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Gas Supplies

Volume 480: debated on Friday 17 October 2008

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Blizzard.]

It is not often that I ask for an Adjournment debate, but a few weeks ago I met someone at my weekly advice surgery and something about her story really got to me. I almost could not believe that a big business, and especially a big power supplier, could treat her as it had and not realise that anything was wrong.

My constituent, Michelle, told me that she and her six-year-old son, Jayden, had been left without hot water, cooking and heating for four and a half months. She told me that she had fallen behind on her gas and had been cut off. At no time did she disguise the fact that she had arrears. She said that she had spoken to her supplier on numerous occasions to try to get on a lower tariff and make affordable monthly payments, or even go on a prepayment meter—all to no avail. She said that she had told her supplier that she had a six-year-old son, but that the person she spoke to had said that that would not make any difference, as they could help only if he was under four. She told me that ever since she had been cut off, she had faced problem after problem and felt as though she was being held to ransom over impossible demands.

Michelle’s gas supplier is Scottish Power. The more I have dealt with that company in this case, the more I can believe what she has told me. Like other hon. Members, I take up dozens and dozens of new cases each week, writing and speaking to companies and public bodies alike. I do not always agree with the outcome, but I usually feel that I am dealing with reasonable people. Scottish Power might be a perfectly nice company, but something about my dealings with it has not felt quite straight. If I were to apply for an Adjournment debate every time I thought that a constituent had got less than they deserved, I would be here every week. But I want to single out Scottish Power for special attention. The information it has given me has been inconsistent and contradictory, and at root I just do not think that it is bothered about my constituent. Nor does it think that I can do anything to affect it.

I have initiated this debate because I am worried that Scottish Power might be treating other people unreasonably. I want Michelle and Jayden to be able to cook again, and to be warm this winter. I just do not think that Scottish Power is all that fussed. I do not pretend for a moment that Michelle has been one of the company’s best customers. She certainly fell behind with her payments, and it has been a vicious circle for her for three years. But the price has been going up, and she is on benefits. It has not been easy, and she has got into a mess. Her history with Scottish Power has been far from straightforward.

Scottish Power took over her supply in March 2005, when she was obviously a customer it thought worth attracting. It said that she could pay a direct debit of £35 a month, but within six months it said that she had to increase her direct debit by 30 per cent. to £45. It is not possible to tell whether it lured her in with a low introductory rate and then decided to start taking more and more, but a 30 per cent. increase in the first six months seems rather high. We should remember that this was before the huge price rises of the last year or two. Nor was it necessary. Michelle’s bill said that in that first six months she had actually overpaid, by £81.38, but still Scottish Power pressed ahead and increased her direct debit. This was the point at which Michelle started to fall behind.

Michelle called Scottish Power to say that she could not afford £45 a month, and asked to stop her direct debit. Scottish Power did not get any further information at this point, or find out if she had children or was on benefits. They just let her be, no doubt happy to add the monthly penalty to the bill of customers who cannot pay by direct debit these days. It did nothing for another five months until, in February 2006, it sent out a reminder, took Michelle off any discounts she might have once had, and gave her case to the collections team.

When I first raised this case with Scottish Power, it insisted that it had been unable to talk to Michelle, and that it did not know anything about her circumstances. But I received a new account on Wednesday, and it admitted that since Michelle first got into difficulties when the company increased her direct debit, she had rung it on many occasions. On at least three occasions, she offered to set up a direct debit that she could afford, every time for more than the £35 a month she was originally told would be enough. Scottish Power said no. By now, the tariff that she was being charged for her gas and electricity became less and less generous, and so a vicious cycle developed. From the moment Scottish Power increased her direct debit beyond her ability to pay—while Michelle was still in credit, remember—the die was cast. The gap between the amount she could afford and the amount she was charged widened until, almost inevitably, Scottish Power cut her off.

Let us look at the tariffs again in more detail. Michelle’s original tariff was £35 a month. Scottish Power put that up to £45 a month, from which point things got worse: because she could not pay that amount, her charges increased month after month. According to the latest documentation, which Scottish Power sent me on Wednesday, between April and July 2006 Michelle’s bill for her gas and electricity averaged £50 a month. From July to October 2006, it went up to nearly £70 a month. In the next three months, it went up to £110 a month. Her next meter reading was amended, and the bill went up to £320 in just one month. In the next two months, she was charged an astonishing £150 a month, and so it went on.

