Energy Bill

Baroness Verma Excerpts

Wednesday 6th November 2013 Lords Chamber

[Lord Whitty (Lab)]

My Lords, this amendment relates to the redress element of Part 6. I approve of the increase in protection for consumers in the redress provisions in the Bill and have supported them throughout. However, there is a dimension that is not there, and there is one that has been discussed with successive Governments but has never been fully put into operation. The present Government, in their consultation through BIS on consumer rights and protection in general, mentioned the possibility of moving to a system of collective redress.

In the energy situation, the whole structure of the market and the whole history of the scandals in relation to consumers underline the need to have some collective resolution of these matters. If you look, company by company, at most of the mis-selling and misrepresentation, the overcharging, the failure in billing and the wrong billing, right up until the very recent case where Ofgem fined ScottishPower, you will see that thousands, and in some cases tens of thousands, of consumers have effectively suffered from exactly the same mistake-cum-misdemeanour by the relevant energy companies.

At the moment, complaints against energy companies are running at an all-time high—you have only to look at the ombudsman’s figures and facts. The need for redress systems is very important, but if every individual consumer has to take that case either through the ombudsman or through the courts, the ombudsman’s agenda is going to get cluttered up and the courts are going to lead to individual decisions, which may be different in different parts of the country. A form of collective redress for everybody who has suffered from what the regulator will have found to be a mistake, or an error, or a breach of the licence or other regulations, affecting tens of thousands of consumers, needs to be treated in a somewhat different way.

I am not stipulating here precisely what way. There have been a number of formulations for collective redress in different sectors. The best of these was never put into legislation, but was dropped during the wash-up at the end of the last Parliament, because the Treasury was proposing very effective collective redress systems within the financial services sector.

The Government, in their draft Consumer Rights Bill, which is now being considered in pre-legislative procedures, have not followed up on what was in their consultation paper, which had a different formulation. In relation to gas and electricity, the degree to which there are large numbers of people suffering from the same act of a company, the fact that there are licence conditions attached to that and the fact that there is a whole structure of regulatory ombudsmen in that area, make it a relatively easy sector, in principle, for which to produce a system of collective redress.

My amendment requires the Secretary of State to come forward with regulations to that effect within six months of the passage of this Bill, so I am leaving the Minister and her colleagues a bit of time to do this, but I think the principle will be recognised. This would be pretty much well supported by, I think, all the consumer groups and many of those who have dealt with individual cases of consumer detriment which have arisen within this sector. I hope that the Government will consider this and, at least, give me some encouragement, if not tonight then in the future, that they will be looking in this direction. The way in which this industry has treated its consumers; the degree of mistrust among them and the level of redress that individual consumers have achieved in this sector show the need for something more systematic. I hope that the Minister and her colleagues will use this amendment to have another look at the issue. I beg to move.

[The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)]

My Lords, I thank the noble Lord, Lord Whitty, for this amendment. Amendment 104B would require the Secretary of State to consult on and then bring forward regulations to allow collective redress for energy consumers. I agree with the noble Lord that consumers need to get the redress that they are due by the most straightforward means available. I fear, however, that the introduction of collective redress in the energy sector would not achieve these aims. My concerns centre mainly on the time and cost of bringing such cases.

The noble Lord has said previously that collective redress offered a quicker and cheaper solution for cases than if cases were pursued by individuals either through the ombudsman, Ofgem or the courts. This presupposes that action through the courts is the only option available where an issue affects more than one consumer. That is not the case. One of the reasons we have introduced the consumer redress order powers in this Bill is to provide consumers with the means of redress without the need to initiate individual complaints.

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[Baroness Verma]

My Lords, I would like to thank the noble Lord, Lord Whitty, for his amendment. It sets out the issues that must be contained within the strategy that will set out how we are going to meet the target. As I mentioned earlier, we will publish the strategy for consultation next year and intend to use this opportunity to set out our plans for how we will tackle fuel poverty. I agree with noble Lords that there are clear links between fuel poverty and health, and a clear health benefit to the NHS by acting in this area. That is why we already include excess winter death rates as part of the annual statistics we publish on fuel poverty. We are working to better understand the costs and benefits to the NHS and we will be building on this within the strategy.

The proposed amendment also suggests that the strategy covers a number of other issues such as debt, the depth of fuel poverty and the number of children who are living in fuel-poor households. These are all very important concerns. It is for this reason that we already report widely within the annual fuel poverty statistics and these issues are included. In reference to the noble Lord’s query about the old and the new definitions, I confirm that we will continue to include fuel poverty numbers under the 10% definition. This is something to which we are already committed, and it will continue to appear in the annual fuel poverty statistics. I hope that the noble Lord, Lord Whitty, is reassured that the fuel poverty strategy will be a comprehensive one and that it is not necessary or appropriate to set out the issues that it will cover within the primary legislation. I trust that he will feel reassured enough to withdraw his amendment.

