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4. Reserved Policy Issues
4.1 For the Westminster Government
(a) Social Tariffs While we recognise the steps already taken to promote social tariffs, such as the Ofgem guidance that any social tariff offered must be at least as low as the company's cheapest offer including on-line tariffs, we believe that further work is needed to ensure these are shaped to benefit the most fuel poor.
However, the UK Government should ensure that social tariffs to vulnerable fuel poor customers are mandatory and that the minimum standards should be strengthened, particularly around clarity of eligibility criteria from each company. Government should ensure that social tariffs are offered on a basis that is the lowest tariff offered, with broadly similar eligibility criteria across the companies, possibly proportionate to market share. Social tariffs should also be linked to energy advice.
(b) Data Sharing We welcome recent commitments by the DWP to share data with energy companies to allow targeting of social tariffs and energy efficiency advice for pensioners, but there is a need to extend this to benefit all low income households vulnerable to fuel poverty.
(c) Carbon Emissions Reduction TargetCERT guidance is currently linked to the cheapest carbon savings, but needs to take into account actual housing stock differences and carbon outputs, such as where Scottish housing has larger cavities than the GB average, to ensure that islands and remote areas are not excluded from benefiting from CERT measures. It should also allow for increased carbon savings based on geography and harsher climate - information which is readily available.
(d) Smart Meters and Pre-Payment Meters ( PPM) Smart meters should be rolled out to fuel poor and other customers as soon as possible, in light of the benefits to companies and customers from accurate billing, and energy efficiency benefits from better informed customers. Smart meters should also support expansion of microgeneration. We recommend that Government work with energy suppliers to promote this, and work with the regulator and suppliers to end the practice, adopted by some energy companies, of charging more for PPMs for those customers in or vulnerable to fuel poverty.
Earlier this year, in the UK Budget, it was announced that discussions were to take place with energy suppliers on reducing the PPM differentials before winter and that the UK Government would legislate if sufficient progress was not made. This was reiterated in the September announcement. We welcome this undertaking.
(e) Switching Suppliers Some vulnerable customers need help with switching suppliers. The limits of its applicability should also be noted, i.e. some customers who have a debt to the existing supplier, or who use a dynamic teleswitch meter cannot switch, while there are limited options for those who are off the gas network.
(f) Energy Complaints The new arrangements for dealing with energy complaints come into force on 1 October 2008, when Energywatch will be merged with the Scottish Consumer Council and Postwatch and renamed as Consumer Focus Scotland. Consumers will get basic advice from Consumer Direct and have recourse to an Ombudsman if problems are not resolved. Vulnerable customers in need of additional support can be referred to the Extra Help Unit in Consumer Focus. These arrangements rely on a much improved level of complaints handling by energy companies who will have to adhere to new Complaint Handling Standards set out by Ofgem. Where this does not materialise, fuel poor customers need to know where to turn for support and then get that support in resolving issues with their supplier. There is a concern that the loss of Energywatch will increase the burden on other advice providers. We see an ongoing monitoring role for the Scottish Fuel Poverty Forum in ensuring that the new arrangements do not disadvantage fuel poor customers and in fact deliver a better standard of service to them.
(g) Cold Weather Payments The UK Government recently announced (September 11, 2008) an increase in the level of Cold Weather Payments from £8.50 to £25 per week. The criteria, and the amount paid under Cold Weather Payments have been criticised as too restrictive. A cold snap of six days followed by a day's respite followed by a further six days does not result in a payment even though heating costs would be high. The criteria, amount paid and qualifying groups should all be reviewed.
In addition, we discovered from the DWP's evidence that DWP offices receive a considerable number of calls during spells of cold weather from people asking whether they would get a cold weather payment. One simple recommendation would be for the DWP to 'warm transfer' all enquiries re cold weather payment to the ESSac network for energy efficiency advice.
(h) Winter Fuel Payments. The UK Government currently spends around £2 billion per annum on Winter Fuel Payments. The correlation between entitlement to a winter fuel payment and fuel poverty is poor and there are a significant number of fuel poor households who do not currently receive any payment who need it. In addition it is questionable whether this level of investment strikes the right balance between symptom relief (support for a current energy bill) and prevention (investing in energy efficiency to reduce future energy bills).
DEFRA are currently consulting on the effectiveness of both Cold Weather Payments and Winter Fuel Payments. A thorough review is required to ensure a better fit with fuel poverty (including regional weighting according to temperature, payment in spring to help with winter bills) and a better balance between symptom relief and prevention in overall budgets. This should consider the following:
- Winter Fuel Payments should be extended to low income families and other vulnerable groups.
- Payments should be weighted for different regions, allowing colder regions to receive a higher payment than at present, while less cold areas would continue to receive the current level of payment. This would reflect temperature differences and fuel choices.
- Payment in the spring rather than December would help more directly with energy costs.
