Off-gas Grid Households

Fiona O'Donnell Excerpts

Tuesday 16th April 2013 Westminster Hall

[Mr Mike Weir (Angus) (SNP)]

I am pleased to speak in this important debate under your chairmanship, Mr Crausby, and to support the recommendations made by the all-party group on off-gas grid in its excellent report, which sets out the issues and proposes interesting ideas to deal with them.

I do not intend to speak on the general problem of fuel poverty, the details of which should be well known by Members on both sides of the House, but I note the point that the hon. Member for Truro and Falmouth (Sarah Newton) made: although only 15% of households in the UK are not on the gas grid, 32% of such households are in fuel poverty, as opposed to 15% of on-grid households. That shows the extent of the problem, particularly, but not exclusively, in rural areas. I have raised the issue of off-grid supplies in all the years I have been in the House. When preparing for the debate, I was tempted simply to say—in the manner of “Blue Peter”—“Here’s one I prepared earlier” and produce an old Hansard. It is slightly depressing to see the same familiar problems that we have talked about for years highlighted in the report.

I have raised the particular issue of winter fuel payments for off-grid pensioners on numerous occasions, to Ministers in both this and the previous Government. I am pleased with the strong recommendation in the new report that calls on the Department for Work and Pensions to reconsider its opposition to my private Member’s Bill. My Bill does not seek to extend winter fuel payments to additional groups, nor does it tread on the contentious issue of means testing that concerns some Members. It is tightly drawn to give some relief to a particularly vulnerable sector: pensioners who are off the gas grid.

As the hon. Member for Truro and Falmouth said, all forms of energy have increased in price, but the price of home fuel oil has rocketed in recent years, and there is clear evidence that the cost rises in early autumn and stays high over winter. Even on the website of an oil supplier, www.valueoils.com, we can read:

“Winter months are typically more expensive than the summer given the rise in demand across Europe, the summer months of June and July will usually provide the lowest rates.”

The graph on the site shows dramatic increases in all areas of the United Kingdom over the winter months. It is important to note that this is not just an issue for the rural highlands and islands of Scotland; it also affects rural Wales and all parts of rural England, including Cornwall.

[Fiona O'Donnell (East Lothian) (Lab)]

What the hon. Gentleman says is further evidenced by the experience of one of my constituents, who queried her bill and had it reduced. No other market—including mains gas and electricity—would operate in that way, so is that not evidence that the suppliers are charging over the odds at times?

[Mr Weir]

The market is not clear. I appreciate that there are difficulties in the market. There are some big suppliers, but there are many small ones, and one difficulty is that many suppliers buy on the notoriously volatile spot market. The APPG report highlights another difficulty, which is that people are given a price when they ask for oil, but the price is not guaranteed and can be completely different on delivery. That is no way for someone to run their main home heating supply. The presence of the hon. Member for Strangford (Jim Shannon) reminds me that this is also an issue in Northern Ireland—I was interrupted before I could mention that.

Figures from Oil Firing Technical Association suggest that a typical rural household could save £170 if they bought heating oil in June 2010 rather than in January 2011, nearly doubling the value of their winter fuel allowance. When I introduced my Bill, the House of Commons Library produced a note that stated:

“The average costs of heating and providing hot water for a typical three bedroom house with LPG have been estimated at around £2,300 per year (based on April 2012 prices with a conventional boiler), heating oil is thought to cost around £1,700 and gas around £1,200.”

It is worth noting that over the past four years, the cost of heating an average home with propane or home fuel oil has increased by £850 and £750 respectively, while gas has increased by only £400, so not only are off-grid homes more expensive to heat but the costs have risen much more sharply than for homes on the gas grid. In short, it costs almost double to heat a home with LPG than a home with access to the mains gas grid. It is also important to note that the main use of LPG and home fuel oil is for heating, so although these homes generally have electricity they still face greater costs.

The traditional response of Government to the problem has been to call for an extension of the mains gas grid, and that point is made in the report, but there are fundamental difficulties, not least because in many rural areas there is simply no gas main and there is no possibility of a gas main ever coming to areas such as the islands and highlands of Scotland, rural Wales and rural Northern Ireland perhaps. Even where there is a gas main, the connection cost can be exorbitant.

I recently came across a case in an urban setting in my constituency. Even though there was a gas main further down the street, my constituent was quoted £6,000 to connect to it. That would be uneconomical for most households, which are struggling to pay their fuel bills. If the Government are serious about the extension of the gas grid, they have to do something about connection costs. In the case of my constituent, it might be that the quoted cost was high because they were the first person in their small area who wanted to connect. People connecting in future might get it cheaper, but it is still uneconomical for the first person, and that issue needs to be tackled.

The problem in many rural areas is exacerbated by the fact that much of the housing is old and of a construction that makes it difficult to install energy-saving measures such as cavity wall insulation. I appreciate that the Minister will say that the energy company obligation is meant to tackle such issues—and I am sure that it will— but there is still a huge problem over all rural areas of the United Kingdom.

Those households receive the same winter fuel allowances as pensioners on the gas grid, but the crucial difference is how the energy is delivered. Those who are on the gas grid will receive their winter fuel bill around the time that the winter fuel allowance is generally paid, and it therefore works well for them. Indeed, in the explanatory notes to the regulations that last amended the benefit, the previous Government stated:

“They are paid in a lump sum each winter to ensure that money is available when fuel bills arrive.”

That, however, is not the case for those who are off the gas grid. They face the difficulty of having to pay for their LPG or home fuel oil up front at the beginning of winter, well before they have the benefit of the winter fuel allowance, and the hon. Member for Truro and Falmouth rightly pointed out the cost of a full tank of gas. Many find it difficult to make the payment at that point, and may well not fill up the tank completely, which leaves them having to do so in the depths of winter, which can bring problems of its own, particularly during the severe weather that we have recently experienced.

The Office of Fair Trading produced a report that found that there were many competing suppliers in the market. However, by definition many of them are small suppliers, and although some of the larger players offer greater payment flexibility, many smaller ones are unable to so.