Domestic Oil Purchasing Syndicates

Jim Shannon Excerpts

Monday 7th December 2015 Commons Chamber

[Mr Williams]

I am pleased to see that the Minister acknowledges that.

The development of domestic oil purchasing syndicates is an important and growing trend in many areas of the UK. [Interruption.] I welcome the hon. Member for Strangford (Jim Shannon) to his place; I was wondering where he was. Those syndicates are helping many communities to save substantial amounts of money by buying their off-grid fuel collectively. This is also helping to tackle the serious issue of fuel poverty in many parts of the country. That issue is not unique to rural areas, but I want to concentrate on those areas this evening.

When communities organise to combine their orders, whether they are communities of single numbers or hundreds, they can negotiate discounts with suppliers by decreasing the number of vehicles that the supplier needs to send to an area, and guarantee the purchase of all the fuel delivered. So there is a gain not only for our constituents but for the suppliers. These arrangements can help substantially to decrease the cost to each member of the syndicate or club, and help to tackle some of the most pressing problems associated with the cost of fuel. Fuel prices represent a serious problem for many rural communities, including not only the scattered hamlets but the bigger towns of my constituency.

In Wales as a whole, 20% of all households still have no access to gas from the grid and are reliant on more expensive forms of fuel, such as oil and coal, as their main source of heating. I have the privilege of representing Ceredigion, a vast tract of rural west Wales with 700 farms and 147 communities. That gives hon. Members an idea of the kind of rurality I am talking about. In my constituency, a majority of households—69%—do not have access to mains gas, and many people are therefore reliant on the more expensive means of heating their homes. This issue is not limited to Wales. Sizeable areas of the United Kingdom, from the west country to the highlands of Scotland—and, I dare say, Northern Ireland as well—have a substantial number of households that cannot access mains gas. The choices available to those households are therefore limited.

The higher cost of off-grid fuel is compounded by other factors such as the age of the housing stock and poor energy efficiency—something that is especially problematic in rural communities with large numbers of solid-wall detached houses. Beyond the image of the beautiful countryside with its thatched cottages and clotted cream, there lies a deeper problem relating to heating houses and keeping our residents warm. There is an attractiveness to many of those isolated rural homes during the summer months, but it belies the reality of living in such old housing stock during the winter. Finding ways to ensure that families and vulnerable people living in rural areas are able to keep warm during the winter months is a major challenge that we must tackle on a cross-party basis.

The huge potential of oil syndicates in tackling fuel poverty was first brought to my attention by the late Jane Wakeham, a constituent of mine from the famous, or infamous, village of Llanddewi Brefi. I should declare an interest, as my home on the clifftops of west Wales is oil supplied and my wife, who manages these things on behalf of our household, actively seeks out syndicates wherever they are.

[Jim Shannon (Strangford) (DUP)]

This is an important subject, and it is always nice to speak about these matters in Adjournment debates. In my area, if a group of elderly people or syndicates come together, they can buy together, get the delivery at the same time and save up to 8p a litre. Does the hon. Gentleman feel—perhaps the Minister will also reply to this—that we should put more focus and emphasis on the elderly, because people are living longer?

[Mr Williams]

I very much agree with the hon. Gentleman about that. He would also recognise that elderly people and less advantaged groups in our society are looking for the lead that somebody in a syndicate can give them so that they can get the benefits and reductions in their fuel bills to which he alludes.

Jane Wakeham got in touch with me some years ago as she was seeking my support in applying for funding from the Department of Energy and Climate Change to help set up a fuel club. Under the previous Administration and our coalition Government, there was a time when a small pot of money was available that people could apply for—it was described as a competition—so that best practice was encouraged around the country, and I will ask the Minister a little about that later. Were Jane still with us, I know that she would be greatly impressed by the work of Clwb Clyd—or Club Cosy—in my constituency. That project was funded over an 18-month period by the Welsh Government and run by Ymlaen Ceredigion—I commend the work of Rachel Lilley and her colleagues there—on behalf of Ceredigion County Council, which has brought together fuel clubs throughout the county.

