Electricity Supplier Payments (Amendment) Regulations 2017

Lord Deben Excerpts

Tuesday 21st March 2017 Grand Committee

As a final point, I assure noble Lords that the Government will continue to evaluate and monitor the reforms following implementation to ensure that the measures put in place remain effective and continue to represent value for money for the consumer.

[Lord Deben (Con)]

I shall intervene for just a short moment. Whenever we talk about these things there is always a kind of reticence—a fear somehow or other that the customer will be charged in an unsatisfactory way for Britain to move to the low-carbon economy that we all seek. I remind the Committee of my interest as chairman of the Climate Change Committee.

I will say three quick things. First, this is inevitably a complex matter. Inevitably, anyone listening to the Minister describing what was changing might have some difficulty in following, were they not absolutely up to date with what it was changing from. That is one of our problems: when we deal with these matters it is difficult to get them right and to get them simple. The Committee must accept that the Minister did a great job in explaining what is to happen. The regulations’ purpose is to do what I imagine we will go on doing almost every year to make sure that we learn from the lessons of the past and discover mechanisms whereby we can make the system work as cost effectively as possible. I emphasise that all of us wish to support that process. Whereas we want some stability in the overall system, we will be concerned if the basics are changed more than is absolutely necessary. We are perfectly happy if on each occasion we seek to tighten some things and loosen others to make the system manifestly more effective.

Secondly, however, I hope the Minister, in all the times that he speaks on these matters, will refer people to the work recently done by the Climate Change Committee, which shows that the overall effect of our low-carbon policy has been to reduce bills, not increase them. Roughly speaking it costs us about £9 a month more to pay for the costs of moving towards a low- carbon economy, but the bills are £20 a month less than they would have been because of the effects of those policies. As people exchange old white goods and other electrical goods for new ones, because of our policies, the latter are much more efficient. We have pressed the technology.

I remember going to buy a freezer at the beginning of the European Union process of warning people about the amount of energy used by new products—when the little notices came in for the first time. The freezers on offer ranged from those with an A rating to those with a G rating. As a matter of fact, I did not buy a freezer in that sale. I waited a year for the next January sales. I went around again and discovered that all the freezers were now between an A++ rating and a B rating. In one year we had changed: people were told about the value of low-carbon, low-emission products at a time when they could do something about it. They were not just generally told about it, but told at the moment when they could save so much a year by making that choice. Manufacturers discovered that they would not sell their products unless they made those technological changes.

I raise these issues because the constant talk in the press is very trying—not just for those of us who are concerned with them daily but for the Government and Opposition too—as if all this has made bills heavier, when it has not. Had we not done this, bills would be £20 a month more. That is not an imaginary figure, but shows how the reduction in domestic use of electricity affects the bills of the majority of people—some 85% of the population—who use both gas and electricity. In those circumstances, we have to go on talking about this, otherwise we lead people astray into thinking they are paying £9 a month extra, instead of saving some £11 a month in total. If they take a personal decision to improve their energy efficiency, they can make even more savings, but we never take that into account, of course, because it is a personal decision. However, the other two factors are a result of government policy playing back into how people pay their bills.

I want the Government constantly to quote this fact, because we have spent a lot of time on it, and it is very objective indeed. I know how objective it is, because our opponents have attacked it and said that it is outrageous, but have been unable to find a single item that they can show to be outrageous, being unable to find a single fact with which they can argue. It is outrageous to them, of course, because it undermines their whole attitude and the campaigning they have done—I am afraid—through a number of our popular newspapers. I hope that the Government will in future speeches include this simple matter to remind people, so that they always know.

My third point is that we hear from the press that the Government are very keen on keeping down energy bills and will make significant investigations and possibly take draconian measures to do so. I point out to the Minister that the report we have just produced shows that business electricity bills in this country are significantly higher than in the rest of Europe. It is not true of domestic bills, as a matter of fact; we sometimes forget that. It is more or less the same position with gas—the cost is somewhere in the middle of bills in the whole of Europe, which suggests that we may find there is not much we can do about it.

