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Power Cuts (North Finchley)

Volume 589: debated on Tuesday 9 December 2014

It is a pleasure to serve under your chairmanship yet again this afternoon, Mrs Main. I welcome my hon. Friend the Member for Wyre and Preston North (Mr Wallace), who is acting in locus ministries, if I have got my Latin correct.

I will give a little background on the situation that has affected businesses and homes in and around High road, North Finchley. During the past year there have been a series of power cuts: on 4 September, 16 and 18 October and 16, 18, 23 and 24 December 2013; and on 6 and 7 January and 13 and 14 November 2014, just a few weeks ago. I make the point of listing those power cuts to stress the ongoing impact and disruption not just to householders but to businesses in North Finchley. In particular, last December, in the run-up to Christmas—the busiest part of the year—businesses struggled to recover the customers and profits that they lost because their shops were closed in that period.

A series of issues has caused the power cuts; one problem has cascaded into another. First, in September last year, the outages were caused by water ingress into a UK Power Networks box, which meant that, quite reasonably, the current had to be isolated on safety grounds. The power then had to be redirected to the remaining circuits, but because those circuits were old, that led to the October outages and the first two outages in December, which were the result of power redirected to the neighbouring circuits overloading the cables: they could not cope and they failed.

Just before Christmas last year, the low-voltage board of the main substation that supplied the circuits failed, which caused yet more outages. That problem reoccurred in January this year. Then, in mid-November—just a few weeks ago—the insulation on the cables supplying this part of North Finchley failed yet again.

I want to put on record that UK Power Networks has been as helpful as it can be. I have met with its officials on a regular basis and they did bring forward a £70,000 investment to remedy the issue. The ducting for the cables to this part of North Finchley has been replaced, the substation has been upgraded, and next week the cables will be replaced through the new ducting. Barnet council has also been helpful in waiving the usual restrictions that prevent major works in the Christmas period so that that can be undertaken in an effort to ensure no repeat of last Christmas’ loss of business.

Although the repair and upgrade programme has taken more than 12 months, we seem to be on the brink of having a—hopefully—permanent solution in place. However, the power cuts that occurred in the past year or so have highlighted a couple of weaknesses in how the electricity is supplied and how customers are dealt with in such events.

One of the factors that contributed to the failure of the cables and the failure of the low-voltage board was increased demand. We have all seen the retail proposition changing: traditional shops, such as clothes shops and newsagents that are relatively low power users, have been replaced with cafés and restaurants. If such shops become restaurants, their power usage profile will be very different. Although the change of use goes through, the builders go in and the electricians assess the supply and say, “Yes, Mr Retailer, the power supply to your unit can cope,” what is missed is the cumulative effect of changes to the connections of that shop and neighbouring shops. Initially, the supply network simply absorbs the increased demand, but that strains the existing, and probably old, infrastructure.

The weakness in the system is that change-of-use permissions at the planning authority, which I appreciate fall under the remit of the Department for Communities and Local Government and not the Department of Energy and Climate Change, are not automatically fed to the network providers so that they can monitor and plan their infrastructure investment and ensure that they can cope with such changes in electricity usage. Perhaps the Minister could arrange that co-ordination with colleagues across Government, so that a system to monitor cumulative impact is put in place.

Finally, there is the issue of compensation, which I have raised with both UK Power Networks and Ofgem. UK Power Networks is helpful, but it is firm that it is bound by the regulations. Ofgem, while sympathetic, says that it holds the power suppliers’ feet to the fire through its internal mechanisms, and that it cannot be held responsible for all the consequential losses that the traders and householders incur through a series of power cuts.

The current arrangements do not provide adequate compensation to householders or businesses, nor do I believe that they hold the infrastructure providers’ and energy suppliers’ feet to the fire. A householder receives only £54 and a business £108 in compensation. That might be bearable if that were per power cut, but it is not. That compensation is payable only when there have been power cuts of at least three hours on four or more occasions in any 12-month period. A business therefore has to be interrupted for a minimum of 12 hours before it gets its £108, which is £9 an hour. That is hardly compensation.

