Energy and Climate Change Committee Consumer Engagement with Energy Markets
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Energy and Climate Change Committee Consumer Engagement with Energy Markets Ref Organisation Page CE 01 DECC 3 CE 02 uSwitch 14 CE 03 OVO Energy 20 CE 04 and CE 04a British Gas 23 and 30 CE 05 RWE npower 34 CE 06 and CE 06a E.ON UK 39 and 50 CE 07 Grass Roots Groups 52 CE 08 ACS 56 CE 09 Energy Saving Trust 59 CE 10 OFT 62 CE 11, CE 11a and SSE 75, 84 and 86 CE 11b CE 12 and CE 12a Make IT Cheaper 89 and 93 CE 13 Scottish Renewables 94 CE 14 ICoSS 98 CE 15 Which? 100 CE 16 Silver Spring Networks 107 CE 17 Lynne Wycherley 109 CE 18 Carllion PLC 115 CE 19 National Grid 122 CE 20 and 20a Consumer Focus 128 and 138 CE 21 REA 155 CE 22 LGA 165 CE 23 Carbon Brief 169 CE 24 Energy UK 176 CE 25 EDF 180 CE 26 and CE 26a John Oddi 191 and 201 CE 27 Good Energy 203 CE 28 Ofgem 208 CE 29 Scottish Power 218 CE 30 SmartReach 229 CE 31 and CE 31a Parliamentary Outreach 233 and 260 CE 33 First Utility 289 CE 34 Ecotricity 295 CE 35 Alquist Consulting 299 CE 36 Correspondence between the Chair and various 301 publications Written evidence submitted by DECC (CE 01) 1. DECC welcomes the ECC Committee’s enquiry into consumer engagement with the energy market and the opportunity to submit evidence. DECC also looks forward to the Committee’s findings, which will be of significant interest as we continue to put tackling consumer issues at the top of our agenda. 2. We know that households are struggling to cope with high energy bills, driven to a large extent by high fossil fuel prices. DECC has implemented a package of measures to help people, particularly the vulnerable, to take control of their energy bills and we continue to develop further measures. 3. The main components of this package are: Helping vulnerable households Through Warm Home Discount, we have made it a legal requirement for large domestic energy suppliers to give discounts on energy bills to 660 000 of the poorest pensioners, plus other particularly vulnerable consumers. This is worth up to £1.1 billion from April 2011 to March 2015 and will help around 2m low income and vulnerable households per year. Helping households save money and energy Around 3.5 million households should benefit from free or discounted insulation under the CERT (Carbon Emissions Reduction Target) extension. We are also developing new measures to assist households – - In the forthcoming Green Deal, energy efficiency measures that save households money will be provided by trusted businesses, installed by accredited professionals. The innovative Green Deal financial mechanism eliminates the need to pay upfront for energy efficiency measures and instead provides reassurances that the cost of the measures should be covered by savings on the electricity bill. - the new Energy Company Obligation will focus energy companies on improving the ability of the vulnerable and those on lower incomes to heat their homes affordably, and on improving solid wall properties. Putting people in control of their bills The ‘Check, Switch, Insulate to Save’ campaign, which was launched at the Energy Consumer Summit hosted by the Prime Minister and Energy and Climate Change Secretary in October, has been instrumental in bringing interested parties together to help consumers to save money this winter. In addition the January Big Energy Week, co-ordinated by Citizens Advice, involved 138 outreach events to connect people to sources of help in managing their energy bills, reaching over 75,000 people in face-to-face contact. Page 1 of 298 A voluntary agreement between Government and large energy suppliers means that all energy bills now tell people how to switch to their supplier’s cheapest tariff and suppliers have written directly to over 8 million receipt of bill customers to tell them what they could save by switching to direct debit. DECC continues to work with Ofgem on measures to improve the information provided on bills and annual statements, such as those referred to in paragraph 20, in order to increase transparency and aid consumers compare tariffs more easily. Promoting Collective Purchasing Collective purchasing schemes have significant potential to help consumers exert market power by grouping together to secure better deals from energy suppliers. DECC recognised the potential for some schemes last Autumn, building on the work carried out by the Department of Business Innovation and Skills as set out in the “Better Choices, Better Deals”1 document published in April 2011, and has been working with key stakeholders to identify any barriers to the development of such schemes and any actions required to bring more schemes forward, with particular focus on maintaining consumer protection. We will continue to look at what the Department can do to promote Collective Purchasing schemes over the coming weeks and months. How “energy literate” are consumers in the UK? For example, are most consumers aware of how much their bills vary according to usage? Are terms such as “kWh” understood by most consumers? 