Domestic Gas and Electricity (Tariff Cap) Bill

John Redwood Excerpts

Wednesday 18th July 2018 Commons Chamber

[Claire Perry]

I strongly believe in competitive, well-regulated free markets. Indeed, in this market there are now more than 60 energy suppliers, all bidding for our business. I have recently switched again to a company that appears to be offering a very good green tariff. However, the problem, and the reason for the Bill, is that there is a very large group of customers who are sticky—who stay on expensive standard variable and default tariffs because they do not know how to switch, or they are not aware that they can. We can all think of grandparents, parents and others who fall into that category—it also includes young people who are renting accommodation—and they tend to be the furthest from the white heat of the switching market.

Understanding what the Bill does to the economic conditions in the market is, of course, an important part of Ofgem’s role. To go back to the original CMA report, however, we also know that the current pricing practices result in £1.3 billion of what it described as “excessive” returns, and we expect that number to come down. If you will indulge me, Madam Deputy Speaker, I wanted to make sure that the House was aware of that.

It is important that we have a level playing field for companies in the market. I have received representations stating that the customer accounts threshold for offering warm home discounts and ECO should be dropped to ensure that more companies can offer them to customers. We introduced legislation recently to reduce that threshold from 200,000 to 150,000, in increments of 50,000. Customers in receipt of warm home discounts will have a lower chance of losing them if they switch.[Official Report, 4 September 2018, Vol. 646, c. 2MC]

I hope the House agrees that amendment (a) is the most appropriate response to the concerns that have been raised, and that it will be welcomed by Members in this place and the other place. I hope that we will be able to move swiftly on this issue and keep our remarkable outbreak of cross-party consensus going, because I think the Bill is an absolutely vital piece of legislation.

[John Redwood (Wokingham) (Con)]

Can the Minister give us some indication of the kind of saving we that we could expect from the managed market, as a result of the amendment, compared with where we are at the moment?

[Claire Perry]

I do not know whether my right hon. Friend is referring to the per-household saving. We have been quite careful not to talk about that, because although we can understand that a total maximum excessive disbenefit of £1.3 billion is created by current pricing practices, how much of that is saved and passed on to consumers will depend on all sorts of things, including changes in the wholesale market and the efficiency of companies. I can reassure him, though, that the absolute price cap that was brought in to protect customers on pre-payment meters and those classified as vulnerable has led to savings of about £60 per household since it was introduced. Of course, prices go up, but customers are still better off than they would have been. Our expectation is that both overall and per household, consumers will see bills lower than they would otherwise have been.