Even though compensation is to increase in April to £150, that is still only £12.50 an hour. That is not compensation; it is barely a gesture. A restaurant that has 12 power cuts of only two hours could lose 12 lunch times but get nothing. I ask the Department to consider instructing Ofgem—or to ask it, if it cannot instruct—to replace the compensation thresholds with a scheme that pays out for each power cut, rather than having that unreasonably high bar. A greater financial penalty may result in faster repairs and investment in the network’s resilience. I have a background in business, where we always work to the motto: “If you grab people by the budgets, their minds will follow.”

In conclusion, we need to join up the change-of-use approvals so that increased energy demand is monitored. We also need a new compensation scheme that treats customers fairly and incentivises the power companies to invest in a resilient supply network.

May I say what a delight it is to serve under your chairmanship, Mrs Main? I congratulate my hon. Friend the Member for Finchley and Golders Green (Mike Freer) on securing the debate. I know from my constituency postbag how important it is for businesses to be able to do business at this time of year. In this economic environment, it is vital that they can keep their doors open to get custom.

Overall, electricity networks across Great Britain are among the most reliable in the world, but that does not mean we should ever be complacent. It is vital that those affected by interruptions to their supply have their power restored as quickly as possible, and that networks ensure that their infrastructure is sufficient.

By way of background, I will tell my hon. Friend about what has been going on. Demand has incrementally increased over the past two years in North Finchley owing to changes in use in and around Ballards lane. There has been a corresponding increase in faults on UK Power Networks’ low-voltage network. On each occasion, UKPN responded to restore supplies as quickly and safely as possible. Network infrastructure has been repaired and new equipment installed. UKPN has some 134,000 km of underground network as well as, obviously, an overhead network. Work to reinforce the network has been under way, as my hon. Friend pointed out, for a number of months, and it is hoped or planned to be complete by Christmas 2014. So far, more than £2,000 has been paid in compensation.

The increase in demand above the capacity for which the low-voltage network was originally designed can result in potential weak points failing. That is why UKPN is carrying out works to reinforce that network. As my hon. Friend said, it has so far invested £60,000 to £70,000 in doing so. Following a high-voltage fault in January 2013, customers near Briarfield Avenue substation were affected. Following restoration and repair of that fault, UKPN yet again invested in new high-voltage equipment to improve the reliability and operational flexibility of the local network. In December last year, a fault developed at Friern Park substation that interrupted some local supplies. Repairs were carried out, the network was stabilised and customer supplies were restored. Shortly afterwards, UKPN invested in a new substation, as well as reconfiguring the local network.

In 2014, there have been 11 separate incidents on Ballards lane, affecting different circuits on the low-voltage network supplied from Gaumont substation in Finchley. The demand profile in that specific area has increased over the last 18 months. As my hon. Friend rightly pointed out, changes of business use have led to higher usage of electricity, which has increased loading on low-voltage cable circuits. We are talking about restaurants, coffee shops and so on.

This is what has happened so far as a result. Compensation to date has included the following. Five businesses have received four good-will gestures totalling £424 and one electricity guaranteed standards payment totalling £54. Also, 28 domestic customers have received 19 gestures of good will totalling £1,072 and nine electricity guaranteed standards payments totalling £520. Actions have been taken to rectify issues and faults. For example, in February 2014, UKPN installed a low-voltage link box in Ballards lane to split up the network and to balance loading across local substations.

We should not forget that at this time of year vulnerable customers are affected by power outages. Network operators are required by Ofgem to offer a range of free services, known as the priority services register, to their most vulnerable customers. The scheme is available to all household gas and electricity customers who fulfil any of the following criteria: being of pensionable age, having a disability, having a hearing and/or visual impairment and/or having long-term ill health. Those customers listed by UKPN on its register have a dedicated freephone priority number. If my hon. Friend is unaware of it, I would be happy to write to him with the details.

