Official Report (Hansard)

Session: 2007/2008

Date: 29 May 2008

COMMITTEE FOR ENTERPRISE, TRADE & INVESTMENT

OFFICIAL REPORT

(Hansard)

Energy Prices

29 May 2008

Members present for all or part of the proceedings: 
Ms Jennifer McCann (Deputy Chairperson) 
Mr Leslie Cree 
Mr Simon Hamilton 
Ms Jennifer McCann 
Dr Alasdair McDonnell 
Mr Alan McFarland 
Mr Robin Newton 
Mr David Simpson

Witnesses:
Ms Jenny Boyd ) NIE Energy Ltd 
Miss Kerstie Forsyth ) 
Mr Stephen McCully )

The Deputy Chairperson (Ms J McCann):
I welcome the representatives from NIE Energy Ltd. The briefing will be provided by Stephen McCully, NIE Energy Ltd’s managing director; Jenny Boyd, its energy services manager; and Kerstie Forsythe, from marketing and communications.

Yesterday, NIE Energy Ltd announced a 14% price increase in electricity costs, which it will discuss with the Committee. I would be grateful if you could keep your presentation to approximately 10 minutes, because Committee members will want to ask questions.

Mr Stephen McCully (NIE Energy Ltd):
Thank you, Chairperson. I thank the Committee for giving us this opportunity to present our evidence.

We forwarded some slides to the Committee; I hope that everybody has received a copy. We hope to cover some issues that will be of interest to the Committee, and we are happy to answer any questions that members may have.

We intend to provide an update on some of the structural changes in the market; to discuss the recent price drivers, and to explain how those had an impact on yesterday’s announcement. We will also explain what our organisation is doing to mitigate the impact of those price pressures, and we will conclude by outlining some ideas that we have for a way forward on those energy issues.

NIE Energy Ltd is a new company, which was established on 1 November 2007 as part of the unbundling of the industry. It was formerly the supply business of Northern Ireland Electricity plc. It remains part of Viridian Group Ltd but is a very separate organisation from Northern Ireland Electricity.

We retail electricity in Northern Ireland to approximately 780,000 customers — of which 730,000 are households. We are based at Newforge Lane in Belfast, and we have call centres in Newtownabbey, Ballymena and Omagh. We are regulated by the Northern Ireland Authority for Utility Regulation (NIAUR), and we interact closely with the Consumer Council for Northern Ireland (CCNI) on pricing and customer-service issues.

The single electricity market (SEM) was established in November 2007. It created a new market for the purchase of electricity at wholesale level. All electricity generators on the island of Ireland sell to the SEM, and all suppliers, such as NIE Energy Ltd, purchase from that pool. It is essentially a spot market — the price that generators pay changes every 30 minutes.

In order retail to customers — particularly households — at a fixed price, suppliers enter into contracts with generators for a term. In most cases, that is for 12 months. That allows us to retail a final product to customers.

I know that the Committee has heard a number of presentations over the past few weeks. Members are probably fully aware of escalating fuel prices. Those price rises — particularly gas and, to a lesser degree, coal — are impacting on the electricity industry. Gas and coal are the main fuel sources for the generation of electricity on the island, excepting renewable generation. To date, and certainly since we last reviewed our prices, wholesale fuel prices have increased significantly — by more than 100%. As we look ahead to the winter of 2008-09, the forward market for gas will continue to increase. This time last year, the price of gas was approximately 22p a therm. That price is forecast to increase to approximately 96p a therm during the winter of 2008-09.

The pie charts in our submission provide a breakdown of the key price inputs into a final tariff. Generation contributes significantly to the final price. It contributes more for business customers, because they are normally connected at a higher voltage to the system, and their network costs are, therefore, slightly less. However, the fuel component accounts for about three quarters of the total generation cost, so any increase in fuel price has a fairly significant impact on the final price for customers.

As I mentioned earlier, we have been consulting closely with NIAUR and CCNI since earlier in the year. We initially engaged with them in January because we were experiencing very high gas prices, and that phenomenon was manifesting itself in high spot prices in the SEM. We worked through the detail of that over the past few months, and yesterday we announced a 14% increase to all our tariff categories, for both households and businesses. The price increase will apply from 1 July 2008, and customers who are on a quarterly billing cycle will see that increase on their bills from 1 October — three months on from 1 July.

