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Vulnerable Households: Energy Costs

Volume 827: debated on Tuesday 31 January 2023


Asked by

To ask His Majesty’s Government what steps they are taking to help vulnerable households with energy costs; and what is the role of Ofgem in delivering affordable energy.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and in doing so I refer to my entry on the register as honorary president of National Energy Action.

My Lords, as part of the Government’s comprehensive package of support, in addition to the energy bills support scheme, EBSS, and the energy price guarantee, EPG, there is further targeted support for vulnerable households to help them to navigate these challenging times. This includes a cost of living payment of £900 to households on means-tested benefits, £300 to pensioner households and £150 to individuals on disability benefits. Ofgem is supporting the Government to deliver EBSS and EPG.

I pay tribute to the Government’s warm home discount scheme and accept that it has been an enormous success. Recently, the chief executive of Ofcom has asked for a serious assessment of introducing a social tariff. Given the fact that Citizens Advice recognises that there has been an excess profit of £7.9 billion this year for electricity distribution companies, will my noble friend do one of two things: either introduce a new social tariff or increase the warm home discount? Instead of asking other households to pay for it, will he ask the electricity distribution companies to pay for the increase?

There were a lot of questions there. The issue around social tariffs is that the warm home discount was introduced in the first place to replace various social tariffs on offer because this was considered to be a better way of supporting vulnerable households, but we always keep these things under review. I did not quite understand my noble friend’s point about excess profits. If she was talking about suppliers, many suppliers have actually gone bankrupt; they are not making excess profits. If she was talking about generators, we have already imposed an excess profit levy on generators.

My Lords, will the Minister explain why energy bills in the UK are double what they are in the rest of Europe? Can he explain that to the customers?

I am interested to see the noble Lord’s figures on that. Various amounts of support are being imposed by different Governments, at different levels and in different ways, so there is a mixed picture across Europe. I know that the German Government, for instance, are putting a huge amount of money behind bills support, as indeed are the UK Government. I struggle to believe that bills are double what they are in Europe.

My Lords, one reason we have very high energy prices, obviously apart from Putin himself, is that we are still very reliant on gas for heating and the generation of electricity. Should not one of the tasks of Ofgem be to persuade the Government to make sure that they have as one of their prime objectives the decarbonisation of our electricity system, not least to make sure that we have connections into the grid—it is a crisis at the present moment?

Ofgem does not need to persuade the Government to do that. We already have decarbonisation of the grid as one of our prime objectives. The noble Lord is right that we still rely very heavily on gas. It is a falling proportion of our generation, as we roll out more and more renewables, but it is a transition. We are advanced on that transition but we clearly need to go faster.

My Lords, I want to follow on from my previous question about patients at home, some of whom are handicapped children and people on ventilators, using oxygen concentrators and so on; these are pieces of equipment which consume a high amount of electricity. Have the Government undertaken an audit to look at the excess cost borne by these families, where the care is happening at home and such equipment has been installed? Following data from that audit, is there any review of the benefits available in those situations, particularly where there are young people who are extremely handicapped but living at home?

Many of those families are on benefits and I outlined earlier some of the support that is being offered. Ofgem also requires energy suppliers and network operators to maintain a priority services register and to provide free non-financial support to people in vulnerable situations with their energy. Customers in such a situation should contact their supplier and their network operator to register.

My Lords, I recognise that my question connects with the previous Oral Question. Listening to clergy in my diocese who are operating food banks and warm spaces, they say to me that one of the biggest challenges that vulnerable households are facing as they try to pay their energy bills is accessing information, particularly when it is available only online. What assurance can the Minister give that those responsible for delivering affordable energy, including Ofgem, will use or require the use of alternatives to electronic forms of communication when trying to reach those in need, including partnering with service providers such as food banks?

Ofgem tries really hard to connect the most vulnerable consumers, to make sure they get the support that they require. There are a number of different forms of payment: people can still pay their bills manually using cash if they wish to do so, and there are prepayment meters which are manually upgraded with tokens, as well as those that are available to update online. There is a variety of payment methods, but we stand ready to assist vulnerable consumers in every way we can.

My Lords, it is now well documented that prepayment customers, many of whom are the least well off in our society, are charged a higher rate for their energy. Do the Government fully recognise the injustice of thousands more families being forced on to prepayment meters and higher rates at a time when so many are facing severe cost of living pressures—for example, we saw the announcement that grocery price inflation has now gone up to 16.7%? Can the Minister assure us that this area is being treated with the urgency it deserves and that we will see some recommendations coming forward swiftly?

I can indeed reassure the noble Baroness that there are extensive regulatory protections in this area. Ofgem rules are clear that suppliers can install a prepayment meter to recover a debt only as a very last resort, and they require energy suppliers to offer a prepayment service only when it is safe to do so. The noble Baroness will have seen that my Secretary of State announced a five-point plan last week, and the Minister of State for Energy has had a meeting with the energy suppliers to discuss this matter. We are on top of it.

My Lords, it is estimated that there will be 8.4 million households in fuel poverty by next April. The warm home discount is clearly not sufficient or adequate to meet that need. Which utility companies provide social tariffs that do not have to be applied for and are offered to customers in need? Why on earth can the Government not, through Ofgem, ensure that social tariffs are provided for electricity and gas payments?

Let me repeat the answer I gave to my noble friend Lady McIntosh earlier: we used to have a system of social tariffs which was judged to be ineffective. That is why we moved to the warm home discount payment, which, of course, has been increased this year. We keep these matters about the best way of getting support to vulnerable consumers under review, and we will continue to look at this.

Would my noble friend comment on the need to reform the standing charge for energy pricing? For the most vulnerable households and, for example, single-person households, regardless of how much they try to cut their energy use, they cannot escape the standing charge—which has in many cases doubled to several hundred pounds per year. I understand that part of the rationale for that is to help pay for the cost of failed gas providers, but this charge is paid even by those who have electricity and no gas.

I know that the standing charge is a subject of controversy, but it is there to cover the costs of providing a supply: the cables, the network and the infrastructure. Included within that are some of the costs for what is called the supplier of last resort function, which includes some of the suppliers that went bust in recent years. They were not just gas suppliers; there were a lot of electricity suppliers as well. We think it is right that these costs should be socialised, because otherwise people would be disconnected from suppliers completely.

My Lords, the Minister is very good at the gobbledegook but could he explain why the decrease in wholesale prices is not passed on by decreasing the price to consumers?

I am sorry if the noble Lord thinks I am spouting gobbledegook but let me try to explain it to him. Many of the suppliers have hedged their supplies over the longer term, so they paid increased amounts. When the price cap is reviewed and the wholesale prices are coming down then eventually that will feed through into lower prices as well. The noble Lord shakes his head but this is one of the protections put in place for consumers to prevent the large increases which would have happened otherwise.