Energy: Prices
Debate between Baroness Maddock and Baroness Verma
Baroness Verma
My Lords, I do not wish to avoid answering any questions but, given the time, I have to answer as much as I can of the questions that I am given. The Government Procurement Service purchases energy on behalf of many public sector organisations, including, I am sure, the organisations to which the noble Baroness refers. Harnessing that collective purchasing power and buying directly on the wholesale market results in lower energy costs.
Baroness Maddock (LD)
My Lords, does my noble friend remember, like me, that the present leader of the Labour Party was once the Secretary of State for Energy? Does she also remember that, far from increasing competition in the market, which is the one way that we will drive down prices, we saw competition decrease on his watch?
Baroness Verma
My noble friend is absolutely right. When the party opposite came to power, there were 14 energy companies. When it left, there were six. I am glad to announce that since then eight independent generators have come on the scene.
Energy Bill
Debate between Baroness Maddock and Baroness Verma
Lord O'Neill of Clackmannan
My Lords, I start by declaring an interest: I am a vice-president of National Energy Action and the president of Energy Action Scotland. The Government have made some moves on this issue in the course of the Bill’s passage, but it would help if they would add to the list of objectives they have set themselves the one concerning fuel poverty mentioned in this amendment tonight. That would be a signal that this is not an issue of party conflict, and indeed that the Government have recognised that one of the deficiencies in the Bill is that insufficient attention was initially given to fuel poverty.
Now that we have had recognition, we can probably argue about the niceties when the appropriate time comes. We are all in favour of the earliest possible elimination of fuel poverty. It is not just about prices. It is about handling our grossly inadequate housing stock. Before too long we may well have to look afresh at the Green Deal that at the moment has, as far as I know, attracted something like 57 successful completions—one for every one of Heinz’s varieties; that is perhaps all that one could say about the proposal. People may find the money and find it attractive to accept the Green Deal at the 7.5% interest that is being charged, but I very much doubt it.
More has to be done on this. It would be helpful to have a clear indication that an opportunity is available with this amendment to put in the Bill, as one of the overarching targets of the Government’s energy policy, that we should as a high priority be able to eliminate fuel poverty. If we all agree on it, why is it not there? It is not a particularly controversial amendment. It is one that would enhance the credibility of the Bill and make easier the passage of future elements in it, which I am sure the Minister is looking forward to bringing before this House.
Baroness Verma
My Lords, I thank the noble Lord, Lord Whitty, for his amendment and all noble Lords who have taken part in this short but important debate. It gives me an opportunity to lay out the Government’s objectives for reform throughout the development of the EMR proposals. These objectives have been set out in the published documents, from our White Paper in July 2011 and within Clause 5, to reflect our aims of reform. This does not mean that other aims, such as minimising fuel poverty, are not important. I agree with noble Lords that this area is incredibly important to us all. As outlined in Clause 5(2)(d), the Secretary of State will have regard to the likely cost of electricity to consumers. This means all consumers, including the fuel poor.
Our analysis suggests that, as a result of EMR, household electricity bills will be on average around 9%, or £63, lower per year over the period 2016 to 2030, relative to what they would have been if decarbonisation were achieved through existing policy instruments. The impact of EMR will be to reduce fuel poverty compared to what it would have been without those policies in place.
However, we should not be complacent. With or without EMR, electricity prices are likely to increase over time due to rising fossil fuel prices and the rising cost of carbon. This is why we have in place a strong package of measures to support low-income and vulnerable households with their energy costs. The energy company obligation ensures that help goes to low-income and vulnerable households to enable them to heat their homes more affordably on a long-term basis. Through the affordable warmth and carbon-saving communities obligations, we anticipate that support should reach around 230,000 low-income households each year. In addition, this winter around 2 million households will get help under the warm home discount scheme, including over 1 million of the poorest pensioners, who will receive £135 off their electricity bill.
