Domestic Gas and Electricity (Tariff Cap) Bill

Jack Brereton Excerpts

2nd reading: House of Commons
Tuesday 6th March 2018 Commons Chamber

[Jack Brereton (Stoke-on-Trent South) (Con)]

As a number of Members have said, the issue of domestic gas and electricity supply is particularly pertinent following the recent extreme weather. The cost of that supply is always hugely important to our constituents, not least because when the mercury drops and blizzards swirl, it an absolutely necessary and unavoidable cost.

Like all other Members, I receive letters and surgery visits from people who struggle with their bills, struggle to understand the tariff choices available, or struggle with access to the internet and the comparison websites that might help them to reduce their domestic fuel bills. I recently hosted an energy-switching surgery with our local citizens advice bureau to help more people to switch to the best deal.

According to the latest figures available, the Office for National Statistics considered 12.3% of households in my constituency to be fuel-poor in 2015. Thankfully, that was a great deal less than the 23.3% of households who were fuel-poor in my constituency back in 2010, but there is clearly still more work to do. Similarly, while the Office for National Statistics reveals that the percentage of households in Great Britain with internet access has increased dramatically over the last decade—from 60% to 90%—there are still in Stoke-on-Trent, according to the city council’s digital inclusion strategy, about 15,000 households without internet connection and 7,000 without a mobile phone. That matters, because one of the driving forces behind the need for the temporary tariff cap under the Bill is the reluctance of consumers to switch, or the inability to do so with ease and convenience. The Bill matters to Stoke-on-Trent’s digital inclusion strategy because a temporary cap would give us the breathing space that we need to take the measures planned locally that will get the market for energy functioning more freely online than at present.

Great efforts have been made to ensure the domination of the market by Blair and Brown’s big six does not mean that new entrants are perpetually crowded out. They demonstrated what Labour does in power: it quashes competition. It now wants to go further, as we have heard from the Leader of the Opposition, by nationalising the energy market at huge expense to taxpayers, eliminating all consumer choice that would allow people to shop around and get the best price. It is greatly to the credit of this Government and their coalition predecessors that the number of suppliers has increased from just 13 in 2010 to 60 now, and that the dual fuel market share of independent suppliers now runs at 22%.

The nudges towards greater competition are not working for everyone, however. The £1.5 billion premium—the difference between what people would be paying in a fully functioning market and what they actually pay—identified by the Competition and Markets Authority in 2016 is a shocking figure. Just as we are taking measures locally to improve consumer engagement in a competitive market—not least with my own free energy guide for constituents, which I recently published—it is right that the Government continue to roll out measures to increase competition in the breathing space that a temporary tariff cap can and will bring.

As a consumer, the rigmarole of changing an energy supplier involves psychological barriers that everyday retail markets—like going to the shops—do not share. The sclerotic consumer side of the energy market also effects psychological disinhibition on the producer side, by which I mean that energy suppliers feel able, and indeed entitled, to take their customers for granted in a way that suppliers in fully functioning free markets do not. As Octopus Energy puts it in its briefing for this debate, in a healthy market, consumers who shop around for the best deals keep prices low for everyone.

I would go further than Octopus Energy: in healthy markets, consumers who are loyal are rewarded, not ripped off. In the very healthy market of coffee houses, for example, suppliers might well attract new customers with flyers or vouchers, but they also tend to take care to reward loyalty over caprice. That point is well illustrated by the fact that even the House of Commons has a loyalty card for tea and coffee. Huge energy corporations with loyal customers have no excuse for treating loyalty with contempt.

My tests for this Bill are that it should motivate more consumers to be confident switchers, that it will require suppliers to provide the customer care that loyal consumers would expect in a fully functioning market, and that it will spur the regulator into action as the consumers’ champion. I am confident that it will.

I will be glad to receive assurances that the long-term ambition for energy policy is not just a reliance on short-term caps. The long-term interests of consumers are best served by the freest possible markets with the greatest possible competition. Looking to the future, there is great potential for new energy sources and new firms in the market. In the renewables sector, costs are coming down. In the nuclear sector, innovative new technology promises unthought-of energy security if we get the policy framework right, taking pressure off the gas network as our primary source of energy. An energy tariff cap cannot become a comfort blanket against embracing sectoral change in the decades to come, even if a temporary cap is a necessary safety net in the immediate months ahead.

In conclusion, the market for household fuels does not function as well as we would hope. It needs to become more competitive, more consumer-focused, and easier to enter for new firms on the block. The Bill will provide temporary respite from the more egregious excesses of the big energy firms that fail to reward loyal customers. It opens a clear window of opportunity for further action in boosting market information, digital access, competition and security of supply. I support the Bill in principle and as part of a wider approach to fixing the problems in our wider energy market.