Energy Bill
Debate between Lord Oxburgh and Lord Whitty
Lord Oxburgh
My Lords, I, too, am extremely sympathetic to the objective of this amendment. But perhaps I am alone in not really seeing why fuel poverty is different from other kinds of poverty. For example, why do the Government not put one point on the rate of VAT on fuel and simply direct the proceeds towards dealing with fuel poverty as part of the general poverty issue?
The difficulty here is that we already have a complex Bill and a complex situation, and we are making it even more complicated if we try to solve a real and very important social problem at the same time. Unless there is something that I have not seen about this, I would much prefer to see this dealt with directly.
Lord Whitty
My Lords, we on these Benches strongly advise the Government to accept something like this wording in this part of the Bill and to reflect on what has been said. Some greater reference to fuel poverty needs to appear at some point in the Bill, probably in Part 6, which deals with tariffs. I certainly will be coming back to it in that respect.
If memory serves, the noble Baroness, Lady Maddock, was one of the progenitors of the warm homes Bill. She says that Ministers should consider this amendment, which they absolutely should, and my noble friend Lady Liddell says if they find something is going wrong, they should do something about it. Again, if memory serves, my noble friend Lady Liddell and I were the two Ministers who signed off on the original fuel poverty strategy in 1999, and we did very well on it for about six years.
However, since about 2005, fuel poverty has been increasing by almost any measure. That was not due simply to the fact that I had left the Government and my noble friend Lady Liddell had disappeared to the Antipodes temporarily but that real fuel prices were going up and the effectiveness of interventions on the energy efficiency side were diminishing. As the noble Baroness, Lady Maddock, said, not only is the ending of Warm Front, CERT and CESP affecting the total resources available on fuel poverty but at the moment the ECO, which was supposed to replace them, is not being spent efficiently. It may improve, but the unit price of interventions is going up, supply companies are seriously concerned about the cost of meeting their ECO requirements, companies in the installation business are running out of work, installers and insulators are being laid off, and for many others who are currently working on the back end of the previous programmes, that work is going to run out within a matter of months or weeks.
We have a very difficult situation, which the Government need to address. I agree with the noble Lord, Lord Oxburgh, that it cannot be addressed directly in this Bill but at least when we are talking about the multiple objectives of energy policy, one of them must be the social objective of reducing fuel poverty. I hope, therefore, that the Government can accept something like the wording proposed here and we could perhaps look at the back end of this Bill to try to do something very substantial about fuel poverty. It is an appalling record for both the previous Government and this Government that we have failed to address this problem, which affects the most vulnerable of our citizens. I hope to get a positive response from the Minister.
Energy Bill [HL]
Debate between Lord Oxburgh and Lord Whitty
Lord Whitty
I put down a similar amendment at Report which we were unable to debate. I am grateful to the Minister and his staff for talking to my noble friend Lord Grantchester in my absence. That makes me more confident that the Government understand that there is still a problem.
The amendment relates to the situation where a renewable energy enterprise has invested, at least as far as getting a lease from the Crown Estate, in offshore wind energy—it could be tidal or wave energy—and subsequently there is an oil discovery which would interfere with that site. This could result in a direct conflict, so my original attempt was to ensure that the Secretary of State could prevent such an oil licence being given unless the two sides negotiated an agreement. However, the noble Baroness, Lady Northover, persuasively indicated that the Government have this in hand, that there are negotiations going on and that they are talking to the industries and trade associations. That is indeed true, but the problem is that they have been talking to those two sides for six years and as yet we have no agreement on how to deal with it.
It was clear from what Baroness Northover said that the Government would not be minded to provide for such an override. In my view, an override would restore the balance between the two sides, but nevertheless the Government were not prepared to go down that road. I have therefore reverted to my third choice. My first choice is to have an agreement, my second choice is that the Government should have the means to prevent the oil or gas development happening unless there was an agreement and my third choice is that, if the oil or gas development goes ahead, compensation should be paid. That should be set out in statute.
One of the reasons why I felt it necessary to return to this is that the noble Baroness, having made some reassuring noises, added another comment, which I did not pick up at the time in Committee, when she said that,
“if the oil company is not prepared to offer appropriate compensation, there is no question of the Secretary of State intervening to override what is happening there”.—[Official Report, 8 February 2011; col. GC52.]
