Huw Irranca-Davies
Main Page: Huw Irranca-Davies (Labour - Ogmore)(10 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint
I absolutely agree. I can hear the Secretary of State saying over and over that it is already available—[Interruption.] Obviously, he has his brief and has not been listening to my speech. As I have outlined clearly and as has been confirmed by Ofgem, the regulator can revoke a licence when a company is going into administration or is insolvent or when it fails to supply gas or electricity, but what is missing at the moment is the ability when there are repeated offences that act against the interests of consumers to take the ultimate sanction and revoke the licence.
Huw Irranca-Davies (Ogmore) (Lab)
I want to try to assist the Secretary of State. My right hon. Friend has rightly said that this will very much be an option of last resort—an ultimate sanction—that we hope will never be used, but the fact that the sanction is available should influence the behaviour of the companies and their investor backers. When an investor community sees that the credit rating of a company that has to gear itself appropriately in the market is jeopardised by a series of serious breaches, we can bet our bottom dollar that they will be banging on the doors of the corporate boardroom saying, “Get your act in order.” It is not a case of when the sanction will be used, as we hope that it will not be. Does my right hon. Friend agree that what is important is the deterrent effect, the cooling effect on reckless decisions in the boardroom, and the good behaviour that that will drive through the investor community into those companies?
Caroline Flint
I absolutely agree with my hon. Friend. The question we should be asking the energy companies is, “Why would you be afraid of this?” The question we have to ask the Secretary of State is, “What is his problem?” [Hon. Members: “What is he afraid of?”] What is he afraid of? It is quite ridiculous.
Mr Davey
No, I am not saying that. If the hon. Gentleman waits for a second, I will put a lot of emphasis on tough regulation, but there needs to be a balance. There needs to be competition as well, because it can often work more quickly and more effectively, and it really hits the firms that are losing customers. Some of the big six have lost tens of thousands—in some cases, hundreds of thousands—of customers because we have enabled competition. I accept that things are not perfect yet, which is why we are working so hard.
Huw Irranca-Davies
The right hon. Gentleman is making a good point in that competition can drive improvement in a number of areas. But badly regulated competition leading to market failure is an issue not just with the big six but with potential new entrants, which could be doing well at the moment but they could fail or overstretch themselves. May I suggest to him that there is a straightforward analogy that any football or rugby supporter will understand? As rules are imposed on that game, players know that if they do something stupid, they will end up in the sin bin for 10 minutes on a rugby pitch. If they do it again, they will be off the field. If they do a spear tackle, they will be red-carded and could be banned for months. If they assault somebody on the field, they could end up in jail. We are not saying that these things should not be used. Companies will want to avoid them being used. The fact that they are there drives good behaviour.
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. I am sure that the hon. Gentleman intended to be brief.
Mr Davey
Obviously, I am grateful to my hon. Friend for his helpful comments. Smart meters have been well tested, and there is a lot of enthusiasm for them. One million have been rolled out, and consumers have embraced them. I was asked to quote Sir Bob Geldof at the launch of Smart Energy GB, but I do not think I will. I promised to give way to other hon. Members.
Huw Irranca-Davies
The right hon. Gentleman has been very courteous in giving way. I suggest to him that he does not close his mind entirely to our proposal because what he has described in some detail is, in effect, a series of yellow cards, following which there is no red card—there is nothing more serious. It is like saying to a player each time, “You have committed a misdemeanour, and now we will wipe the record clean.” The result of that would be appalling behaviour, and that is what we are seeing in some parts of the energy sector. I ask the right hon. Gentleman to keep an open mind because we want an escalation that is clear to energy companies, to consumers and to the investor community.
Mr Davey
I am grateful to the hon. Gentleman for his measured comments. The process in the law that I have described does end in a red card, and I hope that when he and the right hon. Member for Don Valley look at it in more detail, they will see that it can result in a red card. I said that I would give way to the hon. Member for Bolton South East (Yasmin Qureshi).
Dr Alan Whitehead (Southampton, Test) (Lab)
The first thing that would be of interest to the House in this debate this afternoon would be to find out what the Secretary of State really thinks about this matter. I was at an interesting meeting yesterday when I was privileged to hear the Secretary of State speak. First, he effectively apologised for being a Minister in the coalition—[Interruption.] I was there; I was listening to it. To put the record entirely straight, what he said was not exactly couched in terms of an apology, rather, “Here are the limitations under which I work as Secretary of State when we are addressing the issues that are coming forward from questions.” Then the Secretary of State said, “Well, of course, I want to cut loose from this; I want to tell you what I would really do were I really a Liberal Democrat.” The Secretary of State then had some interesting things to say, a number of which I agreed with, and I would be interested to hear more about the Liberal Democrat policy on these matters.