- Similarly, a discount from energy bills could be more effectively linked to fuel poverty than a universal benefit.
(i) Benefits System Funding for welfare advice provision can be very effective in helping people access their entitlements, as well as providing support for related issues such as accessing employment, housing advice and money advice. It is vital, both in terms of fuel poverty and a wider poverty agenda, that this lack of awareness of entitlement is addressed. However, even where full entitlements are received, the benefit and tax credit safety net for low income households currently leaves too many households below the income poverty line, exacerbating fuel poverty. Benefit and tax credit rates and eligibility should be reviewed and up-rated, to take account of rising energy costs. We see a role for the Forum in assisting in any future review of how the benefits system can really benefit the fuel poor.
4.2 For Energy Companies
(a) Social Insurance and Maintenance Contracts Social Insurance and Maintenance Contracts for renewing boilers for fuel poor customers should be explored by energy companies. These might be provided to those eligible for social tariffs that have been given a free central heating system. They might, for example, provide an emergency 24 hour call out service, an annual maintenance check and a free boiler at the end of the boiler's useful life; a guarantee of parts availability beyond 7 years might extend the useful life of systems. The energy companies' social spend might be one source of funding for this.
(b) Carbon Reducing Technologies Leasing carbon reducing technologies to customers could be a valuable option for the fuel poor and all other households as we would see this also as a considerable benefit to carbon saving targets. We recommend that the business case and delivery options for financing innovative schemes are explored.
(c) CERT Additional Measures Before new measures can be added to CERT they must go through a rigorous accreditation process, administered by Ofgem. The key focus of CERT is carbon reduction therefore any new measures added to CERT would be required to demonstrate their cost effectiveness in achieving a carbon reduction and having an impact on fuel poverty. Energy companies should use the flexibility they have to use CERT to maximise impact on fuel poverty, and to support the measures under Stage 4, as outlined in section 6 of this report.
(d) Social Tariffs .Where energy suppliers offer a social tariff, it must be, at least, the lowest tariff they offer by any payment method. Energy companies should each ensure that their social tariffs have clear eligibility criteria and are widely publicised and fully accessible to all who need the information (for example, to cover different languages and formats, including large print and Typetalk).
(e) Pre-Payment Meters For fuel poor customers, paying more for their energy through a pre-payment meter compounds their difficulties. Companies, Government and Ofgem all have a role to play in ending the practice of charging more for those fuel poor energy customers who use this method of payment. Those energy companies who have not aligned their PPM tariffs with their other tariffs, should give a guarantee that fuel poor customers will not pay more for using a PPM.
4.1 For Ofgem:
(a) CERT and Fuel PovertyCERT activity will tend to be biased towards the non-fuel poor, if activity is focused on where carbon savings can most cost effectively be achieved and those who proactively seek energy efficiency measures. We are concerned that CERT measures are not being marketed at the priority group and would hope that our recommended Energy Assistance Package will go some way to redress that for Scotland. We recommend that Ofgem should monitor the impacts of CERT on fuel poverty, as well as the carbon impacts. As noted above, compared to its predecessor scheme, the Priority Group has been reduced from 50% to 40% of the total, and enlarged to include all those aged over 70. The Fuel Poverty Advisory Group in England has suggested that this has led to rather less focus on low income households and somewhat poorer targeting on fuel poverty under CERT than its predecessor, with less well off customers subsidising the better off customers to a greater extent. It would be a concern to us if this were happening in Scotland.
We welcome the agreement, in principle, by the energy companies and the Scottish Government in the CERT Strategy Steering Group to provide annual carbon savings for Scotland. Ofgem should also monitor where companies' CERT activity is taking place, and in particular should gather Scottish statistics separately.
(b) Social InitiativesOfgem should report on what is spent under energy companies' social initiatives in Scotland. Social initiatives cover: social tariffs; other rebates or tariff discounts; trust fund contributions; funding for partnerships with intermediaries and for benefit entitlement checks; energy efficiency initiatives that are additional to existing statutory obligations; and costs of aligning pre-payment meter tariffs with lower tariffs where this is effectively targeted at fuel poor and vulnerable customers. Ofgem could also report on details of social tariffs and which companies offer them.
(c) Energy Markets The Ofgem market probe reports at the end of September. We hope that it will include robust proposals for tackling any disadvantage it finds for customers in general and fuel poor customers, in particular. The following would also be welcome:
- mandatory minimum standards for social tariffs;
- companies and Ofgem reviewing the rules around transferring customers with debt;
- companies and Ofgem to review debt collection strategies in light of rising prices; and
- carbon savings taking into assess actual climatic conditions.
Ofgem also has a role to play in ensuring that fuel poor PPM customers do not pay more and should consider regulation if this is not addressed. The Forum recommends that Ofgem plays a more active role in ensuring that the market works for fuel poor customers and not against them.
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