Press
12/09/2008
Government must commit to ending unfair energy charges
Responding to the Prime Minister’s announcement yesterday of a Home Energy Saving Plan designed to help with rising fuel costs Andrew George, MP for the West Cornwall and Isles of Scilly Constituency of St. Ives, has called on the Government to commit to ending higher charges for low income energy customers who rely on pre-payment meters to manage their energy costs.
Mr George, who is one of the MPs who has supported the principle of a windfall tax on energy and oil companies, recently wrote to Energy Minister, Malcolm Wicks MP, calling for action to end the large price differentials between payment methods which can see pre-payment customers charged £70 per year more than those who pay with quarterly bills, and up to £300 more than those who are able to pay by direct debit.
In Mr Wicks’ response (see below) he acknowledged that the Government is concerned about the high cost of pre-payment meters which are used by a high proportion of fuel poor energy customers but failed to commit to steps which would force energy companies to reduce the tariffs.
Mr George has also questioned the Government over its management of the Warm Front Scheme which offers grants for families to improve heating and insulation in their homes. He is calling for the scheme to make greater use of local contractors who can complete work at a cheaper rate than the centralised private management company currently in charge of the scheme which often demands an excess charge from applicants to cover the full cost of heating improvements thus nullifying the benefit of the public subsidy.
Commenting on yesterday’s announcement Mr George said:
“At last the Government has acknowledged that the practice of charging those on the lowest incomes more for their energy than other, better-off customers is unfair and unacceptable. But all they’re going to do is offer a bit off extortionately charged loft insulation.
“They have stopped short of committing to equalise pre-payment tariffs with the cheaper direct debit deals that energy companies offer some of their customers. Those who live on the margins of credit cannot risk relying on automated payments to pay their utility bills for fear of incurring extortionate charges from their bank if they stray into the red.
“Until the Government takes action to end once and for all the differentials between payment methods then energy companies will continue to penalise their most vulnerable customers.”
Text of letter from Malcolm Wicks MP, Minister of State for Energy in
BERR: Department for Business, Enterprise & Regulatory Reform
Andrew George MP
Trewella
18 Mennaye Road
Penzance
Cornwall
TR18 4NG
2 September 2008
Dear Andrew
Thank you for your letter of 21 August, about prepayment meter tariffs. I am signing on behalf of Malcolm Wicks in my capacity as Duty Minister.
The Government shares your concern about the cost of prepayment meters, knowing that a considerable proportion of the the fuel poor use this payment method. Customers using prepayment meters typically pay around £55 more on their energy bill compared to standard credit, and £144 compared to direct debit. However, it is unclear whether this simply reflects the extra costs required of the energy companies in servicing prepayment customers, which includes the higher cost of the meter itself, the complex payment and support infrastructure required to support them, involving suppliers, meter owners and thousands of rental outlets. Nor is it clear whether prepayment customers are being given enough information on the availability of other tariffs.
Following the announcement in the Budget, Ofgem is considering all these issues as part of its wider probe into the energy market. Ofgem is expected to reveal its initial findings at the end of September and the Government will then decide what action needs to be undertaken.
If Ofgem analysis reveals that action needs to be taken, we are prepared to legislate, using existing statutory powers, to reduce any disadvantage suffered by those using prepayment meters. In the first instance, though, we are looking at Ofgem and suppliers to bring forward proposals for treating prepayment customers more fairly.
(signed)
Yours sincerely
Pat McFadden
DUTY MINISTER
(signed on behalf of Malcolm Wicks)
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