In the last financial year, winter fuel payments helped over 12.5 million older people in over 9 million households with their fuel bills, providing between £100 and £300 tax-free to help pay for heating bills. During the same period, 5.8 million cold weather payments were made, targeted at those households that are most vulnerable to the cold. This Government are committed to helping the fuel poor, now and in the future. That is why earlier this year I proposed amendments to the Warm Homes and Energy Conservation Act, to put in place a new, rigorous and flexible framework for measuring the Government’s progress in tackling fuel poverty in England. As we move forward with ensuring a safe low-carbon future we must be absolutely sure that we do not leave the fuel poor behind.
The noble Lord, Lord Whitty, mentioned the Prime Minister’s announcements last week on green taxes and the review of their impact on the fuel poor. The Government are looking at how to get people’s energy bills as low as possible to help the very families to which the noble Lord refers. We are already increasing competition by bringing new players into the market to offer consumers real choice. The most vulnerable are getting direct help with their bills this winter. We will continue this work to make sure that consumers get a better deal. No one is talking about changing support for large-scale renewables or feed-in tariffs. We want to make sure that those who need help get help. I hope that the noble Lord, Lord Whitty, finds my explanation reassuring and on that basis will withdraw his amendment.
Baroness Maddock
Before the Minister sits down, can I apologise to the House for not declaring my interest? Like the noble Lord, Lord O’Neill of Clackmannan, I am a vice-president of National Energy Action, which is a charity that works towards eradicating fuel poverty.
Energy Bill
Debate between Baroness Maddock and Baroness Verma
Baroness Maddock
My Lords, I support my noble friends in trying to highlight the importance of demand reduction and the fact that this Bill came rather late to it, as has been said by others. I was somewhat confused by some of the earlier comments from those who said that they were in favour of energy efficiency but were not sure about demand reduction. If you increase energy efficiency, you reduce demand. That is fairly logical. I find some of the comments a little curious.
I emphasise the fact that if the Government are having only one pilot that will be only around the capacity market, that will not be good enough, which is why we have tabled these amendments. As regards the amendment in the name of my noble friend Lord Roper, if the Government were to take something like that forward, we could have a demonstration about which scheme or schemes are the most effective in delivering permanent demand reduction. In a sense, that ties in with the amendment of my noble friend Lord Teverson. There was a lot of criticism of my noble friend and talk about the difference between demand management and demand reduction. They are two different things. We have had some strange logic in today’s debate.
Unless we have several pilots, there will be no meaningful comparison and we will not be able to decide which are the most cost-effective and the most effective in reducing demand. I support my noble friends in their efforts to make demand reduction more of a priority in this Bill.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma)
My Lords, I thank my noble friends for enabling me to lay out further a response to the amendment of my noble friend Lord Teverson, which aims to make energy efficiency a general consideration when carrying out key functions of electricity market reform. I also welcome the cross-party support expressed in this House for electricity demand reduction measures and energy efficiency generally.
While I support the sentiment behind the amendment, we consider energy efficiency to be more than just about the efficient use of electricity, on which the amendment appears to focus. Therefore, the danger of this amendment is that, in focusing on efficiency of electricity use, it risks diverting attention from the wider importance of energy efficiency, on which we are already committed to progressing. When exercising capacity market functions, proposed new paragraph (f) would require the Secretary of State to give priority to demand side management and demand reduction measures over increased electricity generating capacity wherever this was economically appropriate.
The capacity market is being designed to allow demand-side response and permanent electricity demand reduction measures to participate in the capacity market. This is a proven way of delivering electricity demand reduction and is already working successfully in the United States. The auction process is a fundamental pillar of the capacity market and all resources that can contribute to security of supply. Demand-side response, permanent demand reduction and generation are able to compete against each other for support in the long term. This will ensure that demand-side measures that deliver the same level of security of supply benefits as generation at a lower cost will always be rewarded at the expense of generation. Accordingly, I hope that my noble friend will see that proposed new paragraph (f) will not add to the practical effort of what is already envisaged for the capacity market.
