Domestic Gas and Electricity (Tariff Cap) Bill

Debate between Lord Carlile of Berriew and Baroness Featherstone

Committee: 1st sitting (Hansard): House of Lords
Monday 11th June 2018 Grand Committee

[Baroness Featherstone]

I thank the noble Lord. This amendment is about the duty on energy companies to communicate properly with their customers. I raised concerns at Second Reading that there is a possibility that energy companies might not be totally up front and honest with customers about the circumstances surrounding the introduction and execution of an energy price cap. I am particularly concerned that some companies may not be up front about the facts: this is a temporary cap, ordered by Parliament, the level of which is set by Ofgem to protect consumers on standard and default tariffs from excessive charging. Companies must not seek to absolve themselves from blame for the fact that a cap is being introduced—an action that they have necessitated. Nor must they be able to play it off as some sort of benevolence introduced by them to help their customers. I am also concerned that companies might imply that the cap brings about the best deal for customers and indicates in some way that they need not shop around.

Communications from suppliers have not always been totally clear, but they need to be. The last thing we need in setting and executing the cap is for communications to confuse, entice or entrap customers into any false beliefs or misunderstandings. The amendment seeks to ensure that suppliers cannot use the setting of a cap as a marketing opportunity. Companies are very clever in their use of marketing language to seduce customers into perhaps believing that the cap is protecting them in more ways than it was created for. We should not provide any opportunity for suppliers to mislead consumers, accidentally or otherwise, into believing that the price cap is beneficial in any other way or being put in place for any purpose other than that for which it was intended; namely, that it is as a temporary cap until such time as circumstances dictate that it must be lifted. It must not allow the supplier to appear to be the instigator of the cap. Nor must the cap be called anything other than what it is: a temporary cap. I am concerned about the wording being used to describe the cap. A company might say that it is a beneficial cap or a protective cap, but there should not be anything to indicate a benefit in the name of the cap.

The amendment is very dictatorial, particularly for a Liberal. It states that the term used should be simply that it is a temporary cap and that, once it has been implemented, all companies should use that phrase in reference to it. There cannot then be any dodging around it. Since writing the amendment, I think it needs to go further and perhaps disallow any words around the name too so that suppliers cannot add adjectives to it. I am not sure how particular we can get on this, but I refer to words such as “beneficial” or “protective” temporary cap. It may seem picky and dictatorial, but my background pre-politics was in marketing and design, and it takes one to know one. Communications are hugely important. There can be no objection to calling it what it is: a temporary cap. In that way, no supplier will be able to use the name of the cap or its description inappropriately.

In the same vein, it should also be obligatory for suppliers to make it clear that the cap does not mean that the price under the cap will necessarily be the best price or the cheapest price. In any communications, suppliers must include clear and accessible information about switching energy suppliers.

Amendment 22 from us and Amendment 23 from Labour concern the provisions in the Bill surrounding the publication of information regarding variations in the cap. Clause 4 states that if the authority is thinking about modifying the price cap, it must notify holders of supply licences, but there is no requirement once a decision is made for companies to inform customers. These amendments put this requirement into the Bill.

Lastly in the group, Amendment 38 is in the name of my noble friend Lord Teverson, who cannot be here today. He wanted Ofgem to have powers to regulate the websites of energy suppliers and energy price comparison site operators. The purpose of that power would be to ensure that consumers are presented with objective information on immediate and future costs and matters of customer service sufficient to make informed decisions about energy supplier choice. I know he wanted a specific requirement for all such sites to list the immediate cost of energy to the consumer, together with, and in the same format, future costs when the initial contract term ends. This would protect consumers from being seduced by a good offer and a good price only to be shortly disappointed to find a huge hike when the first contract ends. He wanted a requirement also that, for each tariff, the terms under which price variations can be applied are clearly shown. However, much of that was out of scope, so Amendment 38 is a lesser version. It requires the authority to modify the supply licence conditions to ensure that the information presented on energy companies’ websites is “sufficiently objective” and to modify the Ofgem Confidence Code so that only price comparison websites that are similarly objective can be accredited by the code.

[Lord Carlile of Berriew (CB)]

My Lords, I want to speak, if I may, in favour of Amendment 23 in the name of the noble Lord, Lord Grantchester. At Second Reading, I referred briefly to my attempts to change tariff with my electricity and gas supplier. I think I described it as a parlour game on a computer system that did not always work. It seems to me that what we need to give the public is, first, clarity and, secondly, the capacity to compare one supplier with another.

Let me give two analogies, one good and one bad. The first occurred to me on Saturday when I was standing at a bus stop in central London alongside a hoarding advertising a new credit card deal. At the bottom of the advertisement, in big letters, it said, “Interest rate 57%”. On the face of it, that is quite a high interest rate, but the company has to advertise that interest rate so that it is really clear to the consumer. That is the sort of clarity we need. The bad analogy relates to train fares. Noble Lords who travel a great deal by train may, like me, go on to one of the internet sites that offer you the timetable and the train fares. With train fares there is absolutely no way of making a decent comparison between the different options available. Indeed, it is so complicated that, if you buy your ticket in Llandrindod Wells to go to Paddington, it may be a different price for precisely the same ticket if you buy it in Paddington to go to Llandrindod Wells.

If we are going to do this job now in the Bill, what is required is to ensure that consumers are able to make a proper comparison between the supplier they have and the alternative suppliers available. It does not mean that they will necessarily take the cheapest supplier. The noble Lord, Lord Lennie, made a point about green suppliers. Some of us might decide that we are prepared to pay a few pounds extra for the purposes of a better environment, but at the moment we have no way of knowing what sort of value green suppliers present. We have to go on to their website and take their word for it, which is not necessarily good enough. Amendment 23 at least makes a start in achieving those joint aims of clarity and the ability to compare.