Even in the context of what was said at that meeting yesterday, I cannot really believe that one half of the Secretary of State’s hat is entirely comfortable with the other side of his hat as he speaks this afternoon. He probably really agrees with what is being put forward this afternoon, and the circumstantial evidence for that is to be found in the meandering circumlocutions that we heard from him today as to why the present system of regulation is pretty dead good and really can do the things that the Opposition are suggesting that it ought to do in any event, even though the Secretary of State accepts that in fact there is not a power in reality to revoke the licence of a supply company or electricity distribution company, on the basis, effectively, of cumulative offences.
Huw Irranca-Davies
In fairness to the Secretary of State, does my hon. Friend suspect that one of the limitations to which he refers might be the bizarre rule on regulation that is now imposed across Whitehall? It was one in, one out, but now I understand it is one in, two out. So even if there is good, proportionate, sensible regulation, it is damn hard to get it on the statute book.
Dr Whitehead
My hon. Friend makes an interesting point. Given where the regulations stand now, it is quite possible that the introduction of the regulation that my right hon. Friend the Member for Don Valley (Caroline Flint) suggests, would lead to several other regulations being removed, so therefore would meet the golden rule of one in, two out. It is something that I can recommend right now to those on the Government Front Bench as a way of earning additional deregulation brownie points.
I mentioned the Secretary of State’s circumlocutions and made considerable play of the fact that, because the regulator can undertake a final order, that is the nuclear option. The Secretary of State will be aware—he has received legal advice to this effect, although I do wonder whether the legal advisers did this during their lunch hour to assist him—that clause 25(1) of the Electricity Act 1989, from which the final order derives, before Ofgem was introduced but the powers were incorporated into its powers, states that
“where the Director is satisfied that a licence holder is contravening, or is likely to contravene, any relevant condition or requirement, he shall by a final order make such provision as is requisite for the purpose of securing compliance with that condition or requirement.”
According to that piece of legislation, one is required to find out what any relevant condition or requirement is. In order to do that, it is necessary to refer to schedule 2 with the imposing title “Revocation”. We may want to look there to find out how nuclear that final order is. The final order not only has to relate to the relevant conditions or requirements, it has to stick to the relevant conditions or requirements. That is what it says in the legislation.
As the Secretary of State has said, there are a number of circumstances under which the licence can be revoked. Where someone has not paid their fine and it remains unpaid, a final order can be issued. If a final order is issued and the licensee fails to comply with that final order, which is something of a tautology, that licence can be revoked. But in order not to comply with the final order the licensee has not to comply with something within the revocation schedule in the first instance. If the licensee refuses to pay the financial penalty, that triggers a final order. Various orders were made under the Competition Act 1998 relating to unfair competition. If the licensee does not supply any electricity within a year or has stopped supplying electricity to a property, a final order can be levied against it. If the licensee is unable to pay its debts according to the Insolvency Act 1986 or has an administration order, or a receiver has been appointed, the licensee may have a final order levied against it. Obviously, if it is insolvent and has ceased trading, it is hardly likely to comply with the final order so its licence would be revoked.
The revocation schedule, upon which the Secretary of State’s magnificent argument about the final order rests, simply states, as has already been rehearsed, that various things could lead to revocation if they are not put right. That seems to be the central point that is being addressed this afternoon. These are all things that might be levied against a company and could be put right, and if they are not put right a nuclear option of revocation can be undertaken. But if those things are put right, case by case by case, section by section by section, that final order cannot be used. So the entire basis of the Secretary of State’s argument, that that really exists to enable Ofgem to revoke a licence for the sort of cumulative issues that we have been discussing this afternoon, simply falls down. We must accept that there simply is no such power in reality, by implication, in legislation or by regulation.
That makes the case fairly simple. Yes, it is true that with regard to competition, the problem of losing a number of customers may cause an energy company to think again about certain of its actions. The possibility of losing all of one’s customers might make one think rather more seriously about the problems being faced and how to deal with them, in addition to the fact that some customers may be lost through competition.
There we have it, in terms of the difference between the present position and a significant change in what Ofgem would be required to do under the proposals set out this afternoon. They require Ofgem to take account of cumulative bad behaviour—of a company getting away with it, not putting right things required under legislation, and living to fight another day and do it again.