Proposed new paragraph (g) of Amendment 51N would require the Government to measure the energy intensity of the UK economy per unit of GDP and to improve this progressively. Again, while I recognise the intention behind this amendment, it would duplicate the existing domestic and European policies, to which my noble friend referred, in the recently adopted EU energy efficiency directive, which is aimed at driving improvements in energy efficiency across the EU and contains, among other measures, two key targets for member states, to which my noble friend also referred. The first is a non-binding national energy efficiency target for 2020, which is equivalent to reducing primary energy consumption by 20% by 2020. The second is a binding target to save 1.5% of additional energy per year, to be achieved between 2014 and 2020, through the deployment of an energy supplier obligation and/or equivalent policy measures.
The UK recently submitted its target to the European Commission under Article 3 of the directive. Under the target, the UK is projected to reduce final energy intensity by 26% between 2007 and 2020, maintaining our position as one of the least energy-intensive economies in Europe. In terms of domestic action, this Government have shown their commitment to supporting every opportunity for energy-efficiency measures. The policies that we have put in place, such as the Green Deal, will help households and businesses reduce demand by installing energy-efficiency improvements, with some or all of the cost paid for from the savings on their energy bills. In addition, the energy efficiency strategy sets out our plans for realising the significant untapped potential that remains in this key sector. Between the measures that we have put in place domestically and the new targets established through the directive, there is already considerable momentum that is contributing to making the UK economy more energy efficient.
Amendment 55ZA in the name of my noble friend Lord Roper, which aims to make an electricity demand reduction pilot compulsory, raises an issue that has come up a number of times at Second Reading: namely, that multiple pilots are necessary in order to test a variety of approaches. While I support my noble friend’s aim of ensuring that we test variations of the key elements associated with demand reduction projects, the Secretary of State already has the ability to design and run a pilot, or pilots, to test different approaches.
Clause 37 is simply a spending power to authorise the spending of money for such a purpose. I appreciate the concern that this amendment demonstrates about ensuring that sufficient funds are available for a demand reduction pilot. However, since it depends on the arrangements for the capacity agreements made in Clauses 22 and 24, funding the pilot in this way would have to wait until the affirmative regulations implementing the capacity market are in place. We considered this option but discounted it because the process would delay considerably the start of a pilot, and, as I have said, the Government are committed to taking forward a pilot with funds that are already available to it.
Before I ask my noble friend to withdraw his amendment, I will refer back to a few points raised during the debate. First, the noble Lord, Lord Cameron, referred to smart meters. I agree with him that increasing developments in new technologies—and the smart meter is one example—will ensure that consumers will have more control over how energy is being used. It is one of a number of measures that we are taking. He also asked why we are not getting on with a pilot. At the moment, there are a number of uncertainties. We are working out how a pilot would lead to a better understanding of the potential benefits of a financial incentive and of the market appetite for such an approach. We are considering detailed elements of how the design of that pilot, its monitoring and its location would work. The noble Lord also mentioned that Germany has 33% of its grid powered by solar. I respond to that by saying that Germany also has much higher energy costs than the UK, of both gas and electricity. We are delivering a low-carbon energy mix, at least cost to the consumer: this is at the heart of what we are trying to achieve through the Bill.
My noble friend Lord Roper asked why DSR and EDR were not in the draft delivery plan. Proposals on demand-side response were detailed in the capacity market framework publication of 27 June. On electricity demand, we are committed to a piloting approach, as I have said already. This commitment—to the pilot—was included on page 15 of the draft delivery plan.
Baroness Maddock
My Lords, I support the noble Lord, Lord Whitty. As I have declared before, I am vice-president of National Energy Action, which has been working with Ofgem on this because there is the potential to reduce prices for vulnerable customers in fuel poverty. As the noble Lord said, it is rather surprising that the distribution network operators have not been specifically mentioned with regard to electricity demand reduction because they have the ability to reduce the cost of network reinforcements, which would reduce prices.
We are always talking about what is going to add to the cost of fuel but this amendment would reduce prices. If we are moving to more people having domestic electric heating, it is particularly important to find ways of reducing the cost. There is quite a lot of work going on here. Indeed, NEA has been working with Ofgem on some of these proposals. I give my strong support to this and I hope that the Minister can indicate that the Government recognise that this is an important part of what we are all trying to achieve.
