Energy Bill

Baroness Maddock Excerpts

Tuesday 18th June 2013 Lords Chamber

[Baroness Maddock]

My Lords, I need to declare my interests as president of the Micropower Council—contrary to what noble Lords might have read in the Daily Mail, you do not get paid for being president of something—and vice-president of National Energy Action, a charity dealing with fuel poverty. Like the previous speaker, I will say a little about fuel poverty in my remarks.

There are many reasons to support the Bill but we have also heard about some of the problems surrounding it. Maybe we in this House can ensure that it is better by the time that it leaves us. However, it will address some of the challenges that we face such as the security of supply and the need to invest to meet our current and future demand for electricity. It has been estimated that we need at least £110 billion to do that. We need to improve the national grid, as others have mentioned; investment in the grid has been neglected for a long period. The Bill will also address our aim, which some people agree with and some do not, to decarbonise the electricity sector by the 2030s as part of the global challenge of tackling climate change. We hope that the Bill will support the construction of a diverse mix of renewables, new nuclear, gas and carbon capture and storage—many of the things that people have said in the debate that we need.

It is estimated that electricity market reform could provide around 250,000 jobs. Coming from the north-east of England, I think that creating jobs away from the south-east is really important. I associate myself with the words of my noble friend Lord Deben about the importance of a supply chain. Already in the north-east we have industries providing pieces for turbines for onshore and offshore wind, and I hope that that will continue.

My interest in how we protect our environment globally and locally stems from three years that I spent over 40 years ago living in Stockholm in Sweden, where I realised that if a home was properly insulated it cost a fraction of what I had been paying in England to heat one. I also realised, because I was teaching English at the time to old-age pensioners, that they did not die in the winter because they were living in cold and damp homes, and that there was no such thing as fuel poverty. Shortly after that we had the world oil crisis, which brought home to me the need to not be wasteful with our global natural resources. Whatever we believe about climate change, that is something that we should all be aware of.

In the 1970s, when I joined a political party, it seemed to me that at that time only the Liberals were genuinely concerned about these issues, although I must say that that is not the only reason that I was a member of the Liberal Party and am now a Liberal Democrat. In my early days, campaigning to be elected and serving as a councillor in Southampton, I was often mocked for what I was talking about with regard to these issues. I particularly remember being mocked when we were trying to introduce recycling in the city. At one point, three colleagues and I held the balance of power on the council and we managed to set up an environment committee. Not everyone at that time was a dinosaur and one of the colleagues that I worked with—we worked across party lines—was the honourable Member for Southampton Test, Alan Whitehead, who has played quite an important part in this Bill’s passage in another place. At that time we managed, using some geothermal energy, to set up a district heating system that has become one of the most successful in the country.

So when I was elected in another place, now 20 years ago, it is not surprising that I chose to promote the Home Energy Conservation Act. I was fortunate enough to be No. 1 in the ballot for Private Member’s Bills and, with the help of a lot of other people and organisations, that Bill became an Act.

I think that a majority of people today—although not everybody, including my noble friend sitting in front of me—are very concerned to protect our planet now that we have seen the data and how human activity affects our climate. In my early days of campaigning on these issues, it was a wild dream that Liberals would be in government and that we might see a Liberal Minister leading a Bill of this nature. So I am particularly pleased that my longstanding colleague, my right honourable friend Ed Davey, has been spearheading this Bill.

Given my background, I think that it is not surprising that the two things that I have chosen to concentrate on in this Bill are electricity demand reduction and help for consumers, particularly with fuel poverty. Several other noble Lords have mentioned electricity demand reduction. A major criticism of the Bill has been that, in its original form, it did not contain measures on electricity demand reduction. During the passage of the Bill in another place, the Government introduced amendments, which have been spoken about, to enable electricity demand reform to form part of the capacity market and for there to be pilot schemes. However, among many of those—including me—who are pleased to see this step, there are concerns about how capacity market measures will operate and whether they will actually achieve substantial reduction in demand, particularly permanent reduction. There are also concerns about the nature of “a pilot”, rather than several pilots, and what actions might follow as a result of such pilots.