We will monitor fuel prices, particularly over the summer, because that is when we enter into contracts for the next tariff year. As I explained, there are some very high energy prices in the marketplace. Another tariff review is scheduled for October 2008, when we expect another significant increase to be required. However, that depends on how fuel prices move over the next few weeks.

The graph that shows Northern Ireland domestic prices history indicates how the total electricity cost for average household consumption has changed since April 1992. Even taking into account the July increase, prices, in real terms, are still down, notwithstanding the current high fuel costs. Many of the savings have been delivered through efficiencies in the industry, both from a network point of view and from the supply business. It is clear from the graph that, since privatisation in 1993, prices have gone up and down. That normally results from shifts that occur from time to time in global fuel prices.

Compared with other markets in Western Europe, NIE Energy Ltd’s prices are still below average. Different organisations and different countries are at different stages of adjusting to the high global fuel prices. Our prices are slightly higher than the GB average but are below the Electricity Supply Board (ESB) customer supply. ESB retails to the majority of households in the Republic of Ireland. Prices differ quite significantly across Western Europe. France is still delivering low prices, and that is a result of its generation mix. Its use of nuclear power plants means that its energy market is not as carbon intensive. Italy and Germany are at the other extreme — those countries have very different energy markets from France.

Electricity is still used to heat homes. Around 30,000 homes in Northern Ireland use Economy 7 for their home-space and water heating. That equates to about 4% of the housing stock. Around half of those 30,000 customers live in social housing, predominantly through the Northern Ireland Housing Executive (NIHE). The Economy 7 tariff has also increased by 14%, in line with the rest of the tariffs, but electricity remains competitive with other fuels in the marketplace. Our figures show that the price of oil has risen by 66% over the past 12 months, but it has increased dramatically in the past few months, and that figure has probably been surpassed. Phoenix Natural Gas recently announced a 28% increase in its prices.

Ms Jenny Boyd (NIE Energy Ltd):
I shall cover some of the practical actions that we have put in place in order to help customers. Those focus on three main themes: discounted electricity; support for vulnerable customers; and saving energy and carbon.

More than 425,000 of our customers currently receive discounted electricity through two main mechanisms. First, 225,000 customers pay by direct debit, predominantly on a 4% discount rate for a monthly direct debit. Secondly, we operate a keypad system, which is a pay-as-you-go type of meter and is used by 200,000 households, or 27% of our customers. Essentially, we provide a free-of-charge meter. Unlike in GB, customers get a discount for paying for electricity that way. Members may be familiar with the fact that, in the GB market, customers typically pay around £80 more for prepaying for electricity. In Northern Ireland, customers receive a 2·5% discount for paying with the keypad meter.

Customers can buy electricity in amounts to suit their budget, and they can do so as frequently as they wish. They can buy top-ups from local shops through PayPoint and Payzone, or they can pay over the telephone or by using the recently introduced online facility, if they have a debit card. If a customer runs out of credit, the meter does not disconnect between 4.00 pm and 8.00 am, and it does not disconnect at the weekends. That provides an extra reassurance, particularly in the winter months, for older people or for people with young kids, because they will not have to go out to buy electricity if they run out of credit.

Another advantage of the meter is that it provides feedback on electricity consumption. Members may have heard of smart meters, which is currently an active subject. Keypad meters provide extra information to customers through their user-friendly display, which lets them know how much electricity they are using and how much they have used in the past day, week or month. That helps people to learn what in their house uses the most electricity, and to use those accordingly.

Keypad meters are good for preventing debt. It is better to prevent debt rather than have to manage customers when they get into debt. A positive of keypad meters is that they do not allow customers to get into debt, because customers pay as they go. Keypad meters are a sustainable social tariff, in that they provide a discount to customers. There is no longer any stigma attached to having a keypad meter — pay-as-you-go mobiles, for example, are popular with people. Keypad meters are easily accessible to a wide range of customers, and they let people budget within their means. Our graph shows that NIE Energy Ltd’s prepay tariff is significantly lower than that of companies in the market in Great Britain. We have been able to deliver that by having prepaid meters in place.