It was through an attempt to tackle fuel poverty in the fuel poverty forum in my constituency that the Club Cosy project came about. With representatives from the county council, the local health board, local housing associations, the West Wales Credit Union, Age Cymru—this goes back to what the hon. Gentleman said about elderly people—Citizens Advice and others, the forum began to explore the work done by oil clubs in the county, and explore the benefits of bulk fuel purchasing and overcoming the problems of minimum purchase ordering. For people on a low income the issue of the minimum purchase order is very important, as it is very difficult for many people to purchase that minimum. There is a serious concern about the many reports of constituents filling their own containers at garages, and filling their own tanks in their yards or their gardens—we should be avoiding that at all costs.

Before the Club Cosy project, coverage in Ceredigion was patchy, the number of co-ordinators was small, and there was very little co-ordination between clubs covering different areas of the county to maximise and co-ordinate their purchasing power. Since the project started, the number of co-ordinators has increased, coverage has improved to cover the entire county, co-ordination has improved and the number of syndicate members has more than doubled. Crucially, awareness has been raised, so that people know that if there is a challenge to household budgets, and my goodness there is, there are alternatives that can be pursued. In addition, the project has included specific work with syndicate co-ordinators to target and identify the fuel poor. Co-ordinators are going out into the community, rather than waiting to be asked. We have had targeted roadshows with housing associations, energy advice being offered directly in the home, and work being done specifically with the most vulnerable households through joining a syndicate. The experience from the Club Cosy project has been used to develop a document, which I will send to the Minister, explaining how sustainable models for fuel syndicates can be established, which should be helpful to other parts of Wales and further afield.

There are thousands of fantastic schemes across the country. My right hon. Friend the Member for North Norfolk (Norman Lamb) has told me about the Thinking Fuel project in his constituency, which provides similar help to local communities to improve co-ordination, lower costs and help decrease the number of people living in fuel poverty.

One syndicate in my constituency has recorded savings of anything from £26 to £76 for every 1,000 litres ordered. That is a 10% saving over an 18-month period, making a substantial difference to many households. In many cases, this has helped people on long-term agreements with fuel suppliers to revisit and review their current arrangements, often finding that they have been paying substantially more than they should have been.

There are also other benefits to forming syndicates. A syndicate of just five households in one hamlet can reduce the number of tankers travelling to deliver their fuel from five to one—an obvious, but useful statistic—which is a fact that is not lost on the companies themselves.

We can see benefits to the local economy through the uptake in bulk-buying clubs. In Llanddewi Brefi, orders are placed via the local shop and pub, enhancing their status as real community hubs. In Siop Cletwr, Tre’r Ddol, the syndicate has added value to other services in the community shop, again helping to sustain the local economy, while in Tregaron, £1 charged per order is ploughed back into the community hall fund.

The project funding for Club Cosy has now come to an end, but the legacy is firm and rooted, and I think it will continue to prosper in the future. The principle behind oil syndicates is something that we can all endorse. I am talking about collective action on behalf of customers to realise economies and bring substantial benefits to people through lower fuel bills. These community-spirited individuals often work in disparate and isolated communities, and in the case of Club Cosy, work closely with fuel distributors as well.

This is an issue that potentially affects huge numbers of people throughout our country. Unashamedly, I want to use this opportunity to celebrate this great scheme in my constituency in the expectation that others will look closely at what has been done, and follow in its footsteps.

As I mentioned earlier, work was undertaken under the coalition Government to push oil clubs on to the agenda, and some minimal funding was made available. I look forward to hearing from the Minister that that work is continuing, because it is important. The support needs to continue because there are still some big unanswered questions. Connecting communities to the gas network may well negate the need for oil clubs, but fracking may assist in some areas.

The gas network as we know it simply does not allow for the distribution of piped gas in many rural areas. The choice available is an issue. Quite rightly, the Government talk about switching within specific forms of energy, but we do not have the choice in many rural areas. That presents a problem to Governments both at a Westminster and a Welsh level, and to the communities that are struggling to cope with bills.

I must commend the work of third-sector organisations, which are well equipped—they are not well resourced—to advance the cause of switching. The citizens advice bureau in Ceredigion and Age Cymru have made a real difference to helping people switch. That is important. Third-sector organisations need support in advancing that cause.