I was not entirely sure what that meant, because it seems to me that where there is no agreement and the Secretary of State, having tried to get the two sides to reach an agreement, judges it to be in the public interest that the oil exploration goes ahead, there ought to be some compensation involved. It is important that we register this as an ongoing concern both for the offshore wind-energy companies and, potentially, for tidal and wave installations. Because the clause in the Crown Estate’s lease enables this to happen, some intervention by the state or through the contractual provisions is required to even up the balance between the two sides.
I recognise that this is a complex area and it would be better for all of us if the Government and the two sides could reach agreement, but six years without agreement does not give me huge confidence that we will solve this before the passage of the Bill through both Houses of Parliament. I therefore tabled the amendment to register that with the Government and possibly to persuade colleagues in another place that this is an important issue. If investment in offshore, wind and other renewable technologies could effectively be overridden by a new oil exploration taking place in a site that had already been allocated and for which a lease had been agreed, some compensation is required if we are to encourage investment.
What lies behind this is that making a major investment in offshore wind and other renewable technologies requires significant private capital. For the most part, that will need to be raised from the markets. Although some large companies are investing in alternative technologies, we are mostly looking at finance through the City or the markets in one way or another. As long as potential investors can see not only that an investment could in effect be lost but that there is no legislative provision for compensation, clearly that will deter investment. That is what the offshore wind companies claim and it seems a valid point on which public policy should clearly give an indication.
I hope therefore that the Government will recognise that the third-choice option of providing in statute for some form of compensation is probably the least they can do in the circumstances. I hope that they will accept the amendment. If they cannot do so today, perhaps a similar amendment could be moved in another place and they could accept that. I beg to move.
Lord Oxburgh
My Lords, the amendment certainly addresses an extremely important point. I conclude from the points made by the noble Lord, Lord Whitty, that the issue involves three separate elements: the Government's North Sea renewable strategy; investor confidence; and the behaviour of the Crown Estate. Unless the problem is addressed, we may be dealing with simply a matter of encouraging investment in the North Sea but of making it possible. Now is not a good time to raise money for renewables or anything else, and this could be the last straw when it comes to investment companies looking for where to put their money.
Anyone observing the behaviour of the Crown Estate in recent years cannot be anything other than impressed by the vigour with which it is pursuing the objectives that must have been imposed by its master the Treasury. To describe the Crown Estate as hard-nosed might be an understatement. Indeed, it does not have responsibility for delivering the Government’s renewable North Sea strategy. Without some clear statement, ideally in the form of a statutory instrument of some kind as suggested by the noble Lord, Lord Whitty, or some comparably sure investable assurance, we will not see this going ahead.
Energy Bill [HL]
Debate between Lord Oxburgh and Lord Whitty
Lord Oxburgh
My Lords, I wish to pursue the point made by the two previous speakers. This is an extremely important area in which the fine detail will determine whether the scheme works. I draw attention to the implicit assumption in the Bill that there is such a thing as a unique assessment. Regardless of who makes the assessment—whether it is done by the person who ultimately provides or an independent assessor—these are matters on which there can be different views and with which a householder may be dissatisfied and may legitimately and reasonably want a second assessment.
Lord Whitty
My Lords, I support all the amendments in this group and wish to speak specifically to Amendments 14 and 15. These are the remnants of a pretty broad discussion that we had in Committee about the need to ensure consumer confidence in this scheme. Indeed, the noble Lord, Lord Oxburgh, has just referred to that matter. The noble Lords, Lord Teverson and Lord Jenkin, have indicated in relatively few sentences what a complicated arrangement this might appear to consumers. One of the reasons they need assurance is because this is more than a trilateral arrangement. In most cases there will be an assessor, who should be independent, and a provider, who will be the main provider and deal with the scheme, but the actual installer might be someone entirely different and under a certified, authorised subcontract to B&Q, the bank, Marks and Spencer or whoever might be the main provider. Then behind all that, financial arrangements that are closer to the householder may or may not come further downstream. It will be confusing. For that reason, the consumer—the householder or the landlord—needs serious confidence-building measures.
We were assured in Committee that some of those measures, apart from a bit of tweaking in the Bill, are already on the statute book in the provisions of the Consumer Credit Act and that they apply in this case. Most of those measures are, in fact; I am greatly reassured by that and I am grateful to the Minister for spelling that out. However, some areas are not so clearly covered by the consumer credit arrangements, and there are other markets where the consumer credit arrangements have not proved to be sufficient.
