Asked by
To ask His Majesty’s Government what steps they are taking to
ensure that individuals and families who pay for their energy
through a prepayment meter are not paying the highest unit
prices.
(Non-Afl)
My Lords, in begging leave to ask the Question standing in my
name on the Order Paper, I declare my interest as director of
Generation Rent.
The Parliamentary Under-Secretary of State, Department for
Business, Energy and Industrial Strategy () (Con)
My Lords, prepayment customers will benefit from both the energy
price guarantee and the Energy Bills Support Scheme. Under the
energy price guarantee, a typical household in Great Britain will
pay around £2,500 a year on their energy bills from 1 October
2022. There will continue to be a small difference under the
energy price guarantee between the unit cost for a prepayment
meters and other types of payment methods to reflect higher costs
to serve those customers.
(Non-Afl)
My Lords, using a prepayment meter is the most expensive way to
pay for your energy, yet they are most likely to be used by the
households least able to afford to heat their home. To cope,
these families severely cut back on the energy they use, but
their efforts are diminished because of the impact of the rise in
standing charges, which remain the same regardless of the energy
used. So I ask the Minister two things. Will the Government
insist that there is a winter truce on energy suppliers forcing
families already struggling to pay their bills to use prepayment
meters to clear their debt? Will the Government make it clear to
Ofgem that the continuing ratcheting up of standing charges to
cover costs over and above what the standing charge should cover
is unacceptable?
(Con)
I am afraid that the noble Baroness is incorrect: using a
prepayment meter is not the most expensive way of paying for your
gas and electricity. Actually, normal credit is the most
expensive way. The cheapest way is direct debit; slightly more
expensive is prepayment; but the most expensive way is credit.
The problem with what the noble Baroness is saying is that if we
were to equalise the charges, and there is actually a higher
percentage of customers who are fuel poor who are paying by
direct debit, they of course would have to bear increased costs
to take account of any reductions for prepayment customers.
(CB)
My Lords, will the Government ensure that all children and
seriously ill adults in receipt of the new SR1 benefit and being
cared for at home are moved to the lowest energy cost tariff,
irrespective of the type of meter and system of payment in place?
Will the Government ensure that they are provided with emergency
supplies in the event of any power cuts in their area,
particularly in the winter, as power to their equipment, such as
home ventilation, oxygen concentration and so on, is absolutely
essential to their care at home?
(Con)
The noble Baroness makes a very important point. Obviously, we
are doing everything we can to make sure that there are no
blackouts, but if that very unlikely eventuality comes to pass,
of course we will want to do all we can to make sure that the
most vulnerable are protected.
(LD)
My Lords, I am sure the Minister will agree that although the
situation now with the differential is not as extreme as it used
to be, we could easily go back to a situation in which those on
prepayment meters will be paying the highest tariff. If the
Government were minded to, they could easily remedy the
situation; for example, simply by removing the ability of Ofgem
to set differential rates for people with prepayment meters. If
they did that, that would sort the problem. Does the Minister
agree that this would do the job and would get rid of the
injustice whereby the poorest are being asked to pay the
most?
(Con)
I refer the noble Baroness to the Answer I gave earlier: using a
prepayment meter is not the most expensive way, and many
customers choose to do it for their convenience. The licensing
conditions for Ofgem reflect the cost of serving different groups
of customers. Of course, we keep these matters under review, but
if we equalised it, then those paying by direct debit—often those
who are fuel poor as well; there is a higher percentage of
customers on that level —would end up paying more. There are no
easy answers to this.
(Con)
My Lords, does my noble friend not accept that it is all very
well talking about those people paying on direct debit, but we
are talking about people who, if they have a bank account, are
probably overdrawn and are certainly not in a position to do so?
I pay by direct debit, but I do not understand why my standing
charges, which are a major part of the costs, are going up as
well as the energy costs. At a time when the Government are
giving huge support to consumers and therefore to the utilities
themselves, which would otherwise be facing severe financial
difficulty, do we not have a bit of leverage and can we not speak
up for those people struggling to pay those bills?
(Con)
We are helping those struggling to pay bills; I refer the noble
Lord to the massive programme of support that we have put in
place. These charges are set by Ofgem. I am aware that the
standing charge is a controversial subject, but that reflects the
network costs and other costs that every customer has to bear in
addition to the unit costs of gas and electricity.
