ERA Manifesto 2005
The Energy Retail Association
The Energy Retail Association was established in October 2003 as a dedicated trade association for UK energy suppliers.
Our aim is to ensure that consumers can make informed decisions about their choice of energy supplier and suppliers maintain a high standard of service across the sector, whether selling, advising on energy savings, billing customers or helping the fuel poor.
All the main energy suppliers operating in the UK domestic market are members of the new association - British Gas, EDF Energy, npower, Powergen, Scottish Power, and Scottish and Southern Energy
Towards An Integrated Fuel Poverty Strategy
The Government wants to eliminate fuel poverty among vulnerable households by 2010 and in other households by 2016. The ERA supports this goal. Fuel poverty damages peoples’ quality of life and health, as well as increasing risk of death in winter.
The number of fuel poor households in the UK has dropped from 5.25 million in 1997 to around 2.25 million last year. In large part this is because the economy has been growing strongly. At the same time energy prices have been falling. However, fuel prices are now rising and the DTI believes this will cause around 200,000 households to fall into fuel poverty.
The causes of fuel poverty are complex. It is clear that fuel poor households have low incomes or are dependent on benefits and suffer from poorly insulated homes. It follows that the problem must be tackled in three ways: increasing incomes of those suffering from fuel poverty, improving housing stock and engaging social care agencies.
The Energy Retail Association would like to see the next Government develop a comprehensive strategy for tackling fuel poverty that brings together these three key policy solutions.
The main elements of such a strategy are set out below:
1. Providing support for low income customers
Fuel Direct is available for particular consumers who face major difficulties paying their bills. Payments for current consumption and debt recovery are deducted from state benefits by the Benefits Office. Eligibility for Fuel Direct is limited to customers on Income Support, Jobseeker’s Allowance and Pension Credit. Those on Disability Living Allowance, Attendance Allowance and Retirement Pension, who are in danger of becoming fuel poor, are not eligible to use the scheme.
The eligibility for Fuel Direct should be reviewed as a matter of urgency, so that everyone who is vulnerable receives help to manage their fuel bills. It currently only applies to those in debt. We propose that the payments should also be available to prevent vulnerable people getting into debt in the first place.For example, Fuel Direct payments should continue for a period after the debt has been recovered, rather than being terminated, so that vulnerable consumers have time to take control of their household finances.
2. Improving housing stock and boosting energy efficiency
The Government’s two key existing measures to improve the quality of housing stock are Warm Front and the Energy Efficiency Commitment. Warm Front provides grants for a range of insulation and heating measures to vulnerable people in owner-occupied homes or in private rented accommodation to improve the energy efficiency of their homes. Under the Energy Efficiency Commitment, electricity and gas suppliers are required to achieve energy saving targets by promoting improvements in energy efficiency in the household sector in Great Britain. Suppliers encourage and assist their domestic consumers to make energy savings - through measures such as cavity wall and loft insulation and energy efficient boilers, appliances and light bulbs. They must achieve at least 50% of this target by the provision of help to consumers in receipt of certain income related and disability benefits.
Two recent reports from the Public Accounts Committee and the Audit Commission concluded that while considerable funds (an average £150 million each year) have been spent on Warm Front, it has been largely unsuccessful in targeting the fuel poor living in energy inefficient homes. The Government has recently said that an additional £140 million to fund Warm Front will be more carefully targeted at fuel poor households. The Social Exclusion Unit has a programme to ensure that vulnerable people can access and benefit from the range of public services available to help them. The ERA has welcomed both of these moves.
The Energy Efficiency Commitment will be reviewed in 2008. As a next step, we would urge the next Government to work with the industry to develop a sustainable programme of delivery that brings together energy savings and support for vulnerable customers based on realistic, cost effective targets. For example, we suggest that any future scheme should not rely on cavity wall and loft insulation, but allow scope for central heating measures and encourage investment in new energy efficient products.
Improving household insulation is an important part of the solution to fuel poverty. But it is not a “silver bullet” solution because not every home with poor insulation is fuel poor. Therefore, incentives should be paid to homeowners to improve the energy efficiency of their houses.
The ERA submits that new fiscal incentives for energy efficiency should be introduced in the first Budget of the new Parliament. Examples are Stamp Duty rebates in return for energy efficiency improvements to a property, a reduced VAT rate for A and B rated energy efficient appliances to make it easier for customers to upgrade their fridges, freezers and cookers and VAT reductions on energy efficient light bulbs to replace less efficient but currently much cheaper than traditional tungsten carbon bulbs.
3. Targeting “hard to reach” fuel poor households
Both Government and energy suppliers are making a major investment in measures to tackle fuel poverty. However, identifying vulnerable groups and communicating the help that is available from the Government and energy suppliers’ social schemes remains a major challenge.
A major priority is to understand where vulnerable customers currently get public information and to then use community based schemes to put across messages about keeping warm and insulating homes. Possible examples are local debt advice counsellors, social workers, or, perhaps, doctors or health visitors. People in fuel poverty often have multiple debt and we need to join up the services that aim to resolve the problems vulnerable people face. Government departments and agencies have access to information about those people that could be used to target help and advice. Government funded organisations such as energywatch and the Energy Saving Trust could be used to communicate the positive messages about support schemes and industry initiatives in the community. Many energy companies have a good record on corporate social responsibility and the Government could capitalise on this to encourage take up of support schemes. The ERA is very keen to explore this issue in more detail to ensure that relevant information goes to people who need it most.
The Role of Energy Retail Companies
Energy companies can play a key part in supporting public policy by maintaining pressure on fuel prices, promoting energy efficiency improvements and enabling vulnerable customers to benefit from competition, support schemes and social tariffs available to them. Over the past three years, UK energy suppliers have spent more than £320 million on initiatives to eliminate fuel poverty. For example, older people can get low fixed energy rates and there are benefits health checks to ensure that vulnerable customers are claiming their full entitlement. Energy suppliers offer loft and cavity-wall insulation programmes, support trust funds and have partnerships with charities and local authorities. This investment will be doubled to £720 million over the next three years.
The retail gas and electricity sector has proved that it can regulate itself successfully. Our sales Code of Practice, the Customer Transfer Programme and our new work on billing has set the standard for other liberalised sectors. We submit that any new policies that impact on the industry should support rather than impede these valuable initiatives.