How is such a thing possible? Michelle and Jayden live in a small, two-bedroom housing association flat. Last week, Scottish Power told me that she was being charged an average of £75 a month and I thought, “Wow, that’s a lot for a small home like hers”. I thought she must be on a really horrible tariff, but the new information from Scottish Power shows that her bill went up to more than £100 a month.

If I do nothing else today, I want to complain about how those who can least afford to pay a bill always seem to be on the least generous tariff. Why are those who are most likely to get in trouble always charged the most? As I said in the topical debate yesterday, the Government must do even more to stop the disproportionate charges levied on people with low incomes. I was pleased that my right hon. Friend the Secretary of State is committed to doing more for people who use prepayment meters. Most people on prepayment meters are the least well-off. It is well known that people who pay by prepayment meters are penalised heavily.

According to Ofgem, people with prepayment meters pay £125 more than people who pay by direct debit, but, ironically for people such as Michelle and Jayden, they can be a useful solution. For people in such a bad position, a monthly payment coming out of their bank account is too much of a worry, and pay-as-you-go can be a helpful arrangement. Michelle has been asking Scottish Power to install a meter, so that she does not lose her heating, cooking and hot water again, but Scottish Power has refused. The company says that it is an infrastructure issue and that a meter can be installed only by the infrastructure provider, Southern Gas Networks, and the meter provider, National Grid Metering.

Apparently, Michelle and Jayden must have extra pipework installed in order to have a prepayment meter and it will cost £350 plus the cost of a CORGI engineer, who is also needed for the job to be done. However, it is not the big utility company that will have to pay all that money. Michelle and Jayden have to pick up the bill. How can that possibly be? How can they be expected to pay hundreds of pounds when they cannot afford even a single month’s charge? The utility companies are not only charging our least affluent constituents the highest tariffs, but trying to get them to pay hundreds of pounds for the privilege of having a prepayment meter that most hon. Members would consider a rip-off if we had to have one.

I asked whether Scottish Power has a charitable arm, or a social responsibility fund, but it replied, “Not for things like this”. So, Michelle cannot even have a prepayment meter. What is worse is that she cannot have her standard meter back either, because Scottish Power will not let her have it unless she agrees to pay a direct debit of £136 a month—£101 more than the amount she was originally paying. That is an increase of nearly 300 per cent. in three years. It is just staggering to see such a price rise for someone on benefits, with a young son.

I am not sure how Scottish Power expects my constituents to get back on the level. They are in a Catch-22 situation. They cannot afford the bill so they cannot have a standard meter, and they cannot afford the charges to install a prepayment meter. As the public affairs man from Scottish Power says, without any sense of how satirical he is being:

“Any payment plan lower than this would not be realistic as this would only result in the debt increasing, which we cannot allow to continue.”

The company seems to have made up its mind. There is no compassion and no sense of responsibility for the position of my constituent.

The company says that it could not do anything because it did not know that Michelle was on benefits and it did not know that she had a child. I am not sure that I believe that; as I said, Michelle told me that she had spoken to an adviser and they had said they could help only if her son was four. Nor am I sure how hard Scottish Power tried to find out whether Michelle was on benefits or whether she had a child. The company said that it had not been able to get through to her, but every time I ring her she picks up straight away, even though her mobile says “Number withheld”.

Michelle has always been very open with me about her situation, so I do not understand how Scottish Power could not have known her circumstances. From my experience of the company, I can easily believe that it would not have bothered, or had the common sense, to ask her—perhaps because it could charge her more if it did not know. Whatever the reason, the Government should insist that utility companies find out whether anyone in arrears has children or is on benefits. When companies find that out—as in this case—the Government should ensure that they change their approach.

Scottish Power would rather have Michelle and Jayden pay hundreds of pounds they clearly do not have and carry on without cooking, heating or hot water. The best the company can offer is to say that as Michelle is on benefits she might be eligible for Fuel Direct, whereby the Department for Work and Pensions deducts payments directly from benefits to pay off arrears. However, as Scottish Power has repeatedly stressed, that would result only in her accruing further debt. Things can only get worse.

