Energy and Climate Change Q&As: Indebted Prepayment Customers

Posted on 31 Mar 2016 under Latest in Parliament

The Secretary of State for Energy and Climate Change was asked what steps she plans to take to reduce energy prices for indebted prepayment customers.

The Secretary of State for Energy and Climate Change (Amber Rudd): The Government want energy bills to reduce for all consumers, and one of the best ways to achieve that is by switching supplier. However, the hon. Member for Coventry North East (Colleen Fletcher) has raised an important point by highlighting the barriers that indebted prepayment customers face in doing so. The Competition and Markets Authority’s report on provisional remedies rightly includes a recommendation that Ofgem should take steps to address those barriers, and I will consider the issue carefully following the publication of its final report.

Colleen Fletcher (Coventry North East) (Lab): The Competition and Markets Authority’s proposal regarding a safeguard price control for prepayment customers is welcome and will go some way towards redressing an inherent unfairness that affects the most vulnerable people, but the authority and the Government should go much further. Will the Secretary of State commit to ensuring that prepayment customers are prioritised during the smart meter roll-out?

Amber Rudd: I share the hon. Lady’s support for the CMA’s proposal for the most vulnerable customers, a larger proportion of whom are on prepayment meters, and we welcome that approach to ensure that we look after those people. On smart meters, while some energy companies are prioritising prepayment meters, we are not obliging them to do so because the roll-out of smart meters is so inherently important to managing people’s bills.

Liz McInnes (Heywood and Middleton) (Lab): Will the Secretary of State tell the House, so that I may inform the 9,255 of my constituents who have prepayment meters, why her Department will not bring forward its fuel poverty strategy for another two years?

Amber Rudd: The Department and the Government take fuel poverty very seriously and we take steps to address that issue. We are reforming the renewable heat incentive and the energy company obligation to focus more on those most in need, who are those in fuel poverty. I ask the hon. Lady to reassure her constituents that we are absolutely committed to doing that and that we will continue to address the issue.

Dawn Butler (Brent Central) (Lab): The CMA report exposes one of the biggest scandals of this generation: the £1.7 billion that customers are being overcharged. The recommendations in the report will not kick in until 2018, by which time people will be overcharged by £2.4 billion a year. The Secretary of State must oblige energy companies to roll out smart meters now, especially if the Government are to achieve their own recommendation of all households having smart meters by 2020.

Amber Rudd: I reassure the hon. Lady that rolling out smart meters is an obligation on energy companies, which are being regulated by Ofgem to ensure that every household has a smart meter by 2020. The CMA’s recommendations observe that competition is the best way to deliver lower prices. We are making sure that more competition enters the market so that customers such as her constituents can have access to that and to cheaper bills.

Andrew Bridgen (North West Leicestershire) (Con): Prepayment customers are among the most vulnerable in our society. They have fewer tariff options and find switching more difficult. What steps is my right hon. Friend taking to remove barriers such as debt issues so that it is easier for these people to switch and get a better price?

Amber Rudd: My hon. Friend is absolutely right. The CMA investigation represents the biggest investigation into the energy market since privatisation, and the Prime Minister promoted it by referring the market to Ofgem and on to the CMA. The CMA has focused specifically on indebtedness. We will look at its recommendations to ensure that the most vulnerable customers also have the option to switch and are not excluded from competition within the market.

Caroline Flint (Don Valley) (Lab): But the CMA found that 70% of customers were being overcharged, while those on prepayment meters represented only 16%. It found that there had been overcharging of £1.7 billion a year since 2012, rising to £2.5 billion in 2015. A cap is available for those on prepayment meters, but what about the rest of the 70% of customers who are being overcharged? What will happen for them, apart from urging them to switch?

Amber Rudd: It was, of course, disappointing that the Labour party opposed referring the energy market from Ofgem to the CMA. It is the CMA that has come forward with the recommendations, which I think is a welcome development. The right hon. Lady asks what can be done for other customers. The answer is that more competition in the market will allow people to switch so that her constituents will be able to have access to cheaper bills. I hope she will welcome the reform in the market that has allowed more competition to develop, resulting in lower bills for her constituents and everybody else.

Caroline Flint: That is misleading the House.

Mr Speaker: Order. The right hon. Lady certainly should not accuse anybody of misleading the House—[Interruption.] Order. I do not require any advice from other Members. I am perfectly capable of dealing with these matters. If the right hon. Lady wants to insert the word “inadvertently”, that would make it moderately less disorderly, although she still should not chunter from a sedentary position in evident disapproval of the stance taken by the Secretary of State. That is rather beneath the dignity of a distinguished former Minister.

Caroline Flint: Thank you, Mr Speaker. I think the Secretary of State inadvertently—

Mr Speaker: Just withdraw.

Caroline Flint: I withdraw.

Mr Speaker: Well done.

Caroline Flint: On a point of order, Mr Speaker.

Mr Speaker: Order. Points of order come later.

Lisa Nandy (Wigan) (Lab): I welcome the action that the CMA recommended for prepayment customers, but I urge the Secretary of State to heed the words of my hon. Friends who urged her to go further. I am sure that she is as angry as I am about the treatment of these customers. I am sure she is also as angry as we are about the treatment of 70% of customers who have been overcharged to the tune of £1.7 billion a year. The Energy and Climate Change Committee said that the Secretary of State’s “Sudden and numerous policy announcements…lack of transparency…insufficient consideration of investor impacts…Policy inconsistency and contradictory approaches”, coupled with the “lack of a long-term vision”, have raised the cost of investing in UK energy by £3.14 billion a year. Given that she is costing bill payers almost twice as much as the big energy companies, will she refer herself to the CMA?

Amber Rudd: Let me start by answering the key point that the hon. Lady makes about the 70% of consumers who are not on prepayment meters and are overpaying. The central way to address the 70% is to make sure that there is more competition in the market. When we came into office in 2010, there were six suppliers; there are now 31 new independent suppliers. Switching times are now down to 17 days and, with Ofgem’s guidance, we hope to move to same-day switching by 2018. All those measures will enable consumers to access a competitive market.

The hon. Lady’s comments regarding the Energy and Climate Change Committee are a random selection of some of the Committee’s thoughts. I do not share its views. In fact, I have been advised by a number of people who have attended the Committee and by major investors that they take great comfort from the clear direction that has been set out from the Government Benches for future energy policy.

Lisa Nandy: It is extremely disappointing that after this lengthy investigation, the Secretary of State has decided to blame customers for not switching and to let energy companies off the hook, so perhaps I will try another one. The CMA inquiry has also found that price comparison websites are taking tens of millions of pounds a year in commission from the biggest energy companies. In 2014 alone, they were paid £24 million. Following her announcement that she will not hesitate to take forward the CMA’s recommendations, does she plan to implement the recommendation to allow the same websites to now deliberately hide the cheapest deals from customers?

Amber Rudd: The hon. Lady has misunderstood me. There is no blame on customers and no blame is being apportioned. We are saying that the CMA has provided a wake-up call to the energy companies, which now need to take action to address competition within the area. We are confident that its recommendations will be key to delivering the competition and low prices that Labour so clearly failed to deliver before 2010.

Lisa Nandy: What about price comparison websites?

Amber Rudd: We already have a price comparison website to which we refer people. The “be an energy shopper” website will then give customers a choice. I urge the hon. Lady to take a look herself and perhaps consider switching.