Baroness Verma
My Lords, I thank the noble Lord, Lord Whitty, and the noble Baroness, Lady Worthington, for tabling these amendments, which highlight the important role that the distribution network operators play in our electricity system, including in supporting electricity demand reduction. Amendment 52B seeks to ensure that distribution network operators take account of government policy as set out in Clause 5. Amendment 55ZZC would insert a requirement in Clause 37 for the Secretary of State to take account of the role of distribution network operators in a pilot scheme to permanently reduce electricity use.
Ofgem regulates through a licensing system and electricity distribution network operators need to obtain licences from Ofgem to participate in the energy market. An important aspect of this system is Ofgem’s power to set regulatory price controls, and its price control framework. This, as the noble Lord pointed out, is known as RIIO, and is well aligned with the Government’s energy policy, including the requirement for network companies to invest efficiently to ensure continued safe and reliable services, to innovate to reduce network costs for current and future consumers, and to play a full role in delivering a low-carbon economy and wider environmental objectives.
As we have previously debated, the Government are providing even greater clarity, as Clauses 119 to 126 will enable the Secretary of State to introduce a new strategy and policy statement for Ofgem to help improve alignment with government policies. In addition, my department works closely with DNOs and the wider industry, through groups such as the Smart Grid Forum, to satisfy ourselves that strategic investment decisions are being made.
On the specific issue of efficiency and reducing demand, DNOs have a licence condition on them to reduce losses, and they have been required to set out in their business plans how they will reduce losses, and to publish annual reports on what loss reductions they planned and what they actually achieved. A discretionary reward of up to £32 million will be made available by Ofgem, over the price control period, for efficient and innovative loss reduction initiatives.
In future price control reviews, when more reliable data may be available through smart meters and smart grid technology on the networks, Ofgem expects to introduce further incentives. Furthermore, Ofgem has recently extended the scope of its Low Carbon Network Fund to enable DNOs to carry out electricity demand reduction projects, which will complement the Government’s larger-scale pilot.
To reiterate the points made in our earlier debate on the electricity demand reduction pilot, while I support the noble Lord’s aim of ensuring that we test variations of the key elements associated with demand reduction projects, the Secretary of State already has the ability to design and run a pilot—or pilots—to test different approaches.
Clause 37, as I said earlier, is simply a spending power; it authorises the spending of money for EDR pilots. Our intention is design the pilot in a way that encourages projects to be delivered by a variety of organisations, including DNOs, provided the projects meet the criteria that we develop.
The noble Lord, Lord Whitty, asked why we cannot deliver eight year-old DNO plans without details under EMR. We have set out clear policy intentions—for instance in the renewables road map published last year, and in our various announcements on EMR—to move to a low-carbon energy mix. This informs the development of the DNO plans.
The noble Lord also asked why we had moved to an eight-year period. This was to encourage DNOs to work more strategically and to invest over a longer term, instead of making short-term investment decisions.
I hope the noble Lord is reassured that I recognise the important role that DNOs are already able to play in helping to realise reductions in electricity use. I hope that on that basis he feels able to withdraw his amendment.
Energy Bill
Debate between Baroness Maddock and Baroness Verma
Baroness Maddock
My Lords, I do not know whether noble Lords are aware but some local councils have energy roadshows, which they take round to the town halls in small towns. They did it in Northumberland. Some of them have a trailer that they take round. I think that the energy centre in Milton Keynes used to have a roadshow, so there are some things that could be built on. However, I cannot see how a Government could afford to put something all across the country and I think we ought to build on what we have.
Baroness Verma
My Lords, I thank my noble friend Lord Teverson and the noble Lord, Lord Hunt, for their amendments concerning consumer access to information. I start by saying to my noble friend and to the noble Lord, Lord O’Neill, that I take the issues around data protection and data security very seriously. I hope that in responding to both noble Lords I will be able to reassure them of the measures we have in place. However, I will address that at the end.
Amendment 51ZDA relates to the ownership of, and access to, the energy consumption data that will be stored by smart meters. I am grateful to my noble friend for the opportunity to explain the important regulatory changes on smart metering data access and privacy that have came into effect since last month. The smart meter data access framework is based on the principle that consumers should have a choice about how their data are used and by whom. The first step is that energy consumption data will be stored by smart meters themselves, in people’s homes. The meters will be capable of storing at least 24 months-worth of historic data. The second step is that consumers will have control and choice over who can access the data held on those smart meters.