There are good and bad negotiators. Some of our fellow citizens, if they are provided with the right information, will be good at arguing their case for switching and for better tariffs. What better way of seeking a cheaper fuel tariff than having someone to take a lead in the negotiations? Again, that is one of the benefits of this scheme.

When I speak to syndicate co-coordinators, one issue keeps cropping up: funding. Funding is available through the Department of Energy and Climate Change for those attempting to save energy and keep their homes warm. Initiatives such as big energy saving week are laudable, but many syndicates find it difficult to access even the most basic core funding. The benefit of having a group of individuals taking the lead on this issue cannot be overstated and funding is therefore important. We need to continue to consider ways of disseminating best practice. Will the Minister look into this issue and ensure that oil syndicates can apply for that support and that those who choose which projects to fund, if funding is available, are particularly aware of the needs of rural communities?

Another important point, which again relates to the issue raised by the hon. Member for Strangford (Jim Shannon), concerns elderly people. Much of the switch agenda is advanced through the internet and through emails, and as I say in any debate that mentions Ceredigion, there are limitations in the broadband roll-out. There is also a demographic divide, as older people are less confident. Again, that points to the benefits of syndicates, as people do the work for their members. Will the Minister detail what action she can promise to help encourage and support the uptake of domestic oil purchasing syndicates more widely?

I am mindful of the time—we waited for this Adjournment debate—but I want to give just one example of a constituent of mine who has benefited from Clwb Clyd, or Club Cosy. The Club Cosy coach visited my constituent at her home on a social housing estate in Ceredigion, an area where there is a high risk of fuel poverty. She was living in a cold and draughty house and her boiler was using excess amounts of oil owing to a thermostat fault. With high bills, paying for oil was a real worry, eating up a huge amount of her limited budget. Tailored advice was given on draught proofing, joining a syndicate and applying for a credit union fuel account. Her response, besides gratitude, was to become so interested in the fuel syndicate idea that she started one on her own with her neighbours on the social housing estate. She was included in Club Cosy’s networking activities and events, and the club has gone from strength to strength. Many of her neighbours have benefited from her initiative. Yet again, that is a good example of an excellent community project making a difference for a lot of people in my constituency.

I hope that I have proved that what might have seemed at first to be a lofty subject for a debate—development of domestic oil purchasing syndicates—is an issue of great significance for a great number of people in my constituency and elsewhere. I commend the work to the Minister who, I know, is supportive. I look forward to hearing what she has to say.

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

I congratulate the hon. Member for Ceredigion (Mr Williams). This is an important debate and I am interested to hear about Club Cosy and the initiatives in his constituency. As I am also off-grid, I, too, participate in an oil buying group, which has been of great personal benefit to me.

The debate is a welcome opportunity to discuss the importance of domestic oil purchasing syndicates. My priority is keeping all energy bills low for hard-working families and businesses, as well as keeping the lights on and moving towards a green energy future. Heating oil is a small but significant part of the energy sector. About 1.5 million households are dependent on heating oil to heat their homes and typically they are among the 4 million not connected to the gas grid in the UK. The Office of Fair Trading noted in its off-gas grid market study in 2011 a large variation between the four nations of the UK, with 80% of homes in Northern Ireland off the gas grid compared with 12% in England, 21% in Scotland and 19% in Wales. Proportionally, more off-gas grid households are single occupancy and/or house a person over the age of 60, so the hon. Gentleman is right to point out the effect on elderly people who are also among the fuel-poor.

Last year, nearly 4 billion litres of heating oil, which is primarily used for heating, was delivered into the UK market. As the hon. Gentleman said, heating oil is brought to consumers by a local distributor company from the refiners and importers. Some distributors have their own storage where they can keep a few days’ supply, while those that do not have storage collect oil from a wholesale terminal and deliver it directly to their customers. The price they charge is dependent on how much they had to pay for the oil, the volume required, and the cost of delivery. DECC analysis suggests that on average, at national level crude oil price changes are fully passed through into heating oil prices within a month. At times, the wholesale price for heating oil may also be influenced by local supply and demand issues.

The average cost of heating oil is currently 34.51 pence per litre, which is down 18p from its peak in September 2014. I have been clear to the oil companies that we expect them to continue passing on any future oil price falls, bringing benefits to consumers and the wider economy.