We are concerned about the most vulnerable customers, and we have a range of initiatives that is designed to try to target those customers and put in place the means to help their circumstances. Those include practical heating and insulation schemes for vulnerable households. Recently, NIE Energy Ltd put £1 million into a benefit-uptake initiative — the four-year benefit campaign. Feedback from that pilot scheme identified that 42% of the customers who had a benefit check performed were under-claiming their benefits. An average of £36 a week in benefit — quite a significant amount — was going unclaimed.

We also try to provide further information about energy efficiency for all customers. Over the past couple of years, information on saving energy increasingly has been enclosed with bills, as members may have noticed. We tailor advice to suit customers’ needs. We have also worked closely with the Energy Saving Trust advice centre.

Customers are not disconnected unless fraud is involved. In the eight years that I have worked for Northern Ireland Electricity and NIE Energy Ltd, and even before then, not one customer has been disconnected. Not everyone is aware of that. I am mindful that the population is much more diverse these days, and we also provide information in a wide range of languages, as well as in different formats for visually impaired customers.

Given the increasing global energy costs, one of the best ways in which customers can be energy efficient is to reduce the amount of energy that is required to heat and power their homes. That practical measure can make a real difference to their bills, as well as to their health and well-being. NIE Energy Ltd typically provides customers who are on low incomes with energy-efficient heating systems, insulation and lighting. We concentrate on areas that are not served by the warm homes scheme and on people who fall just outside the normal threshold for the uptake of benefit, and who often end up most badly off as a result.

In conjunction with the Department for Social Development (DSD), we are piloting a Hard to Heat Homes programme, which identifies those homes that are not on the gas network, have solid walls, or are in rural or exposed areas. Even if we introduce all possible energy-efficiency measures to those homes, we cannot necessarily be confident that their owners will be able to heat and power their homes affordably. Therefore, we are considering some non-typical measures and interventions, such as renewables and solid-wall insulation, to try to provide those customers with a hedge against global fuel costs.

NIE Energy Ltd has a range of offers for other households, such as cashback for installing insulation and special offers on low-energy lighting. People can introduce practical measures to their homes to deliver savings and, importantly, reduce carbon emissions. Much of the energy-efficiency activity is targeted at business customers, particularly the types of business that NIE Energy Ltd serves, which are primarily small businesses and farms. Current offers include one to encourage businesses to convert to low-energy lighting, and all offers will be promoted through the normal billing mechanisms, local PR, and so forth.

For several years, NIE Energy Ltd has been proactive in increasing the use of renewables. We have delivered a wide range of renewable grants and activity schemes on many technologies. In an attempt to introduce those technologies to the market, we provide good demonstration models, and we identify and try to overcome the barriers to renewables. Importantly, we also test new technologies to try to ensure that whatever technology enters the market delivers what it promises. The range of new technologies could be introduced to households, businesses, schools, and so forth.

A mechanism exists to try to enable those customers who generate their own power from solar panels, a wind turbine or combined heat and power (CHP) to sell back any excess power to NIE Energy Ltd. We also help those customers to obtain renewable obligation certificates (ROCs), for small generators. More than 350 have been issued to date, and that number is growing, which is good to see.

Mr McCully:
To conclude, we recognise that higher electricity prices put a tremendous strain on the Province, particularly on its households. We are sensitive to the strain that is being placed on customers and to the fact that we are in the privileged position of supplying all households in Northern Ireland.

In the short term, focus should remain on the mechanisms that have been proven to work. Jenny described the success of keypad metering, and customers who use that system pay a total of approximately £8 million less than they would if they lived in GB. That is a good outcome for them. A tremendous amount of work on energy efficiency has been done, but there is still much wastage in the home and, as an organisation, NIE Energy Ltd is keen to invest in tackling that problem.

Since 1997, approximately £25 million has been invested, particularly through the electricity industry, in energy-efficiency measures. That has resulted in savings of approximately £160 million for customers. However, more must be done.

