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Standing Charges

Volume 21: debated on Monday 5 April 1982

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asked the Secretary of State for Energy if he is ready to announce the results of his discussions on standing charges; and if he will make a statement


asked the Secretary of State for Energy whether, in his review of standing charges for gas and electricity supplies, he has made any assessment of the fairness of the criteria used to determine such charges

My hon. Friend the Member for Braintree (Mr. Newton) and I are still considering the matter, and the point raised by my hon. Friend the Member for Chipping Barnet (Mr. Chapman) is one of the matters that we have very much in mind. I am having discussions with gas and electricity supply industries, whose sole responsibility it is to fix the level of standing charges. A statement will be made as soon as possible.

I appreciate that my hon. Friend has an indirect role in this matter, but does he accept that standing charges are widely, misunderstood, especially by the elderly, who find it difficult to cope with them? Is there some means which be could press by which standing charges can be consolidated into overall charges so that consumers pay only for what they use? Will he consider removing standing charges when the cost of the energy consumed is less than the standing charge?

I am grateful for my hon. Friend's recognition that the extent of charges is a matter for the industries concerned. We are once again examining the rationale behind standing charges. When an examination was carried out in 1976, it was concluded that standing charges were appropriate. The tariff basis for the gas industry was approved as recently as 1979 in the Price Commission investigation.

I am grateful to my hon. Friend for what I consider to be a most helpful and encouraging reply. While I appreciate that the cost of the standing charge is based on the cost of bringing the energy from its source of supply to the consumer, including the provision and maintenance of supply pipes, will he nevertheless keep in mind, when decisions are being taken, that it seems unfair that the consumer must pay the standing charge when it becomes a substantial proportion of the total bill? Does he agree that in equity there should be some arrangement whereby standing charges are either reduced or transferred to the cost per unit of the energy concerned?

I am grateful to my hon. Friend for raising that point. I am well aware of the type of case to which he refers. If the object of the exercise is, as it was for our predecessors, to find a way of helping poor consumers, the problem is that poor consumers are not necessarily the smaller ones. Any removal of standing charges for one group could only lead to material increases in unit charges for others. That could make the position of some poor consumers worse than it is now.

Is the hon. Gentleman aware that standing charges are not only a substantial part of energy bills, as the hon. Member of Ealing, North (Mr. Greenway) said, but that in many cases they are higher than the cost of consumption? Is he further aware that that is what old-age pensioners and people living on their own resent? Will he take the point made by his hon. Friend the Member for Ealing, North, that some way should be found to sink that cost in the overall cost of energy?

I had hoped that I had made the point clear. We are examining the matter. I am anxious not to raise hopes. It is only fair to say that when an exhaustive investigation was undertaken some years ago, it foundered on the difficulty of finding any form of tariff structure that would help all poor consumers. Not all poor consumers are necessarily small ones. That difficulty stands in the way of assisting people by merely removing standing charges, as standing charges are worth some £500 million in revenue to each supply industry and that money would have to be found in some other way.

Will my right hon. Friend bear two matters in mind? First, will he bear in mind that in the 1976 inquiry the percentage of the bill represented by the standing charge was frequently nothing like so great as it is now and that standing charges have risen considerably in the past six years? Secondly, although one may not be able to help all poor people, will he bear in mind that those with small gas or electricity bills who are trying to keep their costs down are usually the poorest section of society and that it would be better to help some people than to help no one?

I certainly take my hon. Friend's point about the level of standing charges, but both industries have been seeking to make standing charges more truly reflect the underlying costs that they are supposed to represent. My hon. Friend will also be aware that in the past there was a low standing charge with a higher price for the first 52 therms. That has now gone and has been replaced by a higher standing charge.

Is the Minister aware that, in the past two years, the charges have risen by between 300 per cent. and 400 per cent. and that the increase is greatly resented, particularly by pensioners and others on low income? Is he aware that pensioners lobbied certain hon. Members only last week—and pensioners are certainly low paid—asking for a withdrawal of the charges?

I know that the hon. Member wishes to be fair. He will therefore bear in mind the point that I made in answer to my hon. Friend the Member for Honiton (Sir Peter Emery). It is a distortion to refer to increases of 300 per cent. in gas standing charges, because the higher charge for the first 52 therms has now been abolished. Had that system been in place in 1979, the gas standing charge in money terms would have been £6·37 per quarter.

I had a most constructive meeting at the Department with the pensioners' group that organised the petition. I assure the hon. Gentleman that all these matters are being looked into with great care. As I said last time, however, I do not wish the Opposition to go away with the idea that it will be much easier for us to resolve the matter than it was when they were in Government.

Will my right hoh. Friend look again at the percentage increase in standing charges for gas? Does he agree that British Gas is now using this as a disguised form of tariff, which is bearing most unfairly on some small consumers who are genuinelly trying to economise?

I have met the deputy chairmen of both supply industries to discuss these matters. We are concerned to ensure that the charges truly reflect the proper costs to the industry and are in no way a cover for inefficiency, but it appears that the accounting basis for the standing charges is accurate and truly reflects the costs that it is supposed to represent.

As has been made clear by the exchanges today, there is now a widespread demand in all parts of the House for a genuine and radical review, and not just the promise of a half review. Can the Minister tell us the time scale of the review that he and his colleagues are undertaking and when we may expect the result?

The last review, which was very thorough, took the best part of a year. Clearly we wish to take a great deal less time than that. Nevertheless, this involves looking again at the considerable amount of work that was done in 1976. It also involves consultation with the industries and with my hon. Friend at the Department of Health and Social Security. I can only tell the House that these matters are being considered properly and seriously. As soon as we are in a position to make an announcement, one will be made.