Consumers will be able to access their data directly from the meter in their home. Energy suppliers are required to ensure that consumers are able to do this. As part of their smart meter installation, all domestic consumers will be offered an in-home display. This will connect them directly to their smart meter and show them how much energy they are using, in real time and historically, and what it is costing them. We expect other innovative products to be developed that will connect directly to the smart meter, which consumers will be able to purchase on the high street.
Consumers can also choose to give their energy supplier, or anyone else offering them an attractive product or service, remote access to their data. This enables companies to offer services to consumers such as regular home energy reports. The only exception, where consumers do not have a choice, is that the meters will provide energy suppliers with the data required for billing or other regulated duties. One of the key benefits of smart metering for consumers is the end of estimated billing. This data access framework, embedding the principles of consumer choice and control, has been implemented through changes to energy suppliers’ licences and will be enforced by Ofgem.
Before I turn to the amendment of the noble Lord, Lord Hunt, I will respond to two points. Both noble Lords asked about data control and engagement. While I have given noble Lords a broad overview, we also have in place a central consumer delivery body that would be able to reach out and reassure consumers with an independent voice on how their data are being kept. We have come to create the mechanism through which the data are stored with advice from the National Technical Authority for Information Assurance, which is linked to the Government’s GCHQ; I hate acronyms. We therefore know that we have worked with a huge amount of expertise on national data security. The noble Lord, Lord O’Neill, will welcome the appointment of his colleague the noble Baroness, Lady McDonagh, as the chairman of the central delivery body.
The other mechanism, which I have just mentioned, is the data and communications company. This will effectively be the mechanism through which all information will go. It has security on the front and back ends. The information that will be utilised from consumers’ homes cannot be accessed unless it has been accredited to the suppliers who have signed up through their licence conditions to the utilisation of smart meters. There is a huge amount of information out there that I urge noble Lords to access. If noble Lords would like me to, I am more than happy to ensure that they receive the updated frameworks and codes of practice that we are putting out there to ensure that there is absolute privacy for and security on data for consumers. We have worked hard to ensure that we satisfy the sort of concerns and fears that noble Lords are raising.
I now turn to Amendment 51AA of the noble Lord, Lord Hunt. I, like the noble Baroness, Lady Worthington, support the sentiment behind the amendment concerning the provision of energy information to consumers. The first step to saving energy is to receive reliable, quality advice about energy efficiency. Generic advice from a high street shop will only get you to a certain stage of information availability. The best approach is to get personalised advice that is tailored to your own home. This is the only way to ensure that recommendations and savings estimates are truly meaningful for the consumer. The Green Deal assessment does exactly that.
The Green Deal assessment provides detailed advice about the range of options which might be suitable for a particular property, including insulation and other efficiency measures, renewable heating systems and options for generating low-carbon electricity, like solar panels. Householders also receive advice on how they use energy through an occupancy assessment. It is still early days, but awareness of the scheme has grown rapidly. I am pleased to say that nearly 40,000 Green Deal assessments had been completed by mid-June, with thousands happening every month. Physical demonstrations are always a highly effective way to raise consumer awareness of the measures available. That is why we are supporting the development of a national “open homes” network to make it easy for people to see how homes can be improved by energy-saving retrofits.
Energy Bill
Debate between Baroness Maddock and Baroness Verma(11 years, 4 months ago)
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Baroness Verma
My Lords, as I said earlier, I am taking the amendment away and shall reflect on what the right reverend Prelate the Bishop of Chester has raised. Like noble Lords, I am very keen that information is available, simple and understandable, but I am also keen to ensure that I can deliver what I am able to. Part of that is by taking this away and giving it further consideration.