We recognise that we can positively use our interface with customers and householders to maximise their income through our benefit-uptake initiative. In the sort term, we must work in partnership with Government and other organisations to address the pressures that people will feel this winter, and we are involved in the Fuel Poverty Task Force. As a region, we have always been innovative in how we deal with such problems.

In the longer term, once we overcome what we hope is the transient problem of high global fuel prices, competition and choice will be important. Structurally, there have been many positive changes, such as the introduction of the SEM. Work is still required to reduce the concentration on the generation side of the SEM. ESB is still quite dominant in that sector, and the regulators are addressing that. Diversity is also important. The level of renewables available is also growing, on a distributive basis and particularly at a centralised-plant level — Jenny mentioned the use of micro-renewables in homes.

Scale is also important, because the move to an SEM provides an opportunity for benefits on a greater scale. The development of a regional market, in which there is greater interconnection with GB and, perhaps, further afield, is important in the long term.

Product innovation will come from competition on the retail side of the market. Keypad metering has put customers in touch with their energy-spending habits. The advent of different types of smart metering, customers can also avail themselves of time-of-day tariffs, which allow them to shift some of the discretionary loads to different times of the day if the energy costs less. The market will move to higher levels of self-sufficiency on point-of-use renewable usage. It will also use different approaches, such as the eco-village concept, which has been developed in GB and is very popular in areas of social housing, in which greater emphasis is placed on centralised electricity production, district heating and private-wire networks. NIE Energy Ltd is keen to see that developed here and is working with organisations to examine the prospects of adopting that approach.

The Deputy Chairperson:
Thank you for your presentation. There is concern among people everywhere, not just about the rise in fuel prices but about the rise in the cost of living in general. That rise is pushing more people into financial difficulty and poverty, particularly low-income families and other disadvantaged groups. All Committee members indicated that they wanted to ask questions, so we will take two at a time.

Mr Simpson:
I echo the Deputy Chairperson’s comments about the social consequences of the rise in the cost of living. In a couple of the presentations that were made to the Committee, we learned the disturbing fact that fuel is traded some 12 times before it reaches our shores and gas is traded six times. You mentioned in your presentation that the pool price changes every 30 minutes. Will you elaborate on that?

You also mentioned the SEM, which was a good move. However, we will not know its full potential until substantial investment is made in the power plants in the South of Ireland. That investment is required because those power plants are aged, but it could yet be some way down the line. I do not know any timescale for that investment, but their inefficiency makes such investment essential. Until that happens, the outcome remains unknown. The graph that compared domestic prices in Western Europe demonstrates that electricity prices in France are low. You mentioned carbon, Stephen. Why are prices lower in France?

Mr Butler:
I echo the remarks of the Deputy Chairperson and David Simpson. In recent days, transparency levels have been criticised. OFREG is content with consumers’ position, but customers do not know why prices have risen by 14% and why there will possibly be another increase in October 2008. Can you justify that increase?

As David Simpson said, when the creation of the SEM was announced, price reductions were expected; however, prices have increased. The graph that shows domestic-price comparisons with other countries is not a true reflection. For example, fuel poverty here is twice as bad as it is in Britain, and there is a greater dependency on benefits here. The graph implies that our prices, in a European context, are low. However, when other factors, such as price increases for oil and gas, are taken into consideration, people here are in diffs, because those increases affect electricity prices.

Mr McCully:
David Simpson mentioned significant gas and oil trading in world markets. In recent times, investors have switched their interest from equities to commodities — not only oil and gas but all commodities. Unfortunately, that has contributed to the increase in global fuel prices. The generators on the island of Ireland purchased those fuels on the world market. NIE Energy Ltd buys nominally out of the SEM; we are a regulated business and, therefore, do not trade fuels or speculate. We arrange contracts — known as “contracts for differences” — with generators to secure a price for a 12-month tariff.

The SEM promoted that concept, and I agree that it will take time before inefficient plants, particularly in the Republic of Ireland, are replaced. In an SEM, an inefficient plant is not a sustainable model. Reinvestment must be considered, and that often reduces electricity prices.

