Domestic Gas and Electricity (Tariff Cap) Bill

Lord Henley Excerpts

Wednesday 18th July 2018 Lords Chamber

Moved by

[Lord Henley]

That this House do not insist on its Amendment 1 and do agree with the Commons in their Amendment 1A in lieu.

1A: After Clause 8, insert the following new Clause—
“Protection for domestic customers after termination of tariff cap conditions
(1) Before the tariff cap conditions have ceased to have effect as provided by section 8, and afterwards at such intervals as the Authority considers appropriate, the Authority must carry out a review into—
(a) the pricing practices of holders of supply licences for the supply of gas and electricity under domestic supply contracts, and
(b) whether there are categories of domestic customers paying, or who may in the future pay, standard variable and default rates for whom protection against excessive charges should be provided.
(2) Such a review must, among other things, consider—
(a) whether there are domestic customers who the Authority considers will suffer an excessive tariff differential where on the termination of fixed rates the customers move to standard variable or default rates, and
(b) whether customers who appear to the Authority to be vulnerable by reason of their financial or other circumstances are in need of protection.
(3) If the review concludes that protection should be provided, the Authority must take such steps as it considers appropriate by the exercise of its functions under the Gas Act 1986 and the Electricity Act 1989.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, I spoke against Amendment 1 on Report, so I will not repeat my detailed arguments. However, I remind the House that the amendment would insert provisions for an indefinite relative price cap. The Government cannot accept a permanent price control being put in place. Members in another place have returned the Bill, having removed this House’s amendment, but with an amendment in lieu, which was agreed without a Division. I will now speak to that amendment in lieu, and I hope that the House will agree with me that it is a sound and sensible amendment.

Amendment 1A will ensure that Ofgem must conduct a review before the removal of the price cap into the pricing practices of suppliers and where there are categories of consumers who are currently paying, or may in future pay, excessive charges for SVT and default tariffs. In reviewing the practices of suppliers, and where the consumers are paying excessive charges, the regulator must consider whether there are consumers who will be excessively negatively affected when they move from fixed rates to SVTs and default rates, and whether vulnerable consumers require protection. If the regulator’s review concludes that protections are indeed required, they must take necessary steps to provide those protections, using their existing powers under the Gas Act 1986 and the Electricity Act 1989. The amendment rightly provides the regulator with the discretion to consider the form that any protections may take so that Parliament does not prescribe a solution today for what may well be a distinctly different concern in the future. The Government view Amendment 1A as striking the most appropriate response to the concerns that were articulated by noble Lords in this House during the Bill’s preceding stages.

I thank noble Lords across all Benches for their interest in the Bill and for their constructive engagement in its development, both in the Chamber and outside. I believe that the Bill is now in the best shape it could be, which is due in no small part to the work put in by this House. I hope that we may swiftly agree with the amendment made in another place so that the Bill may proceed and the price cap can be in place by the end of the year. I beg to move.

[Lord Stoneham of Droxford (LD)]

My Lords, I am speaking on behalf of our Front Bench spokeswoman, my noble friend Lady Featherstone, who unfortunately cannot be here tonight.

We too do not believe that the retail energy market currently operates to the advantage of customers. This Bill is a very blunt instrument, and one that is intentionally temporary—a sticking plaster while the Government desperately search out for a long-term solution. In coalition, we were proud to stimulate switching to a level way beyond what had happened before. But while successful, it is not sufficient. We still believe that a part of the solution lies in a relative price cap mechanism. That is why we supported the original Lords amendment, although we would have preferred it to have been stronger.

The fundamental issue is one of the “tease and squeeze” sales tactics used by energy suppliers, which would be far better tackled by a relative cap. However, we acknowledge the Government’s Commons amendment in lieu has recognised some of these concerns. We also recognise that, however imperfect this Bill might be, it is important to get it on to the statute book in good time before the winter weather and the escalation of consumer energy consumption. It is for these reasons that these Benches do not intend to call a Division this evening.

[Lord Grantchester (Lab)]

My Lords, I am grateful to the Minister and I very much welcome this amendment in lieu of the amendment passed in your Lordships’ House on Report.