I have already spoken about the fact that bills are not greater, but less, because of our green measures, but I want to point to something in the report that is of considerable relevance to our discussion today: that electricity bills to business are higher in this country than in the rest of Europe. It is quite clear why: partly because we charge a higher distribution cost, whether or not it is a real cost, but also because our wholesale market is higher than in the rest of Europe. There is a real problem here. When as a committee we sought to find out why that was, nobody could tell us. Of course, the industry was unwilling to explain it—and one could understand why—and the Government admit that they do not have a ready answer. The Minister has said that the amendments address the cost of the necessary adjustment in how the market works and operating, as far as possible, a free market as we move towards a zero-carbon electricity supply. In that context, I hope he will spend a good deal of time concentrating on the two factors that are independently assessed as the reason for higher prices in the business sector. Otherwise, I am afraid that he may be led down the line that it is all about green taxes, when the opposite is true.

--- Later in debate ---

[Lord Prior of Brampton]

My Lords, I begin by echoing the comments of the noble Baroness, Lady Maddock, about Lord Jenkin. I was reminded of the Schleswig-Holstein question, to which the Duke of Wellington said that only three people knew the answer—and one was dead, one had gone insane and the other one had forgotten it. Fortunately, my noble friend Lord Deben has not forgotten it and spoke very eloquently about broader issues than those raised by the statutory instrument before us.

It was interesting to hear my noble friend’s story about how shopping for a freezer had changed in the space of a year—from being able to buy one rated from A to G, to one now rated A++ to B. That is just one small illustration of how technology has helped hugely in reducing the use of electricity. He is absolutely right that technology has significantly reduced bills.

[Lord Deben]

I am sorry but it is not just that the technology has changed; we have now shown people that it is not worth selling bad products. You have to use the technology and it is we politicians who have made that technology actually go into the marketplace, because it has been worth while. The Government should take credit for what they have done.

[Lord Prior of Brampton]

That is true. The incentives need to be there, but the fact is that technology is remarkable. Technology is going to do it. If we are going to solve the problem of carbon emissions, technology and incentives to use new technology—which is what the CFD programme is all about, as I understand it —are crucial.

My noble friend also spoke about the cost of electricity for business. It is an issue I take a particular interest in, given that it affects very energy-intensive industries, such as the steel industry, the glass and ceramics industries and other industries, including the potteries in places such as Stoke. It is difficult to know why our costs are higher. It is partly because of distribution and transmission, we are told, and partly because of the wholesale market, but I do not think we have a full answer to that. I have not read my noble friend’s report on this. It may suggest an answer. I will read it with interest. It is certainly a question that we need to answer. It is always very easy to blame the green lobby for the extra costs falling on high-energy consumers. My noble friend raises a question that needs to be answered.

I thank the noble Lord, Lord Grantchester, for supporting these regulations. He asked three questions. I shall write to him on them. I have been given the answer, but I cannot absorb it and give it to the noble Lord at the same time without just reading it out without thinking about it. He raised the more general issue of the impact of Brexit on the internal energy market and what tariffs there might be. I will have to give him the rather dull and predictable but honest answer that we will have to wait to see how the negotiations turn out.

The regulations the Government are seeking to amend through this instrument affect the CFD scheme through making some fairly minor technical amendments to improve the efficiency of the CFD supplier obligation and to amend the operational costs levies of the Low Carbon Contracts Company and the Electricity Settlements Company. As I read this, I do realise that this is quite complex, arcane stuff. These companies play a crucial role in delivering the CFD scheme and the capacity market scheme, and they must be sufficiently funded to perform their roles effectively. I have been struck by how the cost of offshore wind has come down in the last auction and how the capacity auction has driven prices down. The market is very powerful. I thank the noble Lord for his support for this measure?

Motion agreed.