Off-gas Grid Households

Jim Shannon Excerpts

Tuesday 16th April 2013 Westminster Hall

[Sarah Newton]

My hon. Friend makes a good point. Parts of rural areas have successfully rolled out super-fast broadband. I must commend the super-fast broadband project in Cornwall; we have very high penetration levels, even in some remote rural areas. She makes a fair point: we need parity across our nation. People living in remote rural areas should not be disadvantaged. As policy makers, we should always consider fairness and parity.

Consumers facing high prices and related competition issues are also bereft of the regulatory protections and consumer support that many on-grid households take for granted. Ofgem has no responsibility in the off-grid energy sector and the OFT can investigate only how well the market is operating. Off-grid energy customers with a complaint against their supplier have only one recourse: their local trading standards team. Support from such teams differs across the UK and is extremely limited in many places. Some moves have been made towards the self-regulation of the off-grid energy sector. The Federation of Petroleum Suppliers, a trade association whose membership delivers 80% of the UK’s heating oil to homes, has a code of conduct that requires members to

“act with integrity and honesty”.

The federation is apparently preparing a more rigorous code, giving further specification on what would constitute a breach of “integrity and honesty”. However robust that code is, the ultimate sanction will remain loss of membership. Given the number of suppliers who successfully trade without belonging to the federation, that sanction does not constitute such a disincentive.

Inadequate regulation is matched by limited support for off-grid customers. On-grid households can access a range of support, including a dedicated team in Consumer Focus, but many off-grid consumers struggle to find expert advice. In the words of Citizens Advice, when giving evidence on consumer advice for off-grid customers to the all-party group:

“A team in DECC… that we knew we could go to, would be nice... we just need a far more coordinated effort, essentially.”

That stakeholder experience of consumer advice matches that of too many off-grid customers. To assess the off-grid energy sector is to assess a range of frustrations faced by off-grid energy consumers, from high prices, possibly caused in part by a lack of competition in the market, to inadequate regulation and a lack of dedicated consumer advice.

What can be done to tackle those issues to ensure that off-grid customers benefit from assistance commensurate with that directed to on-grid households? The all-party group’s report suggests a number of common-sense changes that would make a real difference to off-grid gas consumers. The benefits system could recognise the high prices that off-grid consumers face. Two particular benefits are specifically designed to assist with the cost of energy: the warm home discount and the winter fuel allowance. Citizens Advice and the Energy Saving Trust support proposals to create a higher rate in the warm home discount to reflect high off-grid prices. Last year, the hon. Member for Angus (Mr Weir) promoted a private Member’s Bill that would have enabled off-grid gas consumers to receive their winter fuel allowance in September, rather than December. That simple change would allow older consumers to purchase heating oil at low summer rates, thereby saving an estimated £200 a year.

To help to secure lower prices in the long term, the OFT could be asked to reopen its study into the off-grid energy market, using more localised data. Such a revised study could provide a more definitive answer about the scale of competition issues in the market and suggest possible resolutions should such problems exist. To provide regulatory protection and consumer support to off-gas households, the Government could set up a dedicated team within the new competition and markets authority to regulate the sector and support consumers. Community Energy Plus describes the creation of such a body as

“essential to ensure price parity across the market”.

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Lady for bringing this important matter to the House. The differential in prices across Northern Ireland has been recognised and the regulator is already looking at it. Does she feel that something should be done UK-wide on the regulation of prices? The price, when the stuff comes off the ship in Belfast, is dearer there than in some other parts of the Province. There is something seriously wrong, and the same problem applies across all rural constituencies.

[Sarah Newton]

I hope the hon. Gentleman will forgive my ignorance, but I am not fully aware of the devolved powers in relation to the energy market. I did not prepare to cover that in this speech, as I am very much focused on England and Wales, but perhaps the Minister will respond to that point. He probably has far greater knowledge of whether his powers extend to the Province than I do.

Alongside the measures I suggested, support to the green deal and the renewable heat incentive should continue. If implemented correctly over the coming years, both have the potential to assist off-grid gas households. The renewable heat incentive in particular could help off-grid households to install air or ground heat pumps, providing a new, cheaper and more sustainable energy source.

Having campaigned for some years on behalf of off-grid energy consumers living in my constituency, I am assured that Ministers appreciate how important the issue is. I am grateful for all the time that the Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), an off-grid energy consumer himself, has given and for the help that my hon. Friend the Member for Wealden gave in securing the initial OFT inquiry. I now urge DECC to take that appreciation of the issue one step further, take careful note of the further evidence revealed by the all-party group’s report and consider closely the all-party group’s recommendations, which could help to secure a fairer deal for off-grid customers. It is important to stress that many such customers form part of a group that Ministers are keen to prioritise: households in and at real risk of going into fuel poverty. One OFT statistic is telling: 32% of off-gas grid households in Great Britain are fuel poor, compared with 15% of those on-grid.