(Lab)
My Lords, there are 4 million prepayment energy customers in this
country whose bills are not smoothed out over the year, unlike
those who pay by direct debit. Ofgem figures show that prepayment
customers are likely to pay two-thirds of their annual energy
costs during the winter. What immediate measures will the
Government take to help relieve pressures on these hard-pressed
energy customers?
(Con)
The answer to the noble Lord’s question is the massive programme
of support we have put in place, which amounts to about £60
billion of direct payment support. Had we not put these measures
in place, the average unit cost would have been about £6,000 per
year; now it is down to an average of £2,500 per year. I
emphasise that that is not a maximum but an average of the unit
costs of energy that are capped under the price guarantee.
(GP)
My Lords, is the Minister aware that renewable energy is nine
times cheaper than fossil fuel energy? If there were not an
anti-science coalition in the Conservative Party—including
previous Prime Minister Cameron, who said to cut the green
“stuff”—bills would not be as high and we would not be in this
mess now.
(Con)
Happily, on this matter I can partly agree with the noble
Baroness, which will shock her. Some renewables are considerably
cheaper than gas- fired generation, although it varies—we are
experiencing a price spike in gas at the moment. That is one of
the reasons why we have in place the largest programme of
offshore wind in Europe; we have the second-highest level in the
world, and it is something we want to ramp up greatly, to 50
gigawatts by 2030, because at the moment it is the cheapest form
of generation.
(LD)
My Lords, to return to the question asked by the noble Baroness,
Lady Finlay, I thank the Minister for saying that the Government
will do all they can to provide a secure electricity supply,
particularly to seriously ill disabled children who may be using
ventilators and other equipment. My family has experience of
this; when there was a cut on the south London estate where my
three year-old granddaughter was—she had to have a ventilator and
a heart monitor—it took over three hours before the generator
arrived, even though she was on the list. The scale of the cuts,
if they happen, will be of a different magnitude. It is an
enormous undertaking, so I would be really grateful if the
Minister could make sure that this facility is available to not
just children but other people who use this life-saving equipment
at home.
(Con)
Of course I can give the noble Baroness that assurance; we will
do all we can to protect the most vulnerable. We all recognise
the difficult circumstances that such people would be in, but our
top priority is to make sure that there are no interruptions to
supply at all. That is one of the reasons why we are ramping up
efforts to make sure that we have enough energy to serve the UK
this winter.
(LD)
My Lords, those renting from private registered landlords often
have little choice about how they pay for their energy. I am
thinking in particular of students in houses of multiple
occupation, many of whom are faced with very large bills indeed.
Are landlords in that situation obliged to pass on any government
subsidies to those students?
(Con)
We certainly encourage them to do so. We are looking at the
upcoming legislation, which the House will consider shortly, to
ensure that not just people in situations such as houses of
multiple occupation but also those on heat networks, those in
temporary accommodation, et cetera, get the reduction passed on
to them.
(Lab)
My Lords, is it not the case that once again the regulators are
failing the public? Is it not about time that the regulator in
this case looked at standing charges again and did something
about them?
(Con)
I assume the noble Lord is referring to Ofgem. I can assure him
that it looks very closely at the balance between standing
charges and individual units, but the network has to bear certain
standing costs, which are independent of individual units of gas
and electricity. We talked earlier in this Question about the
expansion of renewables. Of course, the expansion of renewables
involves enormous changes to the structure and operation of the
grid to make sure that that power can be transmitted around the
country, and that has to be paid for.
(Con)
My Lords, my noble friend will be aware that those living in
rural areas pay the highest cost of fuel, which is not covered by
the price cap. I am thinking of oil, solid fuels and LPG. What
plans do the Government have to extend the price cap to these
fuels to help those living in rural areas, particularly in the
north of England and other parts of the country where it is
particularly cold in the winter?
(Con)
Of course, a number of people across the country live off the gas
grid and use oil, LPG, et cetera. The noble Baroness is right
that in most cases they benefit from the electricity cap, but
they do not benefit from the gas cap. We are looking at how they
can be assisted. We have a commitment that they will receive an
equivalent level of support and we will ensure that that is the
case.
