Pre-payment Meters

Chris Stephens Excerpts

Tuesday 1st December 2015 Commons Chamber

[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.

[Chris Stephens (Glasgow South West) (SNP)]

The hon. Lady is making a number of excellent points and I thank her for raising this important issue. I am aware of constituents who are paying more in standing charges for pre-payment meters than they are for the actual energy consumption. That should be regulated a lot more toughly.

[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.

[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.

[Chris Stephens]

I thank the hon. Lady for giving way; she is being very generous. In my experience the fuel regulator has no teeth and is effectively powerless in stopping energy companies installing pre-payment meters early on. Does she agree that the fuel regulator should be given more powers?

[Dawn Butler]

I agree. Not only should the fuel regulators be given more powers, but a closer eye should be kept on what the energy companies are doing. I also think that the magistrates courts play a huge role in ensuring that the energy companies pass all the necessary tests before installing pre-payment meters. The amount is currently set at something like £150, but £500 is the amount set to stop people switching to another energy company. The £500 figure should be the figure that an energy company has to reach before applying for a warrant to install a pre-payment meter, because it is just too easy to get such a warrant, which means that the customer plummets into more and more debt, as they cannot afford the amount that they have to pay.

Record profits are being made by the big six energy firms year on year. Does the Minister agree that the increases in charges and complaints are simply not good enough? Further action to protect the consumer, as my hon. Friend the Member for Glasgow South West (Chris Stephens) mentioned, is necessary.

Does the Minister agree that, when DECC’s own fuel poverty records show that 22% of pre-payment meter users are in fuel poverty, something needs to be done and quickly, especially with winter fast approaching, if we are not already in it? We could well witness a rise in self-disconnections and fuel poverty-related deaths if we do not do something in the next few weeks.

I am sure that the Minister and I are on the same page on this issue. To help her with her response, I would like to summarise some of my requests. It would really help the estimated 11 million people on pre-payment meters if energy companies brought the cost of pre-payment meters into line with those on the cheapest direct debit. It would also add £2.5 billion into the economy. I would also like to see greater protection for vulnerable adults and children when pre-payment meters are installed. That would mean giving clear instructions to the magistrates court. I would like to see no pre-payment meters fitted during the winter months. As previously said, that leads to self-disconnections. So in effect the energy companies are still disconnecting vulnerable people during the winter months. There should be a suspension of debt during the longest winter in 50 years—this year, 2015 leading into 2016. All the above is completely doable, and a letter from the Minister could make it happen.

Lastly, we are all aware that food banks have become a godsend to many in our country and some people would be having a pretty lousy Christmas if it were not for food banks. I wish that they did not have to use them, but that is the situation. I thank the Trussell Trust and E.ON, which have teamed up to provide credit for struggling families who use pre-payment meters. I know that, in my constituency of Brent Central, we will be grateful for their services. I hope that the Minister and I will agree that this country can do more to help those who are fuel poor.

--- Later in debate ---

[Chris Stephens]

I want to come back to the issue of self-disconnection. Have there been any discussions with her Department and the Department for Work and Pensions about emergency help that can be given to someone in those circumstances?

[Andrea Leadsom]

Those conversations happen regularly. I will write to the hon. Gentleman with any specific changes that we intend to make or consult on. I absolutely assure him that suppliers are required to take into account consumers’ specific circumstances. Ofgem is looking into the cost of having pre-payment meters removed and whether that should continue for pre-payment consumers.

I move on briefly to the investigation into the retail energy market currently being conducted by the Competition and Markets Authority. The CMA published its provisional findings and remedies in the summer. It found that customers on standard variable tariffs are being charged unjustifiably high prices; the majority of pre-payment customers, of course, are on those standard variable tariffs. We are committed to acting on the CMA’s recommendations and to ensuring fair prices for all consumers, including standard variable tariff customers using pre-payment meters.

The CMA also found that pre-payment customers have fewer tariffs to choose from than customers paying by direct debit. There are indications, though, that that is beginning to change. We are starting to see the development of smart pre-pay meters. E.ON is currently piloting a smart pay-as-you-go tariff for consumers using a smart pre-payment meter who then pay the same prices as the company’s standard credit customers. It expects to make the tariff more widely available to new and existing customers from next year.

With OVO’s pay-as-you-go tariff, pre-payment meter consumers receive an in-home display that enables them to see how much energy they are using and when, and how much credit they have left. Consumers can also add credit to their pre-payment meter anywhere via app, text or online. We are also seeing examples of good practice by suppliers. For example, there is SSE’s support for its vulnerable pre-payment consumers that includes monitoring those on the priority services register to identify self-disconnection. The company will then call the consumer to check the situation and to make the offer of extra assistance, where appropriate.

The Government have a manifesto commitment to

“ensure that every home and business in the country has a Smart Meter by 2020, delivered as cost effectively as possible”.

The roll-out of smart meters is an important national modernisation programme that will bring major benefits to consumers and the nation as a whole. Domestic customers will be offered an in-home display enabling them to see what energy they are using and how much it is costing.

Smart meters have the potential to transform the experience of being a pre-payment customer. Customers can top up more conveniently through a range of channels. Topping up smart meters in pre-pay mode should become as easy as topping up a mobile phone. They are likely to herald greater and cheaper tariff choices for these customers, as the cost differential will be reduced. Smart meters will enable energy suppliers remotely to take action to avoid disconnection—for example, through switching consumers to credit mode, setting non-disablement periods, and configuring debt recovery amounts to be small.

A customer’s ability to pay their energy costs while keeping warm is among the top concerns of my Department, and we are fully committed to tackling these issues through a range of innovative policies. I thank the hon. Lady and the other hon. Members who contributed to this very important debate.

Question put and agreed to.