The Government are right to do what they can to help households struggling with rising energy bills, but that help will pass millions by if reforms to the mains gas network are not complemented by action on off-grid energy. The 600,000 off-grid households in fuel poverty will continue in fuel poverty, joined, no doubt, by many others, if an unreformed off-grid energy sector is combined with a return to winters like those of 2010 and 2011.

For the Government’s package of measures on energy bills to be fair, it must apply both to on-grid and off-grid households, and to be effective it must help the hundreds of thousands of off-grid households that have fallen into fuel poverty over recent years. For the Energy Bill revolution to be meaningful, it must travel beyond the corridors of Whitehall and to all those beyond the edge of the mains gas grid.

--- Later in debate ---

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Member for Truro and Falmouth (Sarah Newton) on raising this matter, which is very important to my constituents in Northern Ireland. The hon. Member for Brecon and Radnorshire (Roger Williams) referred to the fact that Northern Ireland has even fewer people on the gas grid, and that is true. It is only in the last few years that many of our constituents have been offered the opportunity to get on the gas grid. Indeed, it was only some 10 or 12 years ago that Newtownards first went on the grid, and that is a major town; it is not even a rural area.

I want to make a few quick comments, because I am conscious of the time. Some 42% of rural households are not connected to mains gas, compared with 8% in urban areas. The hon. Member for Truro and Falmouth and a couple of other hon. Members referred to the unfairness of the situation. The cost of fuel and the number of fuel suppliers play a particularly important role in the countryside. Rural households rely on oil and LPG more heavily to heat their homes, so we clearly have an unfairness and imbalance in supply not just in Northern Ireland, but across the whole United Kingdom—Scotland and Wales and elsewhere. We are probably all aware that some 10% of costs in the home go towards heating. In December 2012, prices were 14% higher than in 2011 and 20% higher than last summer.

In the past year, I have been contacted by many pensioners, because they are the people in the greatest need and who have the greatest difficulties in paying their heating bills. They say they can no longer fill their oil tanks. Some petrol stations say that buying a five gallon drum is cheaper, but it is not; it is dearer. Pensioners in my constituency, in both rural and urban areas, say that the only way that they can address their heating problems is by wearing extra clothes. It would be interesting to find out how many people have died as a result of the cold this winter. I think that the numbers will be quite horrific, but I do not have definite evidence. None the less, I am certainly aware of a great many people of a certain age dying because of the cold.

[Mr Alan Reid (Argyll and Bute) (LD)]

The hon. Gentleman is quite right to talk about the problems caused by the high price of heating oil and LPG. Does he share the concerns expressed by the APPG that the OFT study was inadequate? For example, it said that almost all the highlands and islands had between four and seven suppliers, which is obviously nonsense. Does he think that it was over-optimistic about the number of suppliers, that the market is not working properly and that the OFT study should be carried out again?

[Jim Shannon]

I thank the hon. Gentleman for his intervention, and yes I do agree with that. Quite clearly, the figures mentioned were not true, and that applies to many other parts in the United Kingdom as well.

This past winter, pensioners living in rural constituencies have experienced extreme weather conditions and have been unable to provide heating in their homes. The Government must consider introducing a system in which, in extreme conditions, extra payments are made to pensioners.

I will make one other comment, to take matters to a different level. In introducing the debate, the hon. Member for Truro and Falmouth did not refer to this issue, but it is perhaps important that we refer to it. In addressing rural fuel poverty, there needs to be recognition of and support for the role that British farmers and land managers can play in exploiting the huge potential offered by our agriculture to provide renewable energy resources. The Countryside Alliance has long called in its rural manifesto for

“the potential of farming and its by-products as a significant and often existing source of renewable energy to be harnessed not only as a way of mitigating climate change but also of increasing our energy mix and therefore our energy security.”

Cows produce something in great quantities that could be used to provide energy. Why are we not using it in some rural areas? There are ways of using it that the Government must consider fully; it is time that they did so.

In conclusion, there are many methods of addressing the off-grid gas issue; the hon. Member for Angus, who spoke earlier, referred to one method. We cannot provide gas everywhere, but we have to try to provide it in lots of places. I would like gas to be provided in some areas of my constituency where I have been pushing for it to be provided. I would like to see it provided in Ballynahinch; Saintfield in Ballygowan; and in the villages of the Ards peninsula, such as Donaghadee, Millisle, Ballywalter, Greyabbey and Portavogie. Those are areas where gas should be made available, and it is quite possible to do so. There are small groups in all those rural areas that could justify the expense involved, and that process could be replicated in other parts of the United Kingdom.

I congratulate the hon. Member for Truro and Falmouth on bringing this matter forward; this has been a very important debate at a very important time.