As I said in the topical debate yesterday, it is not fair. Keeping a family without hot water, heating or cooked food for four and a half months and trying to charge them £500 for a new meter when they cannot even afford £45 is not right. I hope that my hon. Friend the Minister will listen to this story and come to the same conclusion. The utility companies are very well off and cases such as this are very rare, but there is a degree of responsibility. Utility companies spend an enormous amount on public relations. Scottish Power is part of a group that made profits of €200 million last year. It talks a lot about corporate social responsibility, and for all I know its record may be better than most, but corporate responsibility is about more than fuzzy words and glossy leaflets sent to people such as us and other key stakeholders; it is about people such as Michelle and six-year-old Jayden.

It is time that the utility companies learned real social responsibility. I hope this debate helps them to move in that direction.

I am grateful to my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for raising this very important constituency case and highlighting the wider issues that are of universal concern.

I express my sympathy for my hon. Friend’s constituent, Michelle, and the situation in which she finds herself. Although we all have a responsibility to pay our bills, there is no doubt that rising prices can overwhelm people’s ability to pay and to organise their family finances. That is why a supplier’s ability to disconnect a customer is strictly circumscribed, and rightly so. It should be a weapon of last resort that no one would wish to use.

We expect our energy companies to have in place effective debt prevention policies, which should be rooted in good management and good communications. Such policies would require companies to be particularly sensitive and proactive at a time of unprecedented price rises. Most companies alive to the difficulties brought by higher prices have a social tariff enabling certain groups of low income people to benefit from lower charges. It is surprising that no such tariff is offered by Scottish Power, although the company has told me that it expects to have one in place by the end of the year.

Disconnections are governed by a range of rules in the supply licences under which energy companies operate. Before disconnecting a customer, suppliers have to follow a series of steps—as my hon. Friend suggested—which include giving the customer time to pay, offering alternative payment methods and ensuring that the customer is able to meet any payment arrangements for recovering the debt.

Most problems that stem from customer indebtedness are resolved well before court action and disconnection. As my hon. Friend said, a prepayment meter, which allows the customer to pay for ongoing gas or electricity use and at the same time gradually pay off accumulated debt, is a common way of avoiding disconnection. I shall say more about prepayment later. Specific arrangements, in place since 2004, to which all the large gas and electricity suppliers subscribe, govern the treatment of genuinely vulnerable customers, and are designed to ensure that, as far as is practicable, no vulnerable customer is disconnected. The arrangements include a cross-industry definition of vulnerability and a safety net of measures integrated into suppliers’ debt management processes. Furthermore, customers threatened with disconnection can get assistance from the statutory consumer body, Consumer Focus, whose Glasgow office deals with problems facing vulnerable customers and with all threats of disconnection.

I do not want to—I cannot—enter into a discussion of the merits or demerits of the case my hon. Friend raises, but what is obvious is that none of the mechanisms that are in place worked, and I assume that none of the advice services was accessed. As a consequence, we have a vulnerable family disconnected and no apparent means of solving the problem.

Let me explain what is expected of companies. As an alternative to disconnection and loss of supply, the customer should be offered a prepayment meter, which, as my hon. Friend points out, allows close control over expenditure for the customer and the recovery of debts for the company. However, where a supplier calibrates a prepayment meter installed to recover debt, it must, under the terms of its supply licence, take into account the customer’s ability to pay. It is clear that, in Michelle’s case, that could have been difficult. She would have been well advised to discuss the matter with the Benefits Agency, with a view to agreeing a Fuel Direct payment, because such payments are limited.

As my hon. Friend has explained, however, the reason no prepayment meter was connected arose from the necessity to provide new pipework to the meter. As I understand it, and as she said, I think, the gas infrastructure company, Southern Gas Networks, has confirmed that the pipework is not the responsibility of the gas supplier but that of the customer or landlord. As such, I am sorry to tell her that there is indeed no obligation on Scottish Power to fund the work—indeed, if it did, it would be entitled to reclaim the money from the customer.

I realise that it is of no comfort to my hon. Friend to hear the legal niceties of an obviously distressing and frustrating constituency case. So what is to be done? Clearly Michelle and her son cannot be left to languish without heating, hot water and fuel for cooking. There is no legal redress, but perhaps common sense and a little humanity ought to be exercised. Some energy companies have a trust fund that can be used in exceptional cases. Regrettably, Scottish Power does not, but perhaps, having heard my hon. Friend’s pleas today, the company will review its position.