This is necessarily a Labour-inspired amendment. It addresses our concerns over the domestic energy market at the termination of tariff-capped conditions. On Report, the House supported the contention that there should be ongoing monitoring through the implementation of a relative tariff differential. The incoming chairman of Ofgem, Martin Cave, whose appointment is very much welcomed, has expressed scepticism before the BEIS Select Committee that a fully competitive market will have returned by the end of 2023, when tariff-capped conditions will ultimately end. He has expressed doubt that vulnerable customers will be able to access competitive deals within this timeframe.

Furthermore, the amendment on Report was explicitly designed to deal with the exploitative behaviour of suppliers, known as “tease and squeeze”, whereby customers are moved over time from a competitive deal on to a much higher rate. This behaviour operates now and could continue even if the market be deemed later to be operating under competitive conditions. There is the twin effect that vulnerable customers could continue to be at risk post 2023 and that this particular behaviour of “tease and squeeze” across the market will not be dealt with.

I am very grateful to the noble Lord the Minister, and to the Minister for Energy and Clean Growth in the other place, Claire Perry, for considering this most carefully and engaging with our team so constructively. I thank them for considering that Ofgem must continue to monitor the market and to take appropriate action, should pricing practices of suppliers continue to put customers under disadvantage through excessive charges. Too often in the past, Ofgem has not used the powers it has in order to combat anti-competitive behaviour and excessive pricing.

The temporary nature of the Bill is to correct a clear existing fault in the present operation of the market. But the action to be taken through this Bill must take account of all anti-competitive behaviour, including “tease and squeeze”, and once concluded under the terms of the Bill on or before 2023, to continue to make sure all customers will be protected, including special measures for vulnerable customers.

Most people admit that they find the monitoring and switching of tariffs cumbersome and confusing. The debate over energy market intervention has run for several years, and certainly for too long. I am very pleased that, last year, the Conservative Government finally conceded that action is urgently needed to tackle unfair practices and excessive charges. Customers have been paying up to £300 per annum more than they might have done under a more competitive market.

Both the Conservative Government and the Labour Opposition are committed to have this legislation on the statute book to bring real benefits to consumers this winter. Ofgem must fulfil its functions and be seen to take appropriate action. The industry must realise that unfair behaviour will not be tolerated. Consumers will be protected.

I would like to pay tribute at this stage to all the staff who have worked so hard at both ends of Parliament, and especially the Bill team at the department. I would like to thank my Front Bench colleagues, my noble friends Lord Stevenson of Balmacara and Lord Lennie, for their support and attention, especially at the early stages of the Bill when I was absent due to ill-health. I am very grateful to my noble friend Lady Crawley, who spoke so passionately about the need to tackle the “tease and squeeze” tactics so prevalent in the energy market, and on the Liberal Democrat Benches to the noble Baroness, Lady Featherstone, and the noble Lord, Lord Teverson, for championing vulnerable customers, where we are very much aligned. I certainly do not want to forget or underplay the crucial legislative support of our opposition adviser, Rhian Jones.

I very much support the amendment and the Bill and look forward to the benefits it will bring.

[Lord Henley]

My Lords, I thank the noble Lord, Lord Grantchester, for his intervention, in which he welcomed the amendment and acknowledged that a great deal of work has been done by me, my right honourable friend Claire Perry, the noble Lord and his colleagues, and others, both in the Chamber and outside it. I think we have reached a satisfactory conclusion that provides Ofgem—I am grateful for his welcome of the new chairman of Ofgem—with the appropriate powers to deal with these matters. I thank him also for acknowledging the importance of speed in this matter. That is why, as we said right back at Second Reading, it is important that we get the Bill on the statute book before we rise for the summer—the Chief Whip is sitting next to me, and I know we still have a few days to go. I hope that the noble Lord will not be ill during any further Bills and will not have to leave certain bits to his colleagues.

I welcome the intervention from the noble Lord, Lord Stoneham, in place of his friend the noble Baroness, Lady Featherstone. I am grateful for his confirmation that Liberal party policy is in favour of a relative price cap. I was rather confused at earlier stages as to what its policy was, but it is now on the record. I do not think it is necessarily the right way forward, but it is Liberal party policy and I am grateful for that explanation.

That leaves me with only one final duty: I ask the House to support the Motion.

Motion agreed.