4. DECC has not commissioned any specific research on consumer “energy literacy” but a range of studies commissioned by the Department provide findings that are relevant to this issue. 5. The qualitative research report Empowering households – research on presenting energy consumption benchmarks on energy bills2 found that most participants did not tend to engage with their energy bills and only checked the document to see how much they have paid/ have to pay and to confirm the accuracy of meter readings. A few respondents looked at energy consumption given as kWh usage, even if they said that they do not understand what a kWh is (for many this was to compare energy usage against past bills). 6. Respondents in the same study expressed a preference for data on energy usage to be displayed on energy bills as the amount of money spent (£s), rather than the amount of energy consumed (kWh). This reflected participants’ lack of familiarity with the term kWh and lack of understanding of the level of energy consumption reflected in a certain kWH usage. 1 http://www.cabinetoffice.gov.uk/sites/default/files/resources/better-choices-better-deals.pdf 2 http://www.decc.gov.uk/assets/decc/11/cutting-emissions/behaviour%20change/2136-empowering- households-research.pdf Page 24 of 298 7. Lack of engagement with energy bills was also evident from the Evaluation of the delivery and uptake of the Carbon Emissions Reduction Target3. Lack of engagement with bills was a common reason given as to why respondents could not tell whether energy efficiency measures had led to cost savings. 8. Despite a lack of engagement with, and understanding of, energy bills, consumers claim to have a high awareness of their energy use and to be concerned about energy prices. 9. A national survey carried out in 2010 for the Low Carbon Communities Challenge project found that 63% of respondents always or often think about energy use in the home while 7% do not think about energy use in the home at all. The same survey found that 37% of respondents said they/their household had been very or fairly worried about paying their energy bills in the last 12 months (up to March 2010). 10. These issues are of significant interest to DECC and we will continue to build our understanding and awareness through customer research and policy evaluation. 4 which allows users to try out different options for the UK energy system, including more or less nuclear, more or less wind energy, more or less home insulation, more or less shift from cars to public transport and so on. In each case the calculator shows the impact on energy supply, energy demand, carbon emissions and, in the latest update, costs. The data and calculations underpinning the 2050 calculator are public and have been open to scrutiny and challenge by everyone. There are three interfaces to the calculator: an excel version for experts, a complex web interface for enthusiasts and a simple version (known as My2050) for the public. So far approximately 85,000 people have used the simpler version and 63,000 people have used the enthusiasts version. We are currently working with other countries including China to develop similar tools for them. To what extent are consumers aware of the different components that make up their energy bills and the relative contribution of each aspect? (e.g. wholesale costs, transmission and distribution charges, environmental/social policies and VAT) 12. DECC has not commissioned any specific research on the awareness of consumers regarding the different components that make up energy bills and the relative contribution to the overall cost of each aspect. The research cited in our response to the previous question does, however, suggest that there is a general 3 http://www.decc.gov.uk/assets/decc/11/funding-support/3339-evaluation-of-the-delivery-and-uptake- of-the-carbo.pdf 4 http://www.decc.gov.uk/en/content/cms/tackling/2050/2050.aspx Page 53 of 298 lack of awareness of such detail given that consumer engagement with their energy bills is generally low. 13. We do ensure that information regarding the components of bills is widely available through publication, alongside the Annual Energy Statement, of an annual assessment of the impact of all energy and climate change policies on gas and electricity prices and bills paid by households and businesses. Each annual assessment includes a breakdown of a current household gas and electricity bill by their constituent parts (wholesale costs, transmission, distribution and metering costs, energy and climate change policy costs and VAT).