The market is immature because there is little liquidity in it. Therefore, there is, generally, a shortage of contracts in the marketplace, and, as we prepare for a new tariff year in the summer, that makes it difficult to secure cover for 100% of our annual sales forecast.

NIE Energy Ltd performed quite well this year. Some fuel prices in other places have increased by 100% but we have agreed a 14% increase. If the full wrath of the worldwide increase had been passed on to our customers, the price rise would have been much more significant; perhaps between 30% and 40%. The market is good, in the sense that it provides an opportunity for suppliers to hedge risk on behalf of customers.

You picked up on my comment regarding France, Mr Simpson. The cost of carbon is a feature of wholesale prices and of the single electricity market. The price of carbon and the cost of the carbon intensity of the fuel used are factored into generators’ bids on a half-hour basis. Coal-fired power stations’ prices are inflated by the cost of carbon. The carbon market will become an increasingly significant feature of electricity markets in Europe and throughout the world. If electricity is generated from low-carbon sources, either renewable or nuclear, the marketplace cost will be minimised. France has a well-established nuclear industry that benefits from low-carbon intensity. There are a lot of other issues involving nuclear energy that would be very unpopular and it would probably not constitute a practical solution in Ireland.

Transparency, particularly for customers, was the focus of Mr Butler’s first question. NIE Energy Ltd is a regulated business and we are subject to price control in a similar way to Phoenix Natural Gas. NIE Energy Ltd does not make any extra profit from higher wholesale prices. Our profit margin is regulated by the regulator, so there is no benefit in speculating or trading. The regulator — as a proxy for the customer — has detailed knowledge of every contract that we enter into; and, indeed, we share more information than our licences oblige us to share. We give full disclosure on all our contracts and how they work their way through to the final price for customers. We have provided similar information to the Consumer Council for Northern Ireland, particularly regarding the 14% price increase.

Customers will experience the consequences of higher fuel prices when they enter forecourts, purchase oil, and so on. The electricity industry is experiencing the same pressures. However, the arrangement is complex. We have more than 100 contracts in place for the current tariff year but we share all of that information. If the regulator has any concerns, he has every right to step in, and his ultimate sanction would be to remove our licence as a supplier.

It is unfortunate that the single electricity market was introduced in a climate of high wholesale fuel prices. It is important to note that, over time, the single electricity market will deliver competitive prices. Although world fuel prices will have an input, the single electricity market, as a market, will ensure that fuel is transformed into final electricity in the most efficient manner possible.

Mr Butler mentioned some concerns about how the graph that we have presented to the Committee shows NIE Energy Ltd relative to other markets. We do recognise that Northern Ireland suffers from higher levels of fuel poverty, and we are sensitive to that. It is not good business to sell customers a product that is not affordable: that would be an unsustainable business model.

We have always demonstrated innovation. For example, we were the first utility to introduce keypad metering with a discount. We were also the first utility in the UK to drop standing charges, which benefited low-user customers. That measure was particularly beneficial for elderly people who live alone. We pay a lot of attention to customers, and I hope that they benefit as a result.

The Deputy Chairperson:
You said that you had discussions with the Consumer Council and the regulator. Does your company publicise its profit margins?

Mr McCully:
Yes.

The Deputy Chairperson:
Therefore, people can see the company’s profit margins on a yearly basis.

Mr McCully:
Yes. However, NIE Energy Ltd is a new company; it has not yet been in business for 12 months. In its previous life, the company was a subsidiary of Northern Ireland Electricity Plc. That company’s last full year’s results are available on the website of the Viridian Group Plc. The annual report is in the public domain.

Mr Cree:
An important aspect of what you do relates to costs in wholesale markets. I am trying to understand the concept of buying ahead of contract. That is fine from the point of view that I know that you have an obligation to do so because you are buying on the stock market. How do you balance that need with maintaining price levels for customers?

Mr McCully:
As we enter a tariff year, we try to minimise our exposure to the stock market. We set out to hedge as much of the risk as possible for the tariff year ahead. Last year, we forecast our sales and entered into a range of different contracts. Approximately 90% of the risk was hedged. Our sales are slightly higher this year than we forecast, and the 10% exposure has contributed to the increase that will be introduced on 1 July 2008.