[Lord Whitty]

I am very grateful to the Minister. If she is saying that the method of reporting and the issues which we cover in those reports will continue, I certainly welcome that. On the issue of the measurement, I should say to the noble Lord, Lord Jenkin, and to the House that I do not think Professor Hills’s definition is necessarily a better one. I agree that there are defects in the old one but I think there are also defects in the new one. Professor Hills’s proposal of measuring the depth of fuel poverty as well as the absolute numbers of fuel poverty is a very useful tool and I strongly support it, but time will tell as to whether or not his definition is better than the old one.

I am gratified that the Minister is saying that the series will be continued, at least for some time. By implication she may have meant for longer than is provided for in this amendment. That will give continuity and time for the new series to build up because the new definition will start from next year. We will not have much of a series for very long. That will greatly help those who have campaigned long on the basis of the 10% definition to understand how the policies are impacting that, and to see whether or not the new definition is robust. I am reasonably assured by the Minister, rather more than I expected to be, and so I beg leave to withdraw the amendment.

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[Baroness Worthington (Lab)]

My Lords, I am grateful to my noble friend for tabling this amendment and for his pursuit of this issue in other fora. It is correct that the way that electricity is priced at the moment is illogical: the more we consume as a whole, the higher the cost of producing the electricity. Once our demand rises, we have to bring on marginal plant, which is less efficient and more costly, pushing up the wholesale price for everyone. The people who consume the most therefore cause us to carry a cost that we should not have to bear.

It should therefore be logical that we disincentivise the bringing on of marginal plant by tariff pricing and tariff structures. However, although the idea has been raised on many occasions, the moment has never been found to make it a reality. I hope—and I think that this will be the case—that once smart metering comes into play, this will become an absolute no-brainer. At that point, when we have detailed information about each individual household’s demand across a given period of time, this will become enabled. At present, though, it is a very difficult thing to bring into practice.

Noble Lords have touched on some of the issues. One of them is the question of the variance in demand between households. It can be perfectly true that you have two identical semi-detached houses with very different energy bills, because of different socioeconomic circumstances. Someone who is at home all day will have the heating on and that will increase their bills. If you have a high occupancy rate—if you have children, for example—your energy bills will go up. It is quite difficult to identify the right point at which to say, “This is a fair use of electricity and after this we are going to increase the price”.

That said, though, it is not impossible. It should not be the case that electricity companies incentivise greater usage and reduce the rate of tariffs after a certain point of consumption. If we are not yet able to get to a fully comprehensive rising block tariff system, then at least the Government could perhaps make it clear that tariffs should not have such a regressive effect that the highest price would be for the first units of consumption and then there would be a reduction in the unit price—that should be ruled out. The Prime Minister has indicated that he has a desire to make tariffs simpler. The simplest thing would be to have one unit price for everyone and for everything. Let us start there, and if we can establish that principle and stop the incentivisation of greater consumption, that will be a step in the right direction.

I still think that there is something in this idea. We need to look at it, although it is possibly true that now is not the time. I am sure that that will disappoint my noble friend; one can always say, “Now is not the time”. However, with the advent of better technology such as smart meters and a greater understanding of demand with better data, we will be able to get there. The way that the system is currently structured is illogical, and I am sure that something like this will be introduced within the next decade. I congratulate my noble friend on being so prescient and ahead of the curve.

[Baroness Verma]

I, too, thank the noble Lord, Lord Campbell-Savours, for his amendment. The noble Lord has a long-standing interest in this matter and I understand his desire to encourage more energy efficiency and to reduce the energy bills of low-income households. We considered in the past the case for rising block tariffs. When the issue was debated during the passage of the Energy Bill 2011 we were concerned, as we are now, that they would have an adverse impact on fuel-poor households with high energy consumption. I followed very carefully the noble Lord’s argument that this would not happen, but I believe that many consumers would see their bills rise under a rising block tariff.

The Committee on Climate Change has also examined the case for rising block tariffs and concluded that they,

“should not be introduced until fuel poverty has been addressed through targeted energy efficiency improvement and other fuel poverty policy measures”.

We are addressing fuel poverty through the Warm Home Discount. This year more than 1.1 million households will receive an automatic rebate on their electricity bill of £135 and more than 2 million households will receive assistance from the scheme as a whole. As the noble Lord rightly points out, we are also tackling the poor energy efficiency of our homes through the Energy Companies Obligation and the Green Deal. Some 230,000 vulnerable and low-income households will be warmer this year because of the measures installed in their homes under ECO.

Clauses 130 to 133 are intended to enable the Secretary of State to simplify the tariff market, to increase competition in the retail domestic energy market through greater consumer engagement and to get consumers on to the best tariff for them. We have introduced these clauses to give statutory backing to Ofgem’s reforms of the retail energy market. These reforms have been developed to ensure that customers are on the cheapest tariff that is in line with their preferences with their current supplier. They will introduce a simpler, clearer tariff framework so that consumers can compare tariffs across the market more easily.

The noble Baroness mentioned smart meters. I agree with her. When people have smart meters installed, that will help them recognise the amount of energy that they are paying for at the time of use, and will inform them of when to use energy at different times of the year to get the best value out of it during the day. However, we are just rolling out smart meters now. They are not yet part of a mass rollout. So a key measure is to give consumers the ability to compare tariffs, banning complex multi-tier tariffs and requiring suppliers to structure all tariffs as a standing charge and single unit rate.

