Fuel Poverty
Energy Savings
Changing supplier
Sales practice
Debt and disconnection

Fuel Poverty
There are approximately 1.8 million households in Britain who suffer from fuel poverty; that is households that spend more than ten percent of their income on heating and lighting. In November 2001 the Government published its UK Fuel Poverty Strategy, which set a target to seek to end fuel poverty by 2016. The Strategy gave a further commitment to take all vulnerable households out of fuel poverty by 2010.

Energy suppliers recognise that they have a responsibility to society and, in particular, to vulnerable customers and the fuel poor, the elderly, sick and impoverished. Suppliers have worked closely with social services, citizens advice bureaux and charitable groups, such as Age Concern and Help the Aged to consider the best way to help vulnerable customers. Since 1996 two and a half million people have been taken out of fuel poverty through the efforts of energy suppliers working with social welfare organisations.

Some suppliers employ specialist social welfare staff and others support partnership schemes with local councils and health authorities. There are a number of government initiatives, such as fuel direct and Warm Front specifically to tackle poverty, in which households are targeted according to the state benefits they receive.

Two recent reports from the Public Accounts Committee and the Audit Commission criticised the ineffectiveness of the government’s fuel poverty measures. The reports suggested that whilst the Warm Front scheme has provided significant funding, it has been unsuccessful in reaching the fuel poor living in energy inefficient homes. The ERA will continue to support the Government’s UK Fuel Poverty Strategy.

Energy Savings
The UK Government has committed to reduce CO2 emissions and achieve carbon savings according to the Kyoto agreement. The Energy White Paper has acknowledged the importance of the Energy Efficiency Commitment (EEC) in curbing household emissions and has stated that it “will consult on the expansion of the EEC to run from 2005 to at least 2008 at possibly twice its current level of activity.” The Energy Efficiency Commitment began in April 2002 and requires energy suppliers to achieve a target amount of domestic energy efficiency improvements by 31 March 2005.

Suppliers are currently required to spend the equivalent of £3.60 per customer on energy savings. This could potentially increase to £7.20 by 2008 under EEC2. The Government sets targets on how much energy savings must be achieved through the sale of a range of energy saving measures such as cavity wall and loft insulation, energy efficient light bulbs and heating system upgrades.

The ERA believes that the industry needs the widest flexibility in order to deliver its targets and that the government will need to offer fiscal incentives to encourage houseowners and landlords to invest in home energy efficiency measures. The ERA is working closely with government officials to draw a revised Energy Efficiency Commitment that provides the flexibility for innovation and sets realistic targets for energy savings.

Changing supplier
We are aware that for some customers trying to change their energy supplier has caused severe difficulties.

Energy suppliers are undertaking an extensive exercise to identify and resolve the problems encountered when customers switch from one supplier to another. Working together in a way never before attempted, the industry has just completed stage 1 of a three-part programme.

The aim of the Customer Transfer Programme (CTP) is to deliver the following vision:

• for customers, the transfer process will be a “hassle-free” experience, meeting the expectations set out at point of sale;
  
• for suppliers, the transfer process will be efficient, with effective resolution mechanisms in place when customer issues arise and problems occur;
  
• meter readings will be within an acceptable tolerance for the purposes of both billing and settlements; and
  
• longer term improvements will deliver reductions in cost.
  

So far the CTP team has developed a tool for collecting and analyzing industry data, which has looked at 150,000 individual records. The results of the analysis have identified 294 individual root causes of problems within the suppliers’ systems, many of which are duplicated by different companies.

Stage 1 of the Programme has defined the areas that are causing problems for customers. Stage 2 will prioritise and identify solutions to the causes of the problems. Stage 3 will phase in the solutions to energy suppliers’ transfer processes.

This is an industry-wide programme with participation and input from all sectors. It is an achievement in itself that the industry is now working closely together towards a common goal of improving the market for our customers.