[Jim Shannon]

It is always a pleasure to hear the Minister reply to a debate. How will her Department focus attention on those in fuel poverty? Many of those people are not elderly, because some people are on benefits and have a low income. How does the Minister hope to focus on those people?

[Andrea Leadsom]

The hon. Gentleman has raised that issue in a number of debates, and I agree that fuel poverty is a key issue for our energy support. Everything that we do to support fuel, energy efficiency and warm homes will be directed at fuel poverty.

We are keen for people to join an oil-buying group because they can benefit from reduced prices and the ability to negotiate for large volumes, meaning cheaper oil for all those in the group. Action with Communities in Rural England, Citizens Advice, and the Federation of Petroleum Suppliers have produced guidance on best practice for forming and operating oil buying clubs. ACRE is made up of 38 rural community councils across England. Those are charitable local development agencies—generally based at county level—which have a strong history of leading, supporting, and enabling community initiatives to help communities to help themselves. That includes running oil buying clubs.

Citizens Advice has produced guidance for consumers who experience difficulties with their heating oil suppliers, and set out what to do if people are struggling with their bills. It also has a website search function to find oil clubs, although that is not necessarily a comprehensive list. The sector trade association, the Federation of Petroleum Suppliers, has produced separate guidance on oil-buying groups and published a mandatory code of practice for its members, as well as a customer charter to engage with consumers on a fair and consistent basis and implement best practice to raise standards. The hon. Member for Ceredigion mentioned work by the previous coalition Government, and the Cheaper Energy Together scheme through which the Government funded three oil buying clubs. A decent amount of lessons were learned, and informed guidance allowed new clubs to form and meet to the benefit of consumers.

Some suppliers offer a means of spreading the cost, such as the option of paying by monthly direct debit with a fixed-rate payment scheme. That allows customers to know how much they will be paying for oil over the coming year, and to budget accordingly. Some suppliers offer a top-up scheme where, either through telemetry or distributor knowledge, customers’ tanks are filled as required. Through the telemetry system, suppliers are automatically informed when a tank requires filling. As well as reducing the risk of customers running out of oil, that has the advantage of providing alerts for rapid drops in level, such as those that, sadly, are occasionally caused by theft or leakage. Most companies will inform customers of the price prior to filling their tank.

Although in their infancy, pay-as-you-go schemes linked with credit unions seem to have real potential for supporting vulnerable consumers. Such schemes provide flexibility of purchase, and ensure that when customers need fuel they are able to purchase it. As the Federation of Petroleum Suppliers advises, it is always wise for people to check their fuel price against other retailers on a regular basis, and to ask their suppliers to confirm the price prior to delivery.

The Government are fully committed to reducing energy bills, and energy efficiency is a key part of that. The spending review announced our intentions for a long-term, better focused successor to the energy company obligation from 2017-18 which will run until 2021-22, with a maximum envelope of £640 million per annum, rising with inflation. That will support the insulation of 1 million homes over the course of this Parliament. Officials have engaged with stakeholders to design a successor to ECO, and we will consult on our proposals next year.

We are also committed to helping people move away from dependence on fossil fuels. The renewable heat incentive is the world’s first long-term financial support programme for renewable heat. It provides financial incentives to instal renewable heating in place of fossil fuels. The scheme is designed to bridge the gap between the cost of fossil fuel heat sources and of renewable heat alternatives, with financial support for owners of participating installations. As of 31 October 2015, over 43,000 installations have been accredited on the scheme and over 481 GWh of heat has been generated and paid for.

I want to assure the hon. Member for Strangford (Jim Shannon), who made a point about fuel poverty, and the hon. Member for Ceredigion that my priority is keeping bills low for families and businesses while meeting our climate and fuel poverty goals and continuing to keep the lights on. I should like to draw attention to the work of my hon. Friend the Member for Suffolk Coastal (Dr Coffey), who used to chair the all-party group on off-gas grid, and continues to raise the issue in government. I urge Members who are interested in the subject to join that all-party group. I am always keen to hear new ideas on how we can better support those who are off-gas grid.

One way in which individuals can keep their energy bills low is by joining domestic oil syndicates and, as I have said, I have personal experience of how successful such initiatives can be. I urge consumers who belong to those initiatives to buy early, particularly as winter is approaching.