Energy Company Charges

Jake Berry Excerpts

Tuesday 4th February 2014 Commons Chamber

[Ian Swales (Redcar) (LD)]

I add my congratulations to the hon. Member for Harlow (Robert Halfon), who has led the charge, and to all the other Members who supported his motion today. The debate has already shown that there is no monopoly of concern in one part of the House—we are all concerned about this. I heard the calls for extra analysis of the issue, but there is no doubt that we are talking about an issue that largely affects the poorer part of the community. We could analyse it to death, but we all know intuitively what is going on.

I worked in the electricity industry way back in the 1970s. I was probably around at the start of the discount for direct debit schemes. We always used to do our marketing campaigns in the spring. Why? Because that allowed us to pile up credit through the summer, which helped to finance the business. There is no doubt that companies are doing that. We always used to aim to hit the exact average over the 12 months, but some companies seem to be looking to build up credit over the 12-month period by assuming extra usage. That practice ought to be stopped. Back in those days we used to give people an incentive of £2 or £3 a quarter for paying by direct debit. I am staggered by the size of the so-called incentive that is around now. It seems to be way out of line with any measure of actual costs. Of course, we have additional things now, such as discounts for online bills, which can add up to a fair amount, so there are many ways in which those without direct debit facilities or the internet are being penalised.

However, I want to follow on from the previous speaker, the hon. Member for Makerfield (Yvonne Fovargue), who made a good speech about prepayment meters. Rather like the hon. Member for Harlow, I had this issue brought to my attention just a couple of weeks ago. I was aware there was an issue, but I did not know how big it was until a constituent of mine called Frank Harrison claimed he was spending an extra 25% by having a prepayment meter. I found that staggering, but sure enough, when I did a bit of digging, I found that that was roughly the figure. I heard the figure of £100 from Citizens Advice. However, I have checked the three biggest comparison websites, which estimate the difference at between £160 and £300 extra for having a prepayment meter, and we are talking about people who largely cannot afford any extra.

I understand the history. As an accounting trainee, I remember going round with a meter collector with gigantic bags of silver coins, which he had to keep shipping to a bank. The costs of prepayment meters used to be serious when somebody had to be sent round collecting money frequently. However, we do not have that now; we have pre-payment cards. The risks of default are minimal. Prepayment meters also used to be a big target for theft, but not any more, and the energy companies are getting their money in advance, so the excuse that the costs of prepayment meters are much higher starts to fall away, given that people have to pay for the energy before they use it. Therefore, by definition the bad debts will be nil.

I join other Members in calling for transparency. It is inexcusable that these companies appear to be able to differentiate however they like, whenever they like and to any degree they like. The concept of a cap, which we heard about from the hon. Member for Harlow, is an extremely good start, but I would like to go further. Through policies such as the energy company obligation, the Government already require energy companies to do things—in that case to do with insulation—for the poorer sections of the community. Given the cost of energy, it is high time that companies were required to do more—to get involved not just in insulation, but in levelling the playing field between different methods of payment, particularly when it comes to prepayment meters, and to bring down the direct debit difference, if it is to exist, to a very low level. I would favour the Government saying, “Along with the ECO, we expect you to provide the lowest cost tariffs, whatever the method of payment.”

[Jake Berry (Rossendale and Darwen) (Con)]

I am sure that, like me, my hon. Friend would want to publicise the fact that uSwitch now offers a paper switching service. Some of the people on the most expensive tariffs can be the elderly and the vulnerable—the people least likely to want to go on the internet to change user. This excellent debate initiated by my hon. Friend the Member for Harlow (Robert Halfon) is a good opportunity to publicise uSwitch’s paper switching campaign.

--- Later in debate ---

[Ms Ritchie]

I agree with the hon. Gentleman; nobody should be penalised, and those who are least well-off are being penalised more than anyone else. Energy bills are at very high levels at the moment.

I am glad that the Prime Minister called last week for a probe into these excessive costs, and that the Department of Energy and Climate Change is to investigate the situation. There is clearly a role for Ofgem there, and I will encourage the utilities regulator in Northern Ireland to intervene with Power NI. Any such investigation needs to determine the real cost of the different payment options and the level that should be charged to ensure that one band of customers is not cross-subsidising another.

[Jake Berry]

Will the hon. Lady give way?

[Ms Ritchie]

I apologise, but I want to make some progress; I have already taken some interventions, and to take more would be unfair to others.

As I was saying, we need to determine the level that should be charged to ensure that one band of customers is not cross-subsidising another, particularly when a group of customers with limited financial means is found to be supporting cheaper prices for those who have the luxury of choice. The Consumer Rights Bill to which my hon. Friend the Member for Ynys Môn referred has a role to play. It offers the perfect opportunity for implementing the measures proposed today, and I would like to ask the Minister if he will now bring it forward.

We have a separate energy market in Northern Ireland, but I am aware that a similar situation exists there in relation to non-direct-debit charges. I therefore hope for an assurance from the Minister that the review will consider Northern Ireland as well. Will he tell us what discussions have taken place with the relevant Minister in Northern Ireland on the matter of energy billing?

The House knows of the wider issues facing the energy market, and there is clearly a need for sweeping reform, but today’s motion offers the opportunity to commit to a measure that would resolve at least one inequity. That would bring a degree of relief to families and individuals who are hard pressed by the ever-increasing cost of living.