Sales practice
Since May 2003 energy supply companies have been subject to a self-regulatory Code of Practice for Face-to-Face Marketing of Energy Supply, which incorporated the EnergySure accreditation for sales agents. As a result of the level of energywatch selling complaints has fallen significantly from an industry 3 month rolling average of 1.92 complaints per thousand transfers in June 2002 to its lowest level of 0.54, according to energywatch, in December 2003. This exceeds the target level of 0.85 sought by energywatch at the time the Code was launched.

The energy companies who supply gas and electricity have worked hard to improve their sales service records, whether door-to-door or telesales and over 200 agents who have not met the high standards required by suppliers have had their EnergySure accreditation withdrawn since the Code has been enforced.

In order to continue this improvement the Energy Retail Association is undertaking a wholesale review of the management of the Code of Practice. Key stakeholders such as Ofgem, energywatch and the Department of Trade and Industry are being consulted.

Clearly the industry cannot afford to rest on its laurels, there is more work to do but energy companies are determined to ensure that best practice is achieved across the board for all sales activity.

A revised Code structure will be announced shortly. This will provide even greater consumer protection and, at the same time, increase consumer confidence in the industry and make it even more difficult for rogue sales agents to operate.

Debt and disconnection
In recent months disconnection and, in particular, disconnection of vulnerable customers has become a high profile issue. Energy suppliers avoid disconnection where there are alternative arrangements to recover debt. However, they wish to retain the right to disconnect customers who won’t pay, whilst helping those in financial difficulties who can’t pay. The ERA opposed the call for a ban in an amendment to the Energy Bill. Energy suppliers are committed to eliminating intentional disconnection of vulnerable customers.

In compliance with existing Codes of Practice, suppliers make considerable efforts to encourage all customers to discuss their circumstances with them directly so that an appropriate payment arrangement can be put in place to recover the debt. Failing that, suppliers have an obligation to offer the installation of a prepayment meter thus avoiding the need to disconnect a supply.

Suppliers will make every effort to meet the customer face to face to promote agreement on the recovery of the debt, whilst using the opportunity to obtain further information about the individual circumstances of the customer; enabling an initial assessment to be made as to their degree of vulnerability and the most appropriate action thereafter.

Between 0.01% and 0.03% of electricity customers are disconnected each year and only if a prepayment meter is impractical and the customer is not on benefits.

0.1% of gas customers are disconnected each year. The proportion is higher than for electricity as a prepayment meter can usually only be fitted if the customer is present to test appliances.

• Energy suppliers recognise that they have a particular responsibility to vulnerable customers e.g. the elderly, sick, disabled or families with young children. Many of these customers are identified through the Priority Service Register, which offers advice and assistance to vulnerable groups.
  

The Energy Retail Association, in co-operation with Ofgem, has prepared a strategy paper for consultation. The paper covers two broad areas. Firstly it sets out a common definition for “vulnerable customers”, which will be universally applied in the industry. Secondly, it sets out how measures could be taken to ensure customers are not disconnected without identifying whether they are vulnerable.

The ERA proposes an additional safety net to be put in place offering further protection for vulnerable customers:

Suppliers will, where practical and safe to do so, will fit a prepayment meter ensuring the customer has continued access to a fuel supply or put the customer onto a Fuel Direct payment scheme

If a prepayment meter is not appropriate or agreement cannot be reached, offers of help are refused and the customer continues to be at risk, details will be notified to social services for further support and assistance.

The ERA’s strategy is to build on best practice and develop a procedure that operates in parallel to the work of other local agencies, such as social services and charities etc to allow for assistance to be provided to those most vulnerable in the community. Suppliers will in the last resort refer a customer to the appropriate authority, in most cases social services, where there is good reason to believe that the customer is in a vulnerable group and their health is at risk – this referral will be made in accordance with the guidelines set out by the Information Commissioner.

The ERA recognises that it is not possible to be prescriptive about valid warning signs to which disclosure under the Data Protection Act applies. However, it is possible for suppliers to implement a safety net procedure that demonstrates that best endeavours have been made to identify a vulnerable customer at various points when processing a debt case and appropriate action taken.

Click here for details of our press releases and responses to consultations http://www.energy-retail.org.uk/Press_Releases.asp