Energy Company Charges

Baroness Hoey Excerpts

Tuesday 4th February 2014 Commons Chamber

[Albert Owen]

I am grateful to my hon. Friend for his intervention. He is absolutely right to refer to the regulator’s lack of teeth and its lack of willingness to use the powers it already has. That is an important point.

Some people say, “It’s a free market. Why should we over-regulate it?” They would also oppose the motion’s suggestion that the Government should consider introducing a cap, but it is important to realise that we have been here before. There is no doubt that the price of energy rose considerably between 2006 and 2008. Ofgem undertook an energy supply probe and agreed to place a licence condition on the energy companies to ensure that different segments of the customer base did not face undue price discrimination. This motion—I am certain that the hon. Member for Harlow will make this point more accurately than me, because he has done a lot of research on the issue—does not ask for very much, only to return to the position we were in previously. The licence condition that Ofgem introduced in 2008 after its energy supply probe lasted three years. My hon. Friend the Member for Coventry South (Mr Cunningham) has hit the nail on the head. We have been here before and Ofgem has the ability to address the issue.

My party has talked about having a new body to put consumer rights at the top of the bill. The opening line of Ofgem’s website states that it is there “to protect the interest” of the customer. In this case, I believe that it is failing, and falling short of what it should do on behalf of the consumer. I am very pleased that my party now considers that off-grid customers need the same protection as those on the mains gas grid, so that everybody in the United Kingdom is treated fairly in relation to energy and can have somebody to fight on their side.

Hon. Members have intervened about those who are hurt most by direct debit payments. I confess that I pay my utility bills by a mixture of direct debits and good old quarterly payments on paper—

[Kate Hoey (Vauxhall) (Lab)]

Using the post office.

[Albert Owen]

My hon. Friend is absolutely right. That was my next point—that I use the services of my local post office to pay my energy bills, which helps the local community in many ways. We get drawn into using direct debits, because it is a little bit cheaper, but sometimes there is extra social value from using other methods.

--- Later in debate ---

[Robert Halfon]

My hon. Friend makes an important point. I know that Which? has done an enormous amount of work, as have other organisations and the Keep Me Posted campaign. I am sure the Minister has heard my hon. Friend’s remarks.

How do some of the energy companies justify these fees? First, they claim, amazingly, that the fees they charge are proportionate. Under Ofgem’s licensing conditions to energy companies, they are required to ensure that what they charge is reflective of cost. As I have said, I have no problem with a small administrative charge to reflect the extra cost companies face in processing a cheque, but many companies offer a paperless discount of approximately £6 per annum, implying that the cost of letters is £6. Keep Me Posted, after discussions with mailshot companies, has revealed that the cost of printing letters, staff cost, postage and printing is 19p per item. I would therefore question how some companies have concluded that sending out letters can cost up to £15, and whether that is truly proportionate. It is also worth noting that some companies, such as Good Energy and Green Energy UK, do not charge their customers anything different based on their preferred type of payment, believing that customers should not be penalised for how they choose to pay.

Secondly, the companies argue that they should charge more owing to the cost of providing credit to customers. Of course, I understand that when one pays for something retrospectively there is an extra cost, but, as I have said, it is also worth pointing out that some companies that charge retrospectively do not charge anywhere near as much as the big utility companies. BT is not my favourite company. Nevertheless, it bills customers retrospectively for the calls they make, yet charges just £2 a month to customers who do not pay by direct debit. There is no extra charge for any customers who are on a low income and therefore qualify for the BT basic service. I praise BT for making a commercial decision not to rip off their customers and to charge just £2 a month. I believe that companies should be able to meet some of these extra costs themselves. Because of the nature of direct debit payments, customers often pay too much.

[Kate Hoey]

I congratulate the hon. Gentleman on his articulate outlining of the case. He mentions BT. His ten-minute rule Bill next week covers a much wider area, because it is clearly not just the energy companies that do this. Does he not agree with me that a basic principle should be that if someone has a bill and they want to pay it in cash, they should not be charged a penny extra for doing so?

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Before the hon. Gentleman replies to that intervention, may I remind him that the Backbench Business Committee recommends 10 to 15 minutes for opening speeches? He is not making an opening speech, but he is being allowed that time. That 10 to 15 minutes does not allow extra time for interventions. He has been very generous, but a lot of Members wish to speak. I would be grateful if he could now draw his remarks to a conclusion.