Prepayment meters have been a matter of concern to Labour Members for some time. As prepayment meters are more expensive to buy and to service than ordinary meters and require an infrastructure to support them, customers using them have faced higher costs. That is why, in the Budget, my right hon. Friend the Chancellor made it clear that the Government were prepared to consult on using their statutory powers with a view to reducing the differentials between different forms of payment.

Last week, Ofgem reported on its probe into gas and electricity markets, which included examination of prepayment charges and differentials. It found that the premium charged to prepayment meter customers is, on average, justified. None the less, the premium paid by prepayment customers varied between suppliers, between regions and between levels of energy use, and, on average, it had increased from about £80 at the beginning of 2005 to £125 at the beginning of 2008. Ofgem’s broad conclusion was that premiums at the lower end of the consumption range, which were about £80, had a sound justification, whereas those at the higher end, which were about £170, did not. Between now and 1 December, Ofgem will consult on the findings of its probe, including those on prepayment meters.

As he announced in his statement yesterday, my right hon. Friend the Secretary of State for Energy and Climate Change has met representatives of the six large domestic energy suppliers. He has made it clear that where there are problems, the Government expect rapid explanations and actions to remedy them. He will meet the companies again later this month to see what they have done. If the companies do not take satisfactory action, the Government will consult on legislation to deal with any unfair price differentials. I have to say that Scottish Power’s prepayment charge is less than its standard cash quarterly tariff. Of course, Michelle does not know that because she does not have a prepayment meter.

The fact is that we need greater fairness in electricity and gas prices, and my right hon. Friend the Secretary of State has made clear the Government’s determination to tackle those inequalities. There is undoubtedly pressure on consumers, and, as my hon. Friend the Member for Mitcham and Morden has said, there may be many people facing similar problems, so I should like to set out what consumers might do if they get into difficulties. First, they need to talk to the supplier. I hope that they would get an appropriate response. There might be a trust fund available for emergencies; some companies have such a fund. People should get advice by calling Consumer Direct; they will be put through to Consumer Focus, which deals with such issues. Alternatively, they can contact a citizens advice bureau or other debt advice agencies.

People on benefits should certainly talk to the Department for Work and Pensions and the supplier about using Fuel Direct to recover debt owed to the supplier. Consumers should also consider switching supplier. Consumer Focus’s website gives details of tariffs for all main suppliers, based on low, medium and high use of gas or electricity. It also provides links to price comparison websites and can send out fact sheets for those who do not have computers.

This debate has rightly focused on disconnection and prepayment meters, but the Government have an interest in trying to help all consumers to reduce the cost of their energy, no matter how they pay, so in September we announced a package of measures known as the home energy saving programme, which is designed to help households to reduce their energy costs, year in, year out, with the added benefit of reducing our CO2 emissions. The largest element of the package was an additional £560 million under the suppliers’ carbon emissions reduction target to fund free or subsidised improvements such as loft and cavity wall insulation. Some 11 million elderly and low-income households will qualify for those measures at no cost to themselves. We believe that the element in question could benefit 2 million households.

In addition, gas and electricity suppliers and electricity generators will contribute a further £350 million to a new community energy saving programme. The Warm Front scheme also continues, with increased funds. It offers not just energy efficiency measures but benefit checks that help to produce, on average, an additional £1,400 per household per year. Winter fuel payments have been increased from £200 to £250 this winter for all pensioners, and to £400 for over-80s households. Our Act on CO2 campaign is currently advertising nationally to inform people about the support available. It is continuing its efforts to encourage people to compare the deals available from suppliers, to pay by direct debit and to take advantage of money-off deals on energy efficient products. For the record, its telephone number is 0800 512 012.

I am grateful to my hon. Friend the Member for Mitcham and Morden for securing the debate, and I hope that a solution to her constituent’s problems can be found as a consequence of it. I take very seriously the points that she made today, and I would like her to keep me informed of the company’s response, following this debate. I will, of course, be willing to assist her in any representations that she wishes to make.

In these difficult times, all of us in Government, Parliament and industry need to be proactive, to give maximum help to the most vulnerable, and to ensure that our energy supply costs are fair and transparent. Let me assure the House that my colleagues in the new Department of Energy and Climate Change will energetically pursue that agenda.

Question put and agreed to.

Adjourned accordingly at two minutes to Three o’clock.