Following the initial criticisms, there was a consultation from DECC to explore the options to encourage electricity demand reduction. Of the options put forward, a majority of respondents favoured a system of electricity-efficiency premium payments which would provide electricity users with a payment on top of the savings that result from reduced electricity usage. I strongly support something of this nature. During the time that I lived in Stockholm in the late 1960s and early 1970s, most of the electricity used in Sweden was hydroelectricity. However, they had had two or three very dry summers and there was a shortage of electricity. There was a huge campaign about how to save electricity and measures were advertised, from how many times you should open your fridge to persuading you and those you lived with to sit around one light when you were in your flat in the evening. It resulted in huge savings of electricity. There were no blackouts. The area that saved the most got their bills reduced. So there is evidence that this is something that works.

As to the role of the capacity markets, there is evidence that a capacity market is of limited use in rewarding energy savings—I believe that experiences in America have shown that to be the case. Payments from capacity markets are uncertain and it is not yet clear when or if a capacity auction will be triggered here. Could the Minister, when she replies to this debate, address this issue? As energy efficiency and demand reduction reduce the risk of capacity shortage, it is rather perverse to make support for them dependent on those shortages occurring. I hope that we will address this during the passage of the Bill.

Capacity markets are not suitable for delivering energy saving for households or small businesses. The complex design of the capacity market means that only large energy suppliers and other specialist companies are likely to participate. It is vital that we have mechanisms to capture savings from small businesses and homes if we are to achieve the full electricity-saving potential that the Government have identified. A capacity market is primarily designed to ensure capacity during troughs in supply, so it rewards energy efficiency for only its security benefits, not for the much larger benefits or for emissions reductions and affordability.

I am disappointed that on Report in the Commons, cross-party amendments that would have introduced simple transparent payments for households and businesses that save energy were not addressed favourably. Will the Minister look again at such proposals, which may come forward again during the passage of the Bill in your Lordships’ House?

Clause 37 allows the Government to introduce a pilot for electricity demand reduction. Will the Minister also look very carefully at this? I am not the only one to raise this matter today. We would like to see more than one pilot and a variety of schemes.

As I declared in my opening remarks, I am a vice-president of a national charity that works in the field of fuel poverty. The charity works with government and others to ensure affordable energy for disadvantaged customers through a wide range of activities. National Energy Action is currently helping the regulator Ofgem to refine the contribution of district network operators to permanently reduce electricity demand within the UK. District network operators will be subject to an energy efficiency incentive during the new distribution price control—ED1—and will be encouraged to foster innovation and support low-income and vulnerable customers through new social outputs. Therefore it would be very helpful if Clause 37 could be amended to show that the Department of Energy and Climate Change is aware of the role of district network operators in encouraging permanent electricity demand reduction.

Finally, I turn to consumer bills, which other noble Lords have already mentioned. I am pleased that there is something about this in the Bill. However, due to my experience of the big six energy companies and the various bills that I get from them, I am not holding my breath. I am always shocked by the way in which they try to follow whatever they have been asked to do. They recently began to try to explain to customers, partly because it is in the Bill, how much electricity and gas the customers have been using and how much they can save on one tariff. I usually pay my bill by cheque when it comes. I received a bill—I will not mention from which company—which said on the front that if I paid it by direct debit, I could save X amount of money. On the next page it told me that if I paid it by direct debit I would save 10p. On the front of the bill the figure was several hundred pounds. That does not give me confidence that even the proposals that the Government want to see from energy suppliers in assisting customers may be forthcoming.

A representative of one of the suppliers—I think it was British Gas—came up to me one day proudly talking about their bills and how they set them out. For many years, as noble Lords will have learnt from my comments, I have been a political campaigner. I learnt very early on where you put something on a page so that people look at it first when it comes through the door—the famous Liberal “Focus” leaflets come to mind. I suspect that British Gas had paid huge sums to people to advise them on how to set out their bills. However, the thing that they wanted you to read was down there on the page, not in the top right-hand corner, which is where everybody looks.

I hope that many of the things in the Bill will assist people who find paying their bills difficult—those in fuel poverty—and make sure that we have a secure energy supply. I am sure that the expertise that we have heard this afternoon, and will hear later this evening, should assist us all in ensuring that this Bill is a lot better when it leaves this place and achieves some of the things that we all want to see.