Electricity and Gas (Internal Markets) Regulations 2011

Lord Teverson Excerpts

Monday 17th October 2011 Grand Committee

[Lord Whitty]

My Lords, I broadly support the second package and the transposition of it. However, it leaves a few loose ends, and I want to raise three points, one of which relates very much to what my noble friend Lord Berkeley just mentioned: inclusion in the need to provide access for consumers and businesses those who are licensed for local networks.

I am in a dilemma here—no doubt, so are the Government—in that if you are locked into a local network and there is no alternative supplier, choice does not apply. On the other hand, if you open it up to choice, as the noble Lord explained in relation to ports, the economics of the local network change. There is a real problem here. I ask whether that would apply, for example, to a relatively small CHP system on an industrial estate where all the other units on the estate had agreed to sign up and the economics had been worked out on that basis; or indeed a residential district heating system—I am very much in favour of both such developments of localised and decentralised energy. Opening that up to competition or to the secondary user's choice of supplier makes the economics much more difficult. That is a dilemma. Two principles clash here: one of encouraging decentralised energy and the other of consumer choice. Simply including them under the same obligation as the big network suppliers does not resolve that. I am no closer than the regulations—or, probably, the department—to supplying a solution, but it is not supplied by the regulations.

My second point relates to the reference to consumer protection and Consumer Focus. I declare my past allegiance as former chair of Consumer Focus and—although this applies more to my third point—as currently undertaking some work for the Consumer Council for Northern Ireland. The requirement for Consumer Focus in part 2 to provide a consumer checklist is an extension to what is provided in the Consumers, Estate Agents and Redress Act 2007. It is a more prescriptive requirement on Consumer Focus—the National Consumer Council, in legal terms—than exists under that Act. Even in its current form, one could say that it is an incursion on its independence. The organisation already supplies significant guidance and information available to consumers. However, on balance, I do not object to the current setup.

As the Minister will be aware, under the Public Bodies Bill it is intended to move the role of Consumer Focus on energy either to a third-sector organisation, Citizens Advice or—another proposition currently in play—to Which?, which is, for these purposes, a private sector non-profit-making organisation. Is not the requirement for it to do the job in a certain way an even greater imposition on an independent organisation than it is on a quango? Is the Minister clear that such a requirement would survive a transfer of those functions to organisations that have not been in this game before and that have their own charitable and, in the case of Which?, slightly different structure of obligations and priorities?

Clearly, it is a bit of a problem to get the current powers of what was Energywatch and then Consumer Focus into a completely non-governmental organisation in the first place, but the more prescriptive that that becomes the more difficult it is to ensure that the provision in these regulations survives such a transfer.

My final point relates to Northern Ireland, to which the noble Lord, Lord Dixon-Smith, already referred. He seems to think that this lets Northern Ireland and the separate system of regulation off the hook. I am sure that in Northern Ireland he would be relatively happy for that to be the case, but my understanding is that there is concern about this over there because Northern Ireland organisations are not party to the ACER set-up. There can be only one regulator there, and the energy market there is very different to ours. The gas side is on an all-Ireland basis or is pretty much moving towards that. The Irish regulator would be there but not the Northern Ireland regulator. There are different structures of competition and supply. The regulations are not necessarily appropriate to a very different sort of market with a different sort of fuel supply. I should like the situation on Northern Ireland to be clarified—if not today, then at some point in the near future—because there seems to be a bit of a lacuna in the set-up.

[Lord Teverson]

My Lords, I should like to raise a couple of points—again, primarily on the consumer side, which I suppose is appropriate, given that it is a topical subject in government. I hope that the Official Opposition Front Bench do not take half an hour on the various provisions relating to competition and energy. However, that is entirely up to them.

The only issue that I wanted to raise was that a lot of this relates to competition and openness of markets. I want to understand where the Government are in terms of their recent announcements and the particular Ofgem proposal that 20 per cent of energy production be auctioned, which would at least start to open up the market.

The niche area that interested me is the one that the noble Lord, Lord Whitty, mentioned at some length—the energy consumer checklist. On page 19 of the annexe to the Explanatory Memorandum it is stated that the European legislation,

“Requires Member States to ensure consumers are provided with the Energy Consumer Checklist and that it is made publicly available”.

I understand how that started to work from reading the third column on that page. However, I draw the Minister’s attention to the fact that I tried to find out from a European Commission website and the DECC website what the energy consumer checklist was—particularly as the proposal is to have it printed on all bills. There nothing definitive whatever on the European Commission’s website. It was completely vague and the Commission had obviously decided that this was a good idea, had delegated and had then done not a lot else. On the DECC website there was a copy of a letter from the Directorate-General Energy and Transport to Kim Darroch, the UK’s permanent representative. Some 78 questions were listed on all the things that consumers ought to be able to ask about. My understanding from this—I am sure that the noble Lord, Lord Whitty, already knows the answers, but forgive me if I pursue the issue—is that the National Consumer Council boils those down and makes them work. I am interested in how we make that obligation relate in a useful way to consumers, so that they can actually make real decisions. That is obviously tied up with all the issues around the swapping of accounts and everything else that has been high on the agenda in recent times. However, I should like to understand how the energy consumer checklist will be effective.

Perhaps the Minister can give us an insight into how other European member states are approaching this. I am particularly interested in the auctioning activity and whether the Government feel that other EU member states are starting to move out of the ice age and into global warming in terms of making sure that some of this deregulation and more market competition in terms of unbundling, or whatever, actually happens as regards those other European markets where, historically, we have been well ahead of the rest of the pack.