Baroness Maddock
I am grateful to the Minister for her explanation. I have to say that the proposal is fairly simple and I cannot see that it would damage the Bill tremendously if it were in there, but I suppose that it is too much to hope for. When I was in the Commons, I once got a Minister to accept an amendment in its entirety and I practically fell off my chair as he said it. At that time I was the only Lib Dem on the Committee. I had a whole raft of amendments and was busy looking at my notes for the next amendment when I suddenly heard what he said. I am disappointed that the Minister today was not able to do that, but never mind.
I thank her for taking this issue seriously, because we all think that it is important. The amendment goes to the heart of what we are trying to do about getting better information about tariffs to enable people to make decisions. It is clear to me, as I commented in the previous amendments, that people working with those who could do with better tariffs are finding it very difficult to do so because it is so complicated. The simpler that we can make things, the more chance we have of achieving the aims that we all have in the section that deals with tariffs. I am pleased and disappointed all at the same time, but I recognise that we are where we are and beg leave to withdraw the amendment.
Energy Bill
Debate between Baroness Maddock and Baroness Verma
Baroness Verma
My Lords, I agree that fuel poverty is a real and serious problem faced by many households today. It is one that this Government are determined to address. The intention of Amendments 15 and 23 is to require the Government to consider the impact on the fuel poor of setting a decarbonisation target and provide for mitigating action to offset any consequential impact. We have already taken significant action and I disagree with the noble Lord, Lord Whitty, when he says that ECO is not working. It is early days. ECO works alongside the Green Deal and ensures that help goes to low-income and vulnerable households to enable them to heat their homes more affordably. Energy efficiency measures have already helped 75,000 households this year. It is a long-term programme and, as with all programmes that are implemented over a long period of time, the results are going to be a lot slower than perhaps one anticipates. However, that is because there are a number of processes that people have to go through.
As part of the spending round, last week’s government spending review announced an increased budget of £320 million for the warm home discount in 2015-16, which I hope makes clear our commitment to continuing action to tackle fuel poverty. The warm home discount reaches 2 million households a year, including more than 1 million of the poorest pensioners. It offers direct support when and where it is needed the most. So we are already taking considerable action.
Fuel poverty is already covered, in part, by Clause 2(2)(e), which requires the likely impact on fuel poverty to be taken into account. However, I am sympathetic to the concern expressed by my noble friend Lady Maddock and the noble Baroness, Lady Liddell, that we must not lose sight of the impact on the fuel poor as we seek to ensure we have a safe, secure, low-carbon future. There are issues with the suggested amendments as drafted which mean I cannot accept them. However, I undertake to consider this issue further and hope, on that basis, that my noble friend Lady Maddock will agree to withdraw her amendment and that the noble Baroness, Lady Liddell, will not press hers when the time comes.
Baroness Maddock
My Lords, I thank the Minister for her reply and thank all noble Lords who joined in this short debate. I tried to keep my remarks fairly brief to begin with because I was conscious of the time but was very grateful that noble Lords who joined in all brought in really important points to make the case that I was trying to make. I am also grateful to the noble Baroness for indicating that, as we go through the Bill, we may be able to have something a little more definite.
What really concerned me was that we have all sorts of legislation around the area of energy and energy efficiency and I wanted to make sure that we are joining things up. That is why I mentioned the Warm Homes and Energy Conservation Act. The Government have obligations under that to do certain things, and those obligations will be affected by what is in this Bill. We need to be quite clear on how we are going to deal with it. As I and other noble Lords have indicated, some of the schemes that brought quite a bit of help to those with homes that were not energy efficient have changed.
In the light of where we are going in the future and in the light of this Bill, we need to be conscious of joined-up government, with particular regard to vulnerable people. In this case, of course, I am concerned with those who are vulnerable—one Member said they were not comfortable with the expression “fuel poverty”—in the sense that they cannot afford to keep their homes warm. As I said at Second Reading, it is something I have campaigned on for 40 years, and I am always disappointed. The NEA, the charity that champions the cause of the fuel poor, hoped when it was set up that it would not still be going 25 years later and that we could have done something about it. I hope that, at least in this legislation, we can recognise that we have not done too well and that we have to have regard to it. I look forward to what the Minister may come forward with at a later stage but, in the mean time, beg leave to withdraw the amendment.