate and I am interested to hear about Club Cosy and the initiatives in his constituency. As I am also off-grid, I, too, participate in an oil buying group, which has been of great personal benefit to me.

The debate is a welcome opportunity to discuss the importance of domestic oil purchasing syndicates. My priority is keeping all energy bills low for hard-working families and businesses, as well as keeping the lights on and moving towards a green energy future. Heating oil is a small but significant part of the energy sector. About 1.5 million households are dependent on heating oil to heat their homes and typically they are among the 4 million not connected to the gas grid in the UK. The Office of Fair Trading noted in its off-gas grid market study in 2011 a large variation between the four nations of the UK, with 80% of homes in Northern Ireland off the gas grid compared with 12% in England, 21% in Scotland and 19% in Wales. Proportionally, more off-gas grid households are single occupancy and/or house a person over the age of 60, so the hon. Gentleman is right to point out the effect on elderly people who are also among the fuel-poor.

Last year, nearly 4 billion litres of heating oil, which is primarily used for heating, was delivered into the UK market. As the hon. Gentleman said, heating oil is brought to consumers by a local distributor company from the refiners and importers. Some distributors have their own storage where they can keep a few days’ supply, while those that do not have storage collect oil from a wholesale terminal and deliver it directly to their customers. The price they charge is dependent on how much they had to pay for the oil, the volume required, and the cost of delivery. DECC analysis suggests that on average, at national level crude oil price changes are fully passed through into heating oil prices within a month. At times, the wholesale price for heating oil may also be influenced by local supply and demand issues.

The average cost of heating oil is currently 34.51 pence per litre, which is down 18p from its peak in September 2014. I have been clear to the oil companies that we expect them to continue passing on any future oil price falls, bringing benefits to consumers and the wider economy.

[Jim Shannon]

It is always a pleasure to hear the Minister reply to a debate. How will her Department focus attention on those in fuel poverty? Many of those people are not elderly, because some people are on benefits and have a low income. How does the Minister hope to focus on those people?

[Andrea Leadsom]

The hon. Gentleman has raised that issue in a number of debates, and I agree that fuel poverty is a key issue for our energy support. Everything that we do to support fuel, energy efficiency and warm homes will be directed at fuel poverty.

We are keen for people to join an oil-buying group because they can benefit from reduced prices and the ability to negotiate for large volumes, meaning cheaper oil for all those in the group. Action with Communities in Rural England, Citizens Advice, and the Federation of Petroleum Suppliers have produced guidance on best practice for forming and operating oil buying clubs. ACRE is made up of 38 rural community councils across England. Those are charitable local development agencies—generally based at county level—which have a strong history of leading, supporting, and enabling community initiatives to help communities to help themselves. That includes running oil buying clubs.

Citizens Advice has produced guidance for consumers who experience difficulties with their heating oil suppliers, and set out what to do if people are struggling with their bills. It also has a website search function to find oil clubs, although that is not necessarily a comprehensive list. The sector trade association, the Federation of Petroleum Suppliers, has produced separate guidance on oil-buying groups and published a mandatory code of practice for its members, as well as a customer charter to engage with consumers on a fair and consistent basis and implement best practice to raise standards. The hon. Member for Ceredigion mentioned work by the previous coalition Government, and the Cheaper Energy Together scheme through which the Government funded three oil buying clubs. A decent amount of lessons were learned, and informed guidance allowed new clubs to form and meet to the benefit of consumers.

Some suppliers offer a means of spreading the cost, such as the option of paying by monthly direct debit with a fixed-rate payment scheme. That allows customers to know how much they will be paying for oil over the coming year, and to budget accordingly. Some suppliers offer a top-up scheme where, either through telemetry or distributor knowledge, customers’ tanks are filled as required. Through the telemetry system, suppliers are automatically informed when a tank requires filling. As well as reducing the risk of customers running out of oil, that has the advantage of providing alerts for rapid drops in level, such as those that, sadly, are occasionally caused by theft or leakage. Most companies will inform customers of the price prior to filling their tank.

Although in their infancy, pay-as-you-go schemes linked with credit unions seem to have real potential for supporting vulnerable consumers. Such schemes provide flexibility of purchase, and ensure that when customers need fuel they are able to purchase it. As the Federation of Petroleum Suppliers advises, it is always wise for people to check their fuel price against other retailers on a regular basis, and to ask their suppliers to confirm the price prior to delivery.

The Government are fully committed to reducing energy bills, and energy efficiency is a key part of that. The spending review announced our intentions for a long-term, better focused successor to the energy company obligation from 2017-18 which will run until 2021-22, with a maximum envelope of £640 million per annum, rising with inflation. That will support the insulation of 1 million homes over the course of this Parliament. Officials have engaged with stakeholders to design a successor to ECO, and we will consult on our proposals next year.

We are also committed to helping people move away from dependence on fossil fuels. The renewable heat incentive is the world’s first long-term financial support programme for renewable heat. It provides financial incentives to instal renewable heating in place of fossil fuels. The scheme is designed to bridge the gap between the cost of fossil fuel heat sources and of renewable heat alternatives, with financial support for owners of participating installations. As of 31 October 2015, over 43,000 installations have been accredited on the scheme and over 481 GWh of heat has been generated and paid for.

I want to assure the hon. Member for Strangford (Jim Shannon), who made a point about fuel poverty, and the hon. Member for Ceredigion that my priority is keeping bills low for families and businesses while meeting our climate and fuel poverty goals and continuing to keep the lights on. I should like to draw attention to the work of my hon. Friend the Member for Suffolk Coastal (Dr Coffey), who used to chair the all-party group on off-gas grid, and continues to raise the issue in government. I urge Members who are interested in the subject to join that all-party group. I am always keen to hear new ideas on how we can better support those who are off-gas grid.

One way in which individuals can keep their energy bills low is by joining domestic oil syndicates and, as I have said, I have personal experience of how successful such initiatives can be. I urge consumers who belong to those initiatives to buy early, particularly as winter is approaching.

[Mr Mark Williams]

I am grateful to the Minister for her response and the enthusiasm that she is sharing with us, because this is an important issue. She alluded to something that happened under the coalition Administration. Without wanting to be too nostalgic for those days, may I ask her to reflect on that scheme and the funding for those syndicates? A lot of work to publicise syndicates relies on the third sector. It is something that could captivate people. A lead from Government, with a little money, would go a long way.

[Andrea Leadsom]

I will certainly take that away and look seriously at what the hon. Gentleman says. Only recently, we conducted a small campaign in social media and in the general media to try to encourage people who are part of oil buying syndicates, and people who are not, to buy early in preparation for the winter and to try to grab prices while they are relatively low.

I hope that this debate has been helpful to the hon. Gentleman—and to the hon. Member for Strangford—and I sincerely congratulate him on raising it.

Question put and agreed to.