Electricity and Gas (Carbon Emissions and Community Energy Saving) (Amendment) Order 2011

Debate between Lord Marland and Baroness Parminter

Wednesday 14th December 2011 Grand Committee

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland)]

My Lords, these are minor and technical amendments that I hope will not delay the Committee for too long, but which have the potential for a profound impact for all small energy suppliers, being pro-growth and pro-competition. The amendments are deregulatory in nature, cutting red tape for smaller companies to enable them to compete on a more equal footing with the large, established suppliers.

The order gives effect to the outcome of a public consultation process earlier this year, and makes changes to the carbon emissions reduction target, CERT, and the community energy saving programme, CESP. Its primary effect is to increase the threshold at which suppliers are obliged to participate in both schemes from 50,000 customers to 250,000 customers. It further ensures that obligated parties under CERT, as is already allowed under CESP, can trade completed qualifying activity to the end of the programme. This will provide suppliers with flexibility for longer in terms of the options they have to meet their binding obligations. I emphasise that increasing the threshold for CERT and CESP does not mean that customers of small suppliers will lose out. Customers of small suppliers can still benefit from CESP and CERT because suppliers are free to promote these schemes to any householder, not only those customers they supply.

I am sure we can all agree on the importance of increasing competition in the domestic retail market. Competition is key to keeping prices as low as possible for consumers. However, with six large, established suppliers currently supplying 99 per cent of all households, it is clear that we need to take action to reduce barriers to market entry and growth so that smaller companies can begin to challenge the dominance of these big players. This measure is one step to enabling just that.

Energy suppliers with fewer than 50,000 domestic energy customers are already exempt from participation in CERT and CESP. This was to help avoid creating a barrier to new entrant suppliers whereby they would need to commit significant investment to set up CERT and CESP environmental programmes while still at an early stage. We recognise that compliance with some of the Government’s environmental and social programmes places a disproportionate burden on small suppliers as it involves significant fixed costs for which suppliers are not compensated.

The current threshold disincentivises suppliers from growing beyond 50,000 customers. Increasing it to 250,000 will ensure that no small suppliers will be required to participate in the final year of CERT and CESP. This will help boost competition without imposing new costs on the larger suppliers, burdening those suppliers’ customers or reducing the effectiveness of the programmes. Boosting competition is essential to drive innovation, improve the service customers receive from their supplier, and to keep prices as low as possible. I commend this order to the Committee.

[Baroness Parminter]

My Lords, on our Benches we certainly support the measures in the order. I have three quick questions for the Minister.

It is important that the Government are seen to support a fair and workable distribution of conditions for suppliers participating in environmental and social schemes. In looking at the options, did the department consider a more tapered introduction, say with a small 50,000-strong block of customers rather than the cliff edge of 250,000? If it was considered, why was that approach not adopted? If it was not, might it be as the Government look at future schemes in the area?

My second question is: what estimates are there of the number of new suppliers that will enter the market as a result of this change in regulation? There is no guarantee that smaller suppliers will mean a reduction in the price of a householder’s bills, but we all know that we need to try to cut energy bills and end the dominance of the larger six.

In that regard—supplementary to it—I say that the Minister might find it hard to answer that question because, even if we change this regulation, that will not be the only barrier that prevents people coming into the market. Many of the other barriers, such as liquidity, are outside the Government’s control. Might the Minister take this opportunity to comment on what negotiations or discussions he has had with Ofgem about some of those other barriers to entry into the market, and about whether it intends to act on them in the near future?

[Baroness Smith of Basildon]

My Lords, I thank the noble Lord, Lord Marland, for his introduction. This change is relatively moderate, minor and technical but it is generally welcomed. The issues that I want to raise are similar to those raised by the noble Baroness, Lady Parminter. Although I welcome the change, I am not sure how much impact it will have, and I have given some indication to the noble Lord of the questions with which I shall probe him for explanation.