Introducing a framework for rising block tariffs would cut across Ofgem’s reforms to deliver a fairer, more transparent and competitive market. We are backing its proposals, not instructing it how to regulate the market. Ofgem is an independent regulator and is best placed to assess the regulatory changes needed. Although I suspect that he will not, I hope that the noble Lord will find my explanation reassuring, and that he will withdraw his amendment.

[Lord Campbell-Savours]

My Lords, the Minister said that she thought that it would be easier for consumers to compare tariffs. The reality is that, if she had supported the amendment moved by the noble Lord, Lord Forsyth, that would have been the case. In reality, there will be very little difference in the way that billing is presented, and certainly in the ability of the public to comprehend billing.

I latched on to the statement made by my noble friend on the Front Bench when she referred to smart meters. Although I was engaged, as was the noble Lord, Lord Teverson, in the smart meter debate in 2008—we had those critical meetings at the end before we managed to win, as he will remember—I did not realise the significance of this until my noble friend referred to it just now. It is possible that smart meters will give us some of the information that I need to further reinforce my argument when, no doubt, in a few years’ time, I once again table the same amendment in the hope that one day someone will pick it up and we will transform the energy consumption arrangements for the average household in the United Kingdom. I beg leave to withdraw the amendment.

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[Lord Whitty]

My Lords, I think I will leave this one to the Government.

[Baroness Verma]

My Lords, I thank my noble friends Lord Teverson and Lord Roper for tabling this amendment and my other noble friends for their contributions, especially my noble and learned friend Lord Mackay of Clashfern, as he laid out very clearly the position of the law without referring to windmills or any other type of energy source. The judgment referring to planning consent under Section 36 of the Electricity Act 1989 can be made only when the applicant, at the time of making the application, holds a licence to generate electricity under the Act or holds an exemption from this requirement, as my noble friend Lord Teverson pointed out. This judgment is being appealed and we are monitoring the position carefully. Given that the appeal is under way it would be premature, and indeed inappropriate, at this stage to adopt a legislative amendment without knowing what the outcomes were. Any legislative change would need to be considered in the full light of the outcomes of this case and it would be a mistake to assume that the judgment of the Outer House, if upheld, would be decided upon in exactly the same terms in the Inner House.

If we legislate now, we may find that the amendment does not deal with the final interpretation of the legislation, taking into account the arguments that are being developed as part of the judicial review hearings. In the event that this decision is upheld in terms equivalent to the original opinion of the noble and learned Baroness, Lady Clark of Calton, we will of course work with the Scottish Government to review the situation. For those reasons, I ask my noble friend Lord Teverson to withdraw his amendment.

[Lord Forsyth of Drumlean]

Does my noble friend agree with the position of Scottish Ministers that they should continue with their current approach until the appeal has been determined, or does she take the view that there should be a stay on these matters until the law is clarified?

[Baroness Verma]

My Lords, I will repeat what I have said, which is: let us wait to see what the outcome of the appeal is.

[Lord Teverson]

My Lords, this was tabled as rather a probing amendment, given the situation that has arisen, and I am grateful to noble Lords for their contributions. I do not wish to detain the House on this for too long but I will say that this has nothing to do with retrospection; I absolutely disagree that someone who develops a wind farm or any other energy-generating station over 50 megawatts is necessarily going to be the operator. It is a fact in industry in Britain and worldwide that the developer is often not the operator, in whatever industry we may talk about—they are two entirely separate processes. If you took the view that they had to be the same legal person then you would probably have to go back to 17th-century economics, let alone 21st-century ones. It does not work that way any more. It would also bring the practicalities back into line with the English and Welsh situation. In no way does this amendment make any judgment about whether people should be able to judicially review such decisions; clearly they should be able to do so. I would hope that such actions would not be vexatious, and I am sure that this one was not. Indeed, there was a judgment parallel to the licensing one concerning the wildlife directives, on which I make no judgment at all. It might have been completely valid in terms of their application.

With this amendment I was simply trying to bring the situation back to some certainty and to the situation that was understood prior to this judgment. That is not in itself retrospective. However, I am persuaded by the Minister that perhaps the right course is for this to go through the appeal process—I certainly do not think that it is a good idea for Parliament to interfere with that—and then the situation should be looked at. I am highly persuaded by the argument put forward by my noble friend Lord Forsyth about the reaction of the Scottish Government, in that clearly the rule of law is the rule of law wherever we are within the United Kingdom, and I would never wish to pull the carpet from under that important principle in how we live our public life. I beg leave to withdraw the amendment.

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Moved by

[Baroness Verma]

107: Clause 145, page 113, line 1, leave out sub-paragraph (iv) and insert—
“( ) section 49 (transition to certificate purchase scheme);”

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Moved by

[Baroness Verma]

109: Clause 146, page 113, line 32, leave out paragraph (c) and insert—
“( ) section 49 (transition to certificate purchase scheme);”