Prepayment Meters
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Gregory Barker
I would be more than willing to do that. Perhaps the hon. Gentleman will be kind enough to write to me with his particular proposal, or the example he thinks best illuminates the case. Prepayment meters obviously have a cost. Ofgem estimates that it costs £88 more than paying by direct debit. If there is a cheaper alternative model for prepayment meters in Northern Ireland, I, for one, would be extremely interested in looking at it.
The hon. Member for Angus mentioned the Prime Minister’s commitment to put everyone on the best deal, but that deal must be cost-reflective. As I said, it costs more to put people on prepayment meters. Ultimately, with only 20% of the fuel-poor, roughly speaking, on prepayment meters, we should not see them as a good thing. In an ideal world, no one would be on a prepayment meter. We do not want to create such an attractive situation that more people opt to go to a prepayment meter.
One of the exciting developments in technology is the advent of smart meters, which will considerably change the ability of consumers to interact with suppliers and will enable suppliers to have a much better relationship with consumers. Consumers will be empowered to make better choices of tariff and how they pay. Obviously, it will be a while before the whole country has smart meters, but we are determined that our smart meter programme should cover the entire country by the end of the decade. Clearly, that leaves some time and we cannot ignore what happens in the meantime.
In many cases, prepayment meters are installed to recover a debt. That element of a customer’s payment must be set at a level that takes into account their ability to pay. That is a point of universal agreement. Prepayment meters also enable customers to monitor and control their energy expenditure, and smart meters will play a valuable additional role.
Gregory Barker
I will, but I am running out of time and I had hoped to answer more of the points that have been raised.
Hywel Williams
I will be very brief. Understandably, the Minister has so far talked about the individual consumer. Does he commend the Welsh Assembly for including a specific fuel poverty reduction target in their campaign to reduce poverty in general in Wales by 2020? Would that be a course of action for his Government?
Gregory Barker
We do not just have a target; we have a legally binding obligation to deal with fuel poverty. In common with many other people, I have a slight degree of target fatigue, because targets do not get rid of fuel poverty: action, policy and committing to take measures and following them through get rid of fuel poverty. I am slightly sceptical that setting more targets is a good way of addressing something. The previous Government had a target, and fuel poverty relentlessly rose during the last Parliament. We need a Government who are committed to real solutions in the real world, and that is the hallmark of this coalition.
Given the levels of concern over the payment method, I am pleased that 80% of the fuel-poor do not pay for their energy via prepayment meters, and I do not want those households to find themselves subsidising others, either intentionally or unintentionally. The coalition shares the concerns of the hon. Member for Angus about the remaining 20% of the fuel-poor who pay for their energy through prepayment meters.
Since 2010, most suppliers have chosen to equalise their prepayment tariffs with standard credit prices, which is a major step forward. In the current system, licence conditions require suppliers to take into account the consumer’s ability to repay when setting instalments to repay gas and/or electricity debt. That allows consumers or their advocates to come to an individual agreement with suppliers that fits their circumstances.
Clear communication is the key to compliance. An assessment of a customer’s ability to repay a debt should be verified through direct customer contact or through a third party, such as the citizens advice bureaux, which do such brilliant work. It is clearly important that consumers know how much they are repaying each week and when the debt will be repaid. The average level of debt owed by dual fuel consumers in 2011 was £728, so a family with an average level of debt agreeing to repay the debt at £5 a week on top of their consumption would know that the debt would be cleared within two years and eight months. Fuel poverty and a customer’s ability to pay their energy costs are among my Department’s top concerns.