We seek to purchase and hedge economically. By doing so, we try not to expose customers to the volatility of a market that is running at approximately 60% higher than would have been reasonably forecast at the beginning of the year.

Mr Newton:
I echo the words of others in welcoming your delegation. Is your company part of NIE Plc?

Mr McCully:
No. We are a separate company.

Mr Newton:
Is NIE Energy Ltd a private organisation?

Mr McCully:
Yes.

Mr Newton:
You said that you recognise the high levels of fuel poverty in Northern Ireland, and you said that you are sensitive to those and that, historically, you have introduced measures that are more favourable in Northern Ireland than is the case in the rest of the UK. That was in a situation in which fuel poverty had been recognised.

We are now moving to a more extreme situation. In addition to the measures that have been introduced in the past, what action do you plan to take that will help to alleviate the problems that face less well-off families and senior citizens?

Mr McCully:
Our business is regulated to a very low margin — 1·8%. Therefore, any actions we take have to be within our means. We are now facing a significant issue, and at this stage we require input from the Government. We will assist in whatever way possible.

We recognise that we provide an important channel to the customer. As we attempt to tackle the pressures that are faced by the most vulnerable in society, which have resulted from high prices, we need some form of direct support from Government.

We will continue to do what we have done. Year after year we increase our effort, particularly around energy efficiency. That is desperately important for NIE Energy Ltd, because we are not incentivised to sell more of our product; we are incentivised to ensure that customers minimise wastage.

We will continue, within our means, to tackle those important areas. At present, the price of oil is at its highest level. Previously, prices peaked — at around $70 a barrel — during the Iraq-Iran war in the early 1980s. Extraordinary times require extraordinary action. We will work constructively with the Government; we are actively involved.

Mr Newton:
Members in the room, and others, will understand the pressures that NIE Energy Ltd is under because of surging oil prices. However, when Mrs Smith sees the amount that she has to pay for her electricity, or reads the headlines about price increases, she will not think to herself that it is the fault of the Arabs or the Russians; she will think that is the fault of NIE Energy Ltd, her energy provider. You have said that you want to work with Government; but they will not react unless there are some proposals coming forward.

You say that you recognise the fuel poverty situation. You must propose the action to be taken to help alleviate that situation. Can you build on the initiatives that you said have been successful by allowing greater flexibility? Something has to be done to alleviate the fuel poverty situation in Northern Ireland, instances of which are much higher than in any other part of the United Kingdom.

Ms Boyd:
NIE Energy Ltd has started to roll out an initiative, which was piloted last year, with a range of partners including Citizens Advice, the Royal National Institute of Blind People, Advice NI, the Electrical Contractors’ Association and Bryson Charitable Group. The aim is to deliver benefit entitlement checks.

We are doing some work internally and externally and we are working with the fuel poverty task force, which has just been convened. We participated in the first meeting, which took place this week, to try and identify those customers who are worst off. NIE Energy Ltd is aware of every household in Northern Ireland. However, certain parts of Government and other organisations are probably better placed to tell us which customers are the worst off. That will enable us to ensure that we carry out benefit entitlement checks for those who need them most.

The pilot scheme revealed that of the 2,000 benefit checks we undertook, 42% of customers were not claiming their full benefit entitlement, which amounted to £36 per week. That is a significant amount of money and it will make a real difference. We have started to roll out that campaign.

We plan to carry out between 10,000 and 15,000 benefit checks over the next two years to reach those who are worst off. When we carry out the benefits checks, we do not just leave it at that; we also try to encourage customers to be more energy efficient by referring them to the warm homes scheme or to the NIE Energy programme, which provides free heating, discounted electricity and insulation to our lowest-paid and worst off customers.

I do not think there is any one solution to the problem. It is going to involve lots of organisations pulling together to try and identify the customers who are worst off. We must intervene and help where we can. NIE Energy Ltd does not have all the answers, but it can be part of the solution by delivering a service to customers.