My two amendments address cross-selling and mis-selling. Amendment 14 talks about the assessments being dealt with by assessors who are independent of the providers. That does not mean that they will be totally independent, but that their assessment should be made on an unbiased basis and that they do not make recommendations that are geared to the specific offers of particular providers. Were that not to be the case, not only would the consumer interest be damaged but the Government’s desire—rightly so—to make this a competitive market would be seriously undermined.
The noble Lord, Lord Oxburgh, is right to say that there is ultimately no such thing as a completely objective assessment. However, it has to be an honest and clear assessment that is clear of bias towards any potential provider or installer. Amendment 14 deals with that, because there are no measures in the Bill to prevent Green Deal assessors being incentivised by providers to make assessments in their interests. It is important that the consumer is reassured on that. Similar provisions in other areas of financial credit have not proved to be sufficient to avoid biased financial advice appearing in some markets. Indeed, the FSA is still struggling with some of those issues.
My second amendment deals with transparency. Again, I am not sure that the Consumer Credit Act is sufficient. There are references to fees at various points in the Bill. The noble Earl, Lord Cathcart, referred to the fee for assessment, and I agree with him that it would be highly desirable if in all cases, not simply for the fuel poor, the fee for assessment was rolled up in the totality of the deal and arrangements were made for cross payment, as necessary. If you are faced with a threshold fee, that is a discouragement. You might end up paying the same money, but it should be part of the credit arrangement, not a separate arrangement.
There are subsequent references to fees, not all of which are entirely clear, and some of which may relate to exit fees. I understand that exit fees are an important provision for some credit providers in different markets, but it has to be made absolutely clear in the original agreement if there is to be an exit fee. We know that in other financial markets—mortgages and others—the regulations relating to exit fees are not clear enough. Certainly in the information provided to a person taking out a mortgage it is not always spelt out sufficiently when there is a substantial exit fee. In this case, the fee may relate to the owing of money, not to the person with whom you have dealt or who installed the energy-saving measures but to a financial company that lies behind that, via an energy bill from your energy supplier, and it is important that exit fees, if they exist, are specified. It is highly desirable that exit fees should not be another inhibition to the householder or a subsequent householder when deciding to move away from a particular supplier or form of credit.
Transparency is very important, and the current provisions of the Consumer Credit Act do not seem to tie this up sufficiently for application to these deals. The complexity of the arrangements, and the difficulty of explaining the range of organisations that will be involved in the totality of the deal for the average householder, make it even more important than in some other markets—where there is clearly a bilateral arrangement—that transparency exists. I therefore hope that the Government will take these amendments seriously.
Just to underline this, the real danger for the Government seems to come at the beginning. If one or two of these things go wrong because consumers are put off taking up the scheme, or very early on have some misunderstanding—to put it at its most neutral—with the installer, the provider or the financial vehicle, the rumour that this is not a good scheme will spread rapidly. We all want the scheme to succeed—to have a wide take-up and make the maximum possible impact on energy efficiency. However, it could stumble at a very early hurdle unless consumers are reassured. These two measures would help to reassure them.
Energy Bill [HL]
Debate between Lord Oxburgh and Lord Whitty(13 years, 3 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Oxburgh
My Lords, the step tariff to which the noble Lord, Lord Teverson, has drawn attention clearly has its origin in the old concept of the standing charge—a charge that companies levied to cover people coming round to read the meters, preparing paper bills and all that sort of thing. The smart meter arrangements, which we have just been describing, will remove nearly all the justification for that concept. It would be useful if the Minister considered how he might ensure that the benefits of introducing the meters can be passed on to the consumer; it will obviously be some time before the whole system is drawn out. If any step is needed, it really should be a very small one. Smart meters should certainly make the handling of pre-payment meters identical to conventional ones; there need be no difference in charge. I presume that pre-payment meters will be managed the same way as top-up phone cards, so the whole thing should be straightforward.
Inverted tariffs can work. They have been used for water in Sydney, Australia—you get your first so-many cubic metres of water at a particular price and, as your water use goes up, so does your price. That is not quite the same, because a lot of subsequent use of water would be for watering large lawns and things of that kind, which is not quite what we are talking of here. Also, in my Shell days, we used something like this in Nigeria, where the company gave away a certain amount of electricity—enough to run a refrigerator, a number of light bulbs and a television—and charged consumers only when they went above a particular level. Those things have worked and have been used to alleviate poverty. Whether this is quite the way to do it, I am not sure; I am with the noble Lord, Lord O’Neill. However, there is an important idea here.