Raising the threshold of CERT and CESP from 50,000 to 250,000 customers will benefit smaller suppliers that have reached, are about to reach or are just over the threshold and would struggle to meet the obligations imposed on them, but how many energy suppliers will that affect? I assume that the department has made some assessment or estimate of how many energy suppliers have reached that level and will benefit from not having to fulfil the obligation under CERT or CESP at this time. Any information that the Minister has on the scale of the impact and an indication of the number of companies or customers would be welcome.

The noble Baroness, Lady Parminter, also raised the issue of the impact there could be on bills. Has any assessment been made of the smaller companies, having been relieved of the obligations, passing on the savings that they make to customers? If smaller companies no longer have those obligations, presumably that will assist them with their profit margin. Is it expected that the customer will receive some benefit? My understanding is that, in effect, the larger companies pick up the tab of the obligations not being undertaken in future by smaller companies. Is there any expectation of additional cost being passed on to the customer from the larger companies?

It may be more to do with my lack of computer skills than the DECC website, but I could not find the consultation there. The Minister rightly laughs at me, but I challenge him to find it. I was interested to see whether any responses to the consultation had not been satisfied by the order. The issue that has been raised already is tapering, but I am not sure about it because I could not access the consultation. Did the Government consider tapering the threshold for obligations? Even under the new proposed higher level, which we welcome, there is still an issue about there being an absolute limit at which substantial obligations come into force. Were there representations and responses from the smaller suppliers about a more gradual and graduated approach? If so, were they considered by the Government and what was their reason for rejecting any such taper?

The impact assessment commented on the costs. Is there any impact on carbon or is this measure carbon- neutral? Paragraph 3 of the Explanatory Memorandum, which is headed: “Matters of Special Interest to the Joint Committee on Statutory Instruments”, made the point that there was a delay in the Government announcing their intention to pursue this order change —that was announced in June—because they were considering wider possible changes to the CERT scheme. They are ongoing and are being pursued at the same time as the amendments presented here because they are under strict time constraints. If the Minister could expand on that and say anything about the changes that the Government are looking to introduce, that would be helpful.

Finally, I welcome the Minister’s comments about how essential it is to have market reform if we are to do anything to benefit consumers and assist them with energy prices. As he said, this is just one step. It is a small step but it is welcome. If he can reassure me as regards the points that I have raised, I would be grateful.

Energy: Feed-in Tariffs

Debate between Lord Marland and Baroness Parminter

Monday 31st October 2011 Lords Chamber

[Baroness Parminter]

My Lords, given that the coalition agreement includes a strong commitment to encouraging community ownership of renewable energy projects, what advice can the Minister give to the community energy co-operatives around the country? I am aware of three in my area that have live share offers at this moment. It is now unclear whether their proposed projects remain viable. Should they continue to solicit funds? Does the Minister recognise, as I do, that further reductions of the feed-in tariffs for installations at more than one site—which, I understand, were put in in order to get rid of the “rent a roof” schemes—actually threaten community projects that cover more than one site, such as local hospitals in Warwickshire or local schools in my area in Wey Valley?

[Lord Marland]

I am very grateful to my noble friend. The fact is that if we did not act now, there would be nothing in the pot for those schemes to which she is referring because it would be empty by March for the next spending review period. We have taken this action to allow community schemes, among others, to carry on. This is not retroactive. If you are in the scheme already, you are still benefiting from it. It is new regulation that we are bring in. I hope that gives her a degree of comfort. I am, of course, happy to explore it during the consultation process and, as always, I am delighted to hear my noble friend’s views.

