Energy Bill [HL]

Lord Jenkin of Roding Excerpts

Wednesday 22nd December 2010 Lords Chamber

[Lord Jenkin of Roding]

My Lords, I am sure that I am not alone in having listened to the noble Baroness with great interest. I am sure that she has a point. I will come at the end of my speech to something that is not in the Bill that I would like to see there, but she made a very powerful point.

Most of my remarks will be about the Green Deal, which is at the heart of the Bill. I warmly support it. It has three major advantages over the processes that have been replaced, CERT and CESP—the carbon emissions reduction targets and so forth. My noble friend described the first advantage in some detail. It is the up-front financing with repayment in bills over a period. That is coupled with the golden rule, which is that the savings must be more than the cost of the measures taken. That is a very important step.

Secondly, the energy company obligation—the ECO—is very much better targeted than the targets for the priority group that existed under CERT. That affected no fewer than 11 million households and companies had to get 40 per cent of their savings from that, whereas the ECO is aimed primarily at the fuel poor and hard-to-heat buildings. That, too, is a great improvement.

Perhaps most significant of all is that the Green Deal abandons the concept of trying to measure carbon savings in individual households in favour of securing the benefit of lower bills and warmer homes. People will respond much more readily to the promise of lower bills and warmer homes than they would to appeals to save the planet by cutting carbon dioxide. That is the most important improvement that we have in the Bill.

I have been very critical in the past both of CERT and of its impact on the administration. The legislation and regulations were hugely complicated and they did not work. If you just look at the latest report on CERT by Ofgem, which publishes the figures, you will see that by November this year it had only achieved 58 per cent of its 2010 targets. Less than two-thirds of that is from insulation and more than a quarter is from lighting. I know that the previous Government ended the suggestion of distributing bulbs, but how many of the bulbs distributed are in fact not used? So here is another improvement.

So far as administration is concerned, I have some sympathy with points that have been made and we will need to make sure as we go through the Bill in Committee that this is really something that consumers can operate properly. My own experience in having my house improved is that the biggest single barrier is household hassle. The process set out in the Bill should in time gain a higher level of public confidence, but here again I agree with my noble friend Lord Teverson: everybody, all the bodies concerned, must join together in promoting the concept of the Green Deal. Local authorities are certainly important, as are a large number of social organisations. This cannot be done by the Government alone. Indeed, they should not even try to do it alone.

Many of the questions that one will have will need to be sorted out in Committee, and I shall not deal with them all. In the mean time, I have four specific concerns. The first concerns the individual initial accredited assessments. That is a very important first key stage in the process. It is not clear to me, nor is it clear to some of those whom I have been consulting, who is supposed to pay for these initial assessments. Let us suppose that an assessment concludes that this was not a case for a Green Deal and that the householder is not qualified for any special help under the energy company obligation. Who will pay for that assessment? Secondly, how will the golden rule actually be interpreted? A number of people with whom I have spoken have said that their experience is that if you improve somebody’s insulation, they prefer a warmer home to lower Bills. Indeed, how can you separate the two? The whole basis of the golden rule is that the costs should be less than the savings. There are questions there that we will need to look at.

Ministers have spoken about there being a radical overhaul of the energy performance certificates. Yes, they will be removing the restrictions on access to energy performance data and houses, but what other changes do the Government envisage? Happily, they have abandoned the absurd and unloved HIP process, but it is my understanding that the energy performance certificates will remain an integral part of the Green Deal process. We need to hear a bit more about that, and perhaps we can explore it in Committee.

Mention has been made of the Warm Front scheme; there is some anxiety that it is due to be phased out. My noble friend made a Written Ministerial Statement on this the other day. Yes, it has run out of money this year, but the existing approvals will continue to be made. The Statement also talked of approving new allocations after April 2011 and described it as a key tool for tackling fuel poverty in England, which has helped more than 2 million households. Yes, there is a consultation, but is it envisaged that the Warm Front scheme will exist alongside the Green Deal process. The noble Baroness, Lