Energy Prices

Bob Stewart Excerpts

Wednesday 11th January 2012 Commons Chamber

[Chris Huhne]

I agree with the hon. Gentleman. Sadly, during tough times people tend to fall behind with energy bills and so can be moved on to prepayment meters. One of the things that it is very important the Department does is try to ensure that those who no longer need to be on prepayment meters, from a credit point of view, are moved back so that they pay more directly and can take advantage of those schemes.

[Bob Stewart (Beckenham) (Con)]

If the Government are writing to so many vulnerable people, can we not make it as simple as possible? When we start talking about the elderly shopping around, why can we not just say, “Here are two or three very good deals that will work for you”, and then use that to ensure that energy providers bring their prices down? We should say to energy providers, “We are going to recommend this, so you had better bring your prices down.” That is what we need. We want to keep it as simple as possible.

[Chris Huhne]

I entirely agree with my hon. Friend on the need to continue the whole process of clarifying energy bills and making them simpler so that they are absolutely transparent and people find it easier to switch. That applies to all age groups. Compared with those of us in our 50s, those in their 60s and 70s—the silver surfers—actually do more on the internet, so we should not underestimate the ability for that to happen.

My hon. Friend might be interested to know that the letters the Government are sending out direct customers to a dedicated independent helpline as part of our programme to ensure that an extra 3.5 million homes are properly insulated by the end of 2012, and later this year we will be rolling out the green deal to help even more households save money through energy efficiency. We are ensuring that extra support is available this winter for the most vulnerable households. We are requiring energy companies to provide help to around 2 million low-income households through the warm homes discount, at a cost of £250 million for 2011-12, which is 40% more in cash terms than last year under the voluntary arrangements operated by the previous Government.

The right hon. Member for Don Valley made much of our apparent meanness on this exercise, but I do not see how the Government can be accused of being mean to those in the most vulnerable groups when it comes to energy bills when we are increasing the warm home discount by 40%. The scheme will help around 600,000 of the poorest pensioners with a core group discount of £120 this winter. We are spending £110 million on heating and insulation for low-income and vulnerable households living in energy-inefficient housing through the Warm Front scheme. We will also provide winter fuel payments to pensioners and cold weather payments to some households in areas that have extended periods of very cold weather.

--- Later in debate ---

[Simon Wright (Norwich South) (LD)]

In October we saw the launch of the “Check, switch, insulate to save” campaign. There is a clear need to raise awareness of what people can do today to reduce their bills. Many people can go online, check around for better deals and switch suppliers or change to a cheaper tariff, but three in every five consumers say that, in fact, they have never switched supplier. There are perhaps a number of reasons why not, one of which is that there remains a digital divide, which means that the information is not as easily or quickly available to all. What is more, many of the best deals are for online-only web accounts. Many households could save around £100 immediately by simply moving to an online account, but this is little help to those who have not embraced the internet, which in many cases also includes poorer households. Those who are not online include more than half the UK’s over-65 population.

Other households tend to avoid doing too much of their business online, because they have poor quality internet access where they live. I strongly welcome the Government’s investment in better broadband for Norfolk. Better communication links will allow more people to search online for the cheapest services and, as a result, become more powerful consumers. However, even with 100% broadband coverage, many households will still not connect to the internet. It is therefore vital that every effort be made to ensure that support is available for offline consumers to ensure that everyone can access the cheapest tariffs, not just the internet-savvy. I welcome the work that citizens advice bureaux and Ofgem are doing to help.

[Bob Stewart]

Is that not the very point that we were making earlier? Citizens advice bureaux and the Department, in sending out these letters, should advise vulnerable people exactly what they think is best for them. That should make it as simple as possible for very vulnerable people, and that is our duty.

[Simon Wright]

That is a very good point, and I thank the hon. Gentleman for making it, but given the sometimes huge price differential between online and offline accounts, I hope that Ministers can work with Ofgem and the suppliers to seek to narrow the gap.

In recent years, competition for new customers seems to have been increasingly focused on price comparison websites. That has meant that those who use such tools can find massive discounts for web-only accounts, while the majority, who do not, end up paying more. To improve competition, we need simpler tariffs. Over 70% of consumers tested in Ofgem’s market research said that they would be more likely to switch if tariffs were made clearer. With a bewildering 400 or so tariffs available, only 44% of people in Ofgem’s research were able to select the cheapest tariff, even under a simplified form of the current arrangements.

We also need tariffs to be structured in a way that encourages energy conservation. A system of rising block tariffs—which was mentioned earlier—where customers pay less for the initial blocks of consumption and a rising amount for subsequent blocks, would provide an additional financial motivation for households to consider energy conservation. Low energy users would be rewarded for their efforts. At present, intensive energy users pay proportionately less.

I recognise that there are concerns about the unintended impacts that such a system could have on households that necessarily consume high amounts of energy, such as those of people with long-term health conditions who need to keep their house at a higher temperature. Perhaps we could consider other forms of social tariffs for such households, and examine whether extra support could be made available for housing insulation improvements, possibly through the green deal and through energy company observation. I know that Professor Hills’s fuel poverty review will consider tariff structures in its final report, and I hope that energy conservation will be seen as an important part of that work.

I also want to mention smart meters, which could play a massively important role for consumers. Every household should have one by the end of this decade. As well as encouraging more efficient energy use and allowing for more precise billing, these meters will provide consumers with billing information on what they are paying for, at the touch of a button. There is great potential for people to use that information to ensure that they are getting a good deal. For households to get the maximum benefit, consideration must be given to how best to inform, engage, and motivate consumers to use their meters to the best effect. The consumer engagement strategy, which I hope to see being developed and implemented during this year, will have a vital role to play in that regard.

Simplifying and reforming tariffs and improving transparency are all necessary short-term steps required to increase competition. There are a few encouraging signs of competition in what is, overall, a difficult market for consumers. Today’s announcement by EDF of a reduction in its customers’ gas bills in response to the falling cost of imported gas, following similar moves by smaller suppliers such as Ovo and the Co-op, will be welcomed by many of my constituents. Last year, however, rising costs were passed on to customers very quickly, and I now want to see—on behalf of all my constituents—action being taken by the other big five energy suppliers to reduce their prices. Whether or not they do so will be an indicator of how competitive the market is for consumers. If suppliers do not reduce prices, how many of their customers will go elsewhere? Promoting competition now is vital, and I welcome the emphasis that Ministers, working with Ofgem, have given to this issue.

Today’s debate is important. The issues are not simple, but the public rightly expect Ministers to intervene, and I welcome the progress that has been made in recent months. We are heading in the right direction, and I urge Ministers to continue.