Energy Company Charges

Baroness Ritchie of Downpatrick Excerpts

Tuesday 4th February 2014 Commons Chamber

[Ms Margaret Ritchie (South Down) (SDLP)]

I thank the hon. Member for Harlow (Robert Halfon) for bringing this topic to the Chamber through the Backbench Business Committee and for his tireless work on behalf of consumers and the wider community, and I thank the hon. Member for Ynys Môn (Albert Owen), too.

In addressing today’s debate and the motion, which focuses on direct debit payments for electricity bills, we must also take into consideration the current economic situation faced by consumers. People are already paying excessive energy bills. Nearly all the major UK operators increased the cost of annual bills by about 10% last year, while Power NI delivered a staggering 17.8% increase in Northern Ireland. Although the recent jobs and GDP figures for Northern Ireland give some cause for hope, the truth is that this limited recovery is not being felt by families who are faced with higher energy bills, rising petrol costs and real-terms pay cuts. In this economy, every pound matters and that is why today’s debate is so important.

It is understandable if a company wants to give a discount to customers for paying by direct debit, and that is an entirely valid pricing structure, provided that it reflects the genuine saving to the company of the payment option. However, what is not acceptable is the vast price differential which seems to be prevalent in the current market between customers paying by direct debit and those not paying by direct debit. It would seem that those not paying by direct debit are actually paying a penalty to subsidise other customers’ lower bills. That is clearly unacceptable.

This is not a plain and simple matter of consumer choice. There are over 1 million people in society who do not hold current accounts and who therefore do not have the option of paying by direct debit. Moreover, 45% of all bill payers, including many of those with bank accounts, do not pay using direct debit for a variety of valid reasons. Such people, who are often vulnerable or elderly, should not face a penalty for that. Sadly, the people facing penalties, which can amount to hundreds of pounds a year, are often also those most likely to be facing fuel poverty or for whom such an amount of money would make the biggest difference.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

I thank my hon. Friend the Member for Harlow (Robert Halfon) for calling this debate and I apologise for missing the early part of it. The hon. Lady is making a very valuable case. Does she agree that the additional cost to which disadvantaged people are being put by these meters and other payment systems that are not direct debit is grossly disproportionate to the amount of savings that are supposed to be generated for the power company and therefore represents an extortionate extraction of value from the poor member of the public who has to pay for it?

[Ms Ritchie]

I thank the hon. Gentleman for his intervention, and I fully agree with him, because I have seen that, not least in my own community in Northern Ireland.

Many people are likely to be pushed into financial difficulties by such charges and they often have the least flexibility when it comes to arranging their financial affairs. I support this motion on the simple principle that price structures and options should offer customer choice, not be determined by customer constraint.

It should also be pointed out that not every company operates in this way. In contrast to Power NI, there is Budget Energy in Northern Ireland. It does not penalise customers for non-direct debit payments. In fact, its cheapest tariff per unit is for prepayment meters. Other companies should be encouraged to consider similar pricing structures that do not penalise certain bands of customers. Again the issues of transparency and equity and fairness come into play.

[Bob Stewart (Beckenham) (Con)]

If someone pays their bill promptly, it is unfair that they should be penalised for not using a direct debit. Surely it should be put into law that people who pay their bills when they are asked to do so should not pay a penalty in that way.

[Ms Ritchie]

I agree with the hon. Gentleman; nobody should be penalised, and those who are least well-off are being penalised more than anyone else. Energy bills are at very high levels at the moment.

I am glad that the Prime Minister called last week for a probe into these excessive costs, and that the Department of Energy and Climate Change is to investigate the situation. There is clearly a role for Ofgem there, and I will encourage the utilities regulator in Northern Ireland to intervene with Power NI. Any such investigation needs to determine the real cost of the different payment options and the level that should be charged to ensure that one band of customers is not cross-subsidising another.

[Jake Berry]

Will the hon. Lady give way?

[Ms Ritchie]

I apologise, but I want to make some progress; I have already taken some interventions, and to take more would be unfair to others.

As I was saying, we need to determine the level that should be charged to ensure that one band of customers is not cross-subsidising another, particularly when a group of customers with limited financial means is found to be supporting cheaper prices for those who have the luxury of choice. The Consumer Rights Bill to which my hon. Friend the Member for Ynys Môn referred has a role to play. It offers the perfect opportunity for implementing the measures proposed today, and I would like to ask the Minister if he will now bring it forward.

We have a separate energy market in Northern Ireland, but I am aware that a similar situation exists there in relation to non-direct-debit charges. I therefore hope for an assurance from the Minister that the review will consider Northern Ireland as well. Will he tell us what discussions have taken place with the relevant Minister in Northern Ireland on the matter of energy billing?

The House knows of the wider issues facing the energy market, and there is clearly a need for sweeping reform, but today’s motion offers the opportunity to commit to a measure that would resolve at least one inequity. That would bring a degree of relief to families and individuals who are hard pressed by the ever-increasing cost of living.