Domestic Gas and Electricity (Tariff Cap) Bill

Debate between Lord Carlile of Berriew and Lord Young of Norwood Green

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

[Lord Young of Norwood Green]

My Lords, there is no danger of my repeating what I said at Second Reading because unfortunately I missed the cut and was too late to make a contribution. I do not want to repeat what has been said by the noble and learned Lords. I am trying to think of the collective noun for a group of such distinguished legal experts. I am not sure “a clutch” does them justice—if your Lordships will pardon the pun.

[Lord Carlile of Berriew]

Would the noble Lord accept “a brief”? But that depends on him paying the fees.

[Lord Young of Norwood Green]

That is a given! I will not go through the arguments again. I concur with them. The case has been made and I hope the Minister is listening. I, too, look forward to his alternative response—or perhaps there has been an epiphany and he will accept the validity of the arguments that have been so ably put.

I want to make a few points that have not been made. It is important to understand the context within which price caps are going to be set. A number of times in the debate reference has been made to the introduction of smart meters. That is not going to happen by chance, it is going to happen because the major suppliers have been told that they have to be introduced. The cost is not insignificant: 50 million smart meters will need to be installed at a cost of something like £7 billion. There is a long way to go: only about 12% of the smart meter installation has been completed.

An independent analysis by an energy sector expert points out:

“An energy price cap that pushes the industry as a whole to break-even or losses has significant implications on the smart meter roll-out programme”,


and that it is,

“absolutely essential to secure the cost-effective deployment of electric vehicles in addition to enabling the reduction of switching times to 24 hours”.

That will be one of the benefits of the smart meter rollout. If we want to encourage electric vehicles—which we do, as we know—smart meters need to be a key part of that.

I was also interested to see that the report talked about the incentives to switch. It said:

“The cap is intended to be set at a level that provides customers incentives to switch. When the CMA surveyed customers to understand the level of savings from switching that would encourage them to switch, it found that the median amount of savings”,


for customers was £120. It went on:

“At savings of £50, only 7% of customers were interested in switching … The survey did not find any meaningful variation in the level of savings required by different demographic groups”.


That is a really interesting bit of analysis, ironically by the Competition and Markets Authority.

I will go on to what we expect from our major energy suppliers, which are vital to the UK economy and the day-to-day lives of British citizens. They account for something like 2.3% of gross domestic product and £100 billion of investment has been earmarked to 2020-21 to ensure that the lights stay on and customers have reliable, affordable and low-carbon energy. There are 600,000 people employed in the sector—even more, if you include indirect jobs—and it is at the forefront of essential new technology, as I have said, such as the smart meter rollout. That will facilitate the rollout of electric vehicles, which will be a £200 billion global market in 2019.

Energy companies are at the forefront of training apprentices. For example, Centrica has six training academies, employs 27,000 people in the UK and has trained 1,000 apprentices a year in recent years, including 2,500 smart apprentices. These are no mean considerations and they do not just happen. I hope there is recognition of this. Energy companies supply households with their gas and electricity, and the market is more open and competitive than it has ever been. Some of this statistical evidence is interesting. We have had an argument about suppliers but the fact is that there are more suppliers than before. I do not disagree with my noble friend about concentration but there has been significant switching. Nearly 400,000 customers switched during January 2018, a 14% increase on the same period last year, while 5.5 million customers—one in six—switched supplier in 2017. Awareness of the ability to switch is high; I have already given the Committee that information. It is interesting that in the BEIS tracker polling, public concern about energy bills does not rank higher than it does about other household bills.

I want to make my position clear. I am not in hock to the energy companies—I will finish in a minute—and I am in favour of a price cap, but it has to be administered in a way that takes cognisance of the role that energy companies play. It also has to be done in an appropriate way. Unfortunately, my quote from the Green Paper was anticipated by the noble Lord, Lord Hunt, so I will not go through that again but I believe that the evidence to support this amendment is overwhelming and, on those grounds, I support him.