Lord Whitty
My Lords, the noble Lord, Lord Teverson, is to be congratulated: he has really put his finger on what is utterly wrong with the whole structure of tariffs in the energy market. It is an object of public policy to reduce fuel poverty, and it is an object of public policy to reduce consumption of energy, yet we have a structure of hugely complicated tariffs for households—2,500 tariffs, or whatever it is—the net result of which is that the poor pay more, and that the more you use the less you pay. That is an absurdity arising from a combination of an oligopolistic market, a history of the standing charge, and a sort-of ideology behind the Ofgem intervention about cost reflectivity. If you were really trying to achieve the outcomes that successive Governments have declared, you would restructure and regulate the market in the direction proposed by the noble Lord, Lord Teverson.
Obviously, there are complications. There will be winners and losers. I disagree with the climate change committee and, to some extent, with my noble friend Lord O’Neill—the bulk of the fuel poor are fuel poor because of the price that they pay for electricity, not because they have to use more of it, even though it is true that a programme of improving the energy efficiency of buildings would ideally predate any change in the tariff structure. A sub-group of the fuel poor have to spend to use an enormous amount of energy to meet minimum comfort levels, but the majority are hit because of the prices that they have to pay within the properties that they occupy.
There would have to be some sophistication of the proposition made by the noble Lord, Lord Teverson. The crude definition is a rising block tariff, but it is not necessarily the only way in which to act. The Government would be well advised to ask Ofgem, the energy companies and everybody else in the field to look at the whole concept. Until we effectively reverse the structure of tariffs, we will not achieve those two objectives and—via the objective of using less energy—the energy-security objective of energy policy. The noble Lord, Lord Teverson, has a big idea here. I suspect that the noble Earl is correct that the Minister will not leap overboard and grab this amendment, but we need to think radically here and ensure a proper analysis of how the restructuring could be done effectively with minimum collateral damage.
Energy Bill [HL]
Debate between Lord Oxburgh and Lord Whitty(13 years, 3 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Whitty
Prompted by the noble Lord, Lord Teverson, I rise to speak to the amendment in my name. Amendment 11 would require the assessor to inform the householder or landlord of the full range of possibilities and the flexibility within any recommendations. The assessment should be subject to clear, objective criteria. I know that some noble Lords dislike the reference to “standardised assessment”, but we need some objectivity and we need to give the householder some choice in how they take the assessor’s recommendations. We need to indicate some flexibility, even within the Green Deal, if we assume that there is a financial limit. This is before you consider the possibility of other arrangements to go beyond the provision of a new deal.
On the point made by the noble Lords, Lord Jenkin and Lord Moynihan, it is clear that there will have to be a detailed code of practice and it may be that some of these issues will be dealt with in that. However, those issues covered by the code of practice in Clause 3 do not include the listing or the objectivity in that listing of recommendations. While I accept that it may be more appropriate for this to go into the code of practice, the primary legislation has to make clear what the Secretary of State will have to bring forward when that code of practice eventually appears.
Finally, I underline the point that the noble Lord, Lord Teverson, made about the importance of there not being any bias towards any particular provider. This goes back to who is doing the assessing and what the qualifications for the assessing are, which we discussed at our last sitting. These things are quite ticklish. Obviously, we wish to encourage innovation in this area and we wish to encourage new entrants in the provision of energy-saving installations, ventilation equipment and so on, but these things get roguish at times. It is important to recognise that there is no point in going for the latest super-duper micro CHP system in an individual house if the roof is still not properly ventilated and the windows are not properly fitted. There is a hierarchy of things that you need to do, both in terms of cost and in terms of the most appropriate treatment of those premises. The code of practice and, in broad terms, the primary legislation need to make that clear. Otherwise, we will—I go back to the point that I made when I first spoke in Committee—get back to a situation where, in the very early days, there will be some bad publicity about what people have been lumbered with and the inappropriateness of the work that has been carried out. That would be very dangerous to the success, which we all want to see, of this Green Deal scheme.
Lord Oxburgh
My Lords, in view of the concern that some noble Lords have expressed over the difficulty of achieving a uniformly high level of competence in the assessors, it ought to be explicit in the Bill whether or not individual householders will have the opportunity to go to a different assessor if they feel that the job has not been done properly by the first.