Energy: Electricity

Debate between Lord Marland and Baroness Parminter

Tuesday 11th January 2011 Lords Chamber

[Lord Marland]

My Lords, this is a complicated issue, and we have been in consultation with all the ports, airports and railways. That has been an extensive consultation. If the noble Lord wishes to meet with officials for further explanation and briefing on the consultation, I will, as always, make my officials available. I agree with him: it would be perfectly acceptable, if private network customers are satisfied with their private network suppliers, to go out to tender to obtain cheaper electricity. The fundamental point, however, is that in these difficult times, it is important that the customer has the cheapest and fairest electricity supply that is available.

[Baroness Parminter]

My Lords, it is welcome that the proposed changes will help people switch suppliers and potentially save money on their energy bills. Does my noble friend agree that more market competition and greater transparency in wholesale costs and retail prices would assure consumers that they were paying a fair price for their energy?

[Lord Marland]

I totally agree with the noble Baroness, but in fairness, it is the role of Ofgem to ensure that electricity prices remain competitive. We strongly encourage Ofgem to be transparent and to challenge the fairness of prices. As noble Lords know, we are reviewing the role of Ofgem and ensuring that it is carrying out those methods so that we end up with a competitive electricity market in these very difficult times.

Redfern Inquiry

Debate between Lord Marland and Baroness Parminter

Tuesday 16th November 2010 Lords Chamber

[Baroness Parminter]

My Lords, my thoughts and prayers are with the families and surviving relatives of those involved as they hear the results of the inquiry today. It will clearly come as some consolation that these appalling practices, including the disposal of body parts, are no longer legal. We have indeed moved on in practices and procedures and the ethical framework that governs such decisions. However, my question is: has the nuclear industry moved on? One of the key points of the inquiry’s remit was to identify the purpose for which these body parts and tissues were removed, as well as the conclusions of the research. Can the Minister inform the House whether the nuclear industry will communicate to the families involved the value of and conclusions from that research, giving them the respect that they deserve and helping to end the culture of secrecy which pervades the nuclear industry?

[Lord Marland]

I think I can assure the noble Baroness that the nuclear industry has moved on. There is deep sympathy within the community surrounding these awful events, and that has been manifested through the full co-operation shown by Sellafield and the boards represented there, together with their support for the inquiry, as I referenced earlier. It is important that the families involved are given all the support that they need at what is a very grim time for them, and it is incumbent on the authorities at Sellafield to show them due respect in that regard.

Climate Change: IPCC Leadership

Debate between Lord Marland and Baroness Parminter

Monday 25th October 2010 Lords Chamber

[Baroness Parminter]

My Lords, should not the most important leadership on climate change be from the United States and China? Will my noble friend inform the House what the Government are doing to persuade those two giants of carbon emissions to exercise that leadership at Cancún later this year?

[Lord Marland]

I thank my noble friend for her second question in this House. Both of them have been excellent on this particular subject. The fact is that we have to show leadership. I am glad to say that the Prime Minister will visit China next month. He will lead a UK-China summit on low carbon development, which will be a central pillar of the visit. The Secretary of State, Chris Huhne, will join him.

The USA has made commitments. We may or may not consider them adequate, but it has made a commitment to improve carbon reduction by 17 per cent on 2005 levels by 2020.

Climate Change: Cancun

Debate between Lord Marland and Baroness Parminter

Wednesday 20th October 2010 Lords Chamber

[Lord Marland]

I think that the noble Baroness is referring to the fast start scheme. The fast start finance of £1.5 billion is ring-fenced and is our commitment to overseas development. It is not recycled money; I want the noble Baroness to understand that clearly.

[Baroness Parminter]

My Lords, what proposals do the Government have to ensure that the imminent report from the United Nations Secretary-General’s advisory group on climate finance is brought within the United Nations Framework Convention on Climate Change, so that its contribution to identifying sources of funding for developing countries dealing with climate change can inform future negotiations?

[Lord Marland]

I can tell the noble Baroness that we intend to work very closely. In fact, my right honourable friend the Secretary of State, Chris Huhne, is on the UN advisory group on climate finance and we intend to encourage the raising of $100 billion by 2020 to support the carbon reduction.