We also work with a wide range of organisations, including health providers. We have just launched a scheme with Bryson Charitable Group and Gordons Chemists that involves chemists identifying customers who regularly present prescriptions for respiratory disorders, because it is those people who will struggle. We must find innovative mechanisms such as this to help people. We must take a one-stop-shop approach, instead of just focusing on energy efficiency. When we try to help a customer, we engage with them to deliver the whole package and do the best for them.

Mr Newton:
A number of examples you have given have been relatively low key. Gordons Chemist may be a great organisation but it does not represent the scale of the problem that needs to be tackled. Is there some way that the actions you are taking can be mainstreamed or publicised?

Ms Boyd:
One message we are putting out is that assistance is available and that we are working with a range of organisations. One issue that those organisations raise is that the people who put their hands up and ask for assistance are often not those who are worst off.

There is a huge amount of publicity being undertaken to promote and help raise awareness of the action we have taken — Kerstie is involved in that aspect — but we need to engage with the people who are already in touch with those who are worst off. GPs, health visitors and so on, already have the trust and knowledge of those individuals and are in a position to deliver those services.

There is also a role for local politicians in helping to promote those services, and if members can think of other channels we can use to get that message out then we would be delighted to work with the Committee.

The Deputy Chairperson:
Have you looked at the social tariffs? You said that there is a discount, but could that discount not be more generous? Could you introduce social tariffs that directly reach those in need?

Most of the people who have keypad meters in their homes represent low income families and those on benefits. You said that you do not disconnect anyone’s electricity supply, but having been caught out myself, I know that you do. I have a meter in my home. However, I cannot phone your company unless I have a direct debit account; I have to wait until the local shop opens to purchase a card. At 8.00 am in winter, when it is still dark, I have had to get my kids out to school after having run out of electricity.

Many people in vulnerable households do not have access to bank accounts, and it needs to be taken into account that some people pay for their electric by cash; you do not offer a discount scheme for those people. Are there ways in which you could look at the social tariffs? It is a scheme that could be explored and built upon — as Robin said — to be innovative and meet the needs of those who are most vulnerable.

Mr McCully:
There is an opportunity around social tariffs: however, it is about identifying and targeting the right people. The keypad product can be customised to suit specific groups of customers and we have done that in the past, working with local communities to customise a tariff around the vending hours or flexible friendly-credit hours.

We have been able to deliver the pre-payment scheme very efficiently and give those efficiency gains back to customers. We can work with customers, particularly those in greatest need, and identify ways of being even more efficient.

We have a product that offers discounted electricity during the day and in the evening. Although there is a slightly higher premium at peak time, customers can use their electricity during the discounted times and make significant reductions. Again, that product is built around the keypad.

We will continue to be innovative and to work on solutions that can be the basis for a social tariff. We could be looking at further discounts for keypad customers, if we can make those efficiency gains.

At the outset, we recognised that not many vending channels were available and that it was often difficult for people to purchase top-ups. A couple of years ago we introduced the facility whereby people could pay for top-ups by telephone, which has proved very popular. More recently, customers have been able to purchase top-ups over the internet as well, and that option is probably more appealing to students and to the private-rented sector. The phone-line service is used by around 40,000 vends a year. So, other options are available. We are also working with other organisations to make the top-up facility more accessible to customers. There are around 1,300 outlets throughout the Province at which customers can purchase electricity, and we are considering augmenting that number.

Mr Newton:
You stole my last question, Deputy Chairperson.

The Deputy Chairperson:
Sorry, I thought you had finished.

Mr Newton:
In some ways, the items you are talking about are not going to come into force quickly. It would stand NIE Energy Ltd in good stead, as a monopoly organisation, if it made some gesture — quickly — that could alleviate the problems over and above the strategy it has in place. We all recognise the problems facing the most vulnerable.

Mr McCully:
I note your points. You said that we are a monopoly organisation. That may be so, in the sense that we have not seen any competition in the domestic sector, but from a sales point of view, we account for only around 55% of the marketplace. The competition is very real, and we are regulated to within very thin margins. Therefore there is only so much that we can do. However, rest assured that we will do everything in our means to help customers through this difficult time.

The Deputy Chairperson:
Thank you for coming to the meeting today. I am sure that we will meet you again.

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