Norbury backs removal of operating and customer service costs from standing charge

Eon’s chief executive said the company would be open to moving operational costs and those associated with serving customers off the standing charge.

However, Chris Norbury told MPs that he was opposed to the idea of shifting distribution network costs onto the unit rate element of bills because of the potential impact on low incomes earners who must use high levels of energy.

Speaking at the first evidence session of the recently launched inquiry into domestic customers’ energy bills Norbury said distribution network costs should not be shifted because of the potential “distributional consequences” to low-income customers, such as dialysis patients who require a lot of electricity to run their life-saving machines. He added: “The risk is that if we move elements of standing charge onto the unit rate we could inadvertently and disproportionally affect customers we are trying to help.”

Norbury also said that any move to reform standing charges should only be introduced in conjunction with “targeted support” for customers as part of a “wider review” of affordability.

Simon Francis, co-ordinator of the End Fuel Poverty coalition, told the committee that all operational and marketing costs could be put onto unit rates.

“It might drive more competition on price so we might not see firms sponsoring Premiership football clubs,” he said.

In a later section of the hearing, Centrica chief executive Chris O’Shea called for responsibility for the smart meter programme to be handed over from retailers to installers.

Suggesting that making the the smart meter roll out “a mandatory programme” should be considered, he said: “If we want the smart grid that we all want and that will reduce costs, we should embark on a programme whereby it’s not the responsibility of retailers to instal smart meters.”

O’Shea said he would be “very happy” for Centrica’s own 1,700 strong team of smart meter installers to fit the devices for other energy retailers.

“If we split the UK up street by street rather than customer by customer, you could get quite a lot of efficiencies. If we mandate it, we could have it done in the next five years,” he said, while adding that around one in twelve of Centrica’s customers have repeatedly refused to have a smart meter installed despite repeatedly being offered one.

Around 600,000 British Gas customers, equating to 8% of the company’s customer base, have turned down a smart meter after being contacted four times, O’Shea said.

However Rachel Fletcher, director for regulation and economics at Octopus Energy, opposed mandatory installation of smart meters.

“This should not be done to consumers,” she said, adding that Octopus has customers “queuing up” to have smart meters installed.

Fletcher also criticised Ofgem’s recently introduced measures to force energy retailers to maintain capital buffers.

“The capital adequacy requirements are setting too high a bar and treat energy suppliers as if we pose the same systemic risks to the economy as banks that we don’t.”