Energy Pricing (Off Gas Grid Households)

Drew Hendry Excerpts

1st reading
Wednesday 23rd February 2022 Commons Chamber

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

I beg to move,

That leave be given to bring in a Bill to make provision about the application of the energy price cap in relation to households without mains gas supply; to require the Secretary of State and Ofgem to make proposals for measures to ensure that households do not have to pay more for energy because they do not have access to mains gas supply; and for connected purposes.

Let me lay out the key points of the issue and then describe how vital it is for people to be protected from a crisis on top of a crisis, because they are caught in a specific energy price trap that is none of their making and that is set to bring additional hardship and misery to people already being financially crushed by a cost of living crisis that has been imposed on them.

The current price cap introduced by the UK Government and Ofgem is based on the assumption that households across the nations of the UK consume energy with a split of 80% gas and 20% electricity. However, about one in six households across the nations of the UK are currently off gas grid. The result is that these households are forced to pay about four times more for their energy bills than the so-called average household. We have a ridiculous situation in which Ofgem’s own statistics tell it that more than 15% of all UK households cannot get mains gas, yet it treats them as if they do, based on that 80:20 split in favour of gas. This ignores the energy price consequences for those who need to fill that 80% gap with other forms of fuel, such as domestic oil or other unregulated fuel, all of which have soaring prices themselves. This is grossly unfair. The inevitable result is that most off gas grid households then become wholly reliant on electricity. This is discrimination, and this is unacceptable. The UK Government are failing families across the nations of the UK simply because of where they live.

However, that is not the worst of it. From 1 April, Ofgem will set its price cap tariffs—they will be painful for most households, as we know already—at 28.34p per unit for electricity and 7.37p per unit for gas. What this means is that those who cannot access the assumed 80% of their energy from mains gas will be paying four times as much as those who can and nearly twice as much for the standing charge. The Ofgem average consumer faces an eye-watering rise in their bill of 54% or £700 a year, which takes them to about £2,000 a year. That is bad enough, but spare a thought for off gas grid customers, many facing colder rural conditions, who will see their bills hit an outrageous £4,416 for the same net energy usage. It gets even worse for those on prepayment meters, who face even higher energy price caps.

People and families are already struggling even before this combined cost of living crisis and energy price conundrum, coupled with the callous UK Government cut of £20 a week in universal credit. People now find themselves in some cases literally powerless. They no longer have a choice even between heating or eating. For some—too many now, and many more coming soon—that is the shameful reality of life in the UK under this UK Tory Government. The kick in the teeth is that consumers in off gas grid areas, such as those in the highlands and islands that I represent in my constituency of Inverness, Nairn, Badenoch and Strathspey, can often see clean and cheap renewable energy being generated in their own backyards.

People in off gas grid areas are also likely to be faced with higher transport costs. They are highly likely to be living in older properties that are less energy efficient. Crucially, they are likely to have lower than average incomes. What chance do they have if nothing is done to help them? Fuel poverty, and the extreme fuel poverty I am describing, can lead to many negative outcomes—far too many for me to list in the time that I have here—but the charity Crisis has raised concerns about rapidly accelerating homelessness. That is just one of the possible consequences of the rising debt, rent and mortgage arrears for many as a result of this.

What is the point in having a UK energy regulator if it is unwilling to ensure that, at very least, people are equitably treated, whether they live in an off gas grid area or with the benefit of being on it? Either Ofgem or the UK Government can make the required change, and they must not be allowed to play off each other, or to deflect and hide behind each other on this issue. The Government could choose a mechanism such as a vulnerable area designation, ensuring that all off gas grid households are not charged any more than on-gas households are for the same number of units used.

The UK Government should also commit to an immediate and urgent review of regulated energy prices and their component costs, to level the playing field for all households. That process should begin immediately. There is an undeniable moral duty to intervene, and to rescue the affected families and children right now from impending financial disaster. Sorting that injustice should be swift, but while those levers are being pulled, there should be no delay in emergency action to support people facing those impossible challenges.

Along with longer-term reform, and in addition to the designation of vulnerable areas, the UK Government should play catch-up and help people in other ways. For example, while instructing Ofgem to create vulnerable area mechanisms and commencing that review of regulated energy prices, they could reinstate the £20 per week cut to universal credit. The Chancellor’s loan scheme does not provide meaningful help for those I have described; it simply pushes a small part of the problem out.

The Scottish Government are using the consequential funding, but as the Cabinet Secretary for Finance and the Economy, Kate Forbes MSP, pointed out, much more is needed than small loans and council tax discounts. The UK Government could give further assistance, for example by copying the Scottish Government, who have introduced the Scottish child payment and now doubled it to £20 a week, and are operating the child winter heat allowance, up by 5%. They are supporting carers and disabled people with additional grants, including help for severely disabled children and low-income households. Replicating all that will not solve the problems people face, but it would help people across the UK, and allow Scotland to provide even more help through consequentials and spending, so that more people might be helped through this escalating crisis.

I mentioned older, less energy-efficient homes. The Scottish Government announced an additional £80 million to help households to install energy efficient measures aimed at reducing heating bills. I urge people to take advantage of that, but the UK Government should play catch-up on their own commitment to boost it. The UK Government have so far allocated only a fraction of the £2.5 billion they pledged for the home upgrade grant—another measure that could exist in the longer term if the will existed on the Government Benches.

At the heart of this issue is a badly broken, discriminatory system that must be fixed. Yes, it needs emergency interventions, but the problem will persist and get worse, driving people into desperation, due to the lack of thought given to the problem of off gas grid inequality. This Bill would fix that. Ofgem and the UK Government cannot now say that they have not been warned of the dire consequences of inaction. Let us see them work together to grasp this challenge for once, to do the right thing, to support people and families, and to support the Bill and take the urgent steps that are desperately required.

Question put and agreed to.

Ordered,

That Drew Hendry, Ian Blackford, Brendan O’Hara, Jaime Stone, Pete Wishart, Angus Brendan MacNeil, Alan Brown, Ben Lake, Liz Saville Roberts, Hywel Williams, Richard Thomson, and Stephen Flynn present the Bill.

Drew Hendry accordingly presented the Bill.

Bill read the first time; to be read a Second time on Friday 18 March, and to be printed (Bill 258).