The Electricity (Standards of Performance) Regulations 2010 define the guaranteed standards that we can expect from our power suppliers. They cover a range of network reliability circumstances in which customers are entitled to payments when distribution network operators fail to meet those standards. They are established measures of performance that apply in the current electricity price control period, covering the 2010 to March 2015 period, and that will be continued—and, importantly, tightened—in the next price control period, RIIO-ED1, commencing in April 2015. That is a catchy title if ever there was one.

Currently, in normal weather conditions, business customers are entitled to a payment of £108 if power is not restored within 18 hours and a further £27 for each further 12 hours off supply. For multiple interruptions, defined as four interruptions of at least three hours or more in a 12-month period, customers are entitled to £54. To help to reduce the duration of power cuts and to incentivise improved performance, Ofgem has proposed—the Government fully support this—that the minimum standard for restoration of supplies in normal weather conditions be reduced from 18 hours to 12 hours from next year. As has already been pointed out, in normal weather conditions, payment levels will increase to £150 for business customers and a further £35 for each further 12 hours. For multiple interruptions, the level will be raised to £75. I recognise that that is not exactly in line with the calls made by my hon. Friend, but it is going in the right direction. It is about tightening up obligations on suppliers to ensure that they bear the responsibilities to customers that we would expect today.

As we head into winter, with forecasts for severe weather in parts of the country over the next few days, I should add that Ofgem proposes to double the payments that DNOs make to customers following a prolonged period without supply caused by severe weather. Those will be £70 after the initial period of interruption, followed by an additional payment of £70 for each successive period of 12 hours without supply. The cap per customer, for both business and residential customers, will be increased to £700.

It is important to recognise that the guaranteed standards of performance are in recognition of “inconvenience” to customers, rather than being a reflection of the full cost of a power cut to a customer. The level of payments reflects a balance between the impact faced by customers from periods without power and the amount of expenditure that each customer pays to their local electricity distribution company through their bill. Currently, distribution costs make up about 16% of an average electricity bill. If payments for loss of supply were far in excess of the amount paid for the service, that would result in increased network charges and higher customer bills, which we all wish to avoid. Indeed, Ofgem research indicated that customers did not place a high value on higher compensation levels if those ultimately led to higher customer bills.

It is important to recognise at this stage why, unlike some other products, electricity has certain conditions around it that often make it hard—this has been the case for decades—for consumers to seek recourse through the civil courts. An electricity supplier has a duty to connect; it has to serve the customer. In addition, the nature of a network means that continuous supply in one area may cause damage elsewhere, and that may require a switch-off or an adjustment. Effectively robbing Peter to pay Paul, with damage in one place rather than the other, is not good for the overall impact of the network. The other issue is the very nature of electricity. It is hazardous, and it is always difficult to guarantee it 100% of the time for 100% of customers. Those extra duties and difficulties mean that it is often harder to make a pure economic case for loss of business as opposed to actual damage to one’s property through a direct fault. That has an established place in law and has done over many years. It is not of great comfort to businesses, but the Government recognise, as does Ofgem, that things are moving in the right direction. The consultation on an increase in penalties is a move in the right direction, although we certainly wish to do more.

On the important issue of notifying network operators following change-of-use permissions, my hon. Friend brought out an incredibly good point. I will ask my right hon. Friend the Minister of State to write to the other relevant Departments and colleagues regarding the possibility of ensuring that we notify network operators following change-of-use permissions, to try to reduce the number of incidents of this sort occurring in the future. Forewarned is forearmed. I certainly agree with my hon. Friend that if we ensure that people are prepared for what is coming down the line, then hopefully, by the time we get to next Christmas or the next peak period, the network will be in a better position to make accommodation for that.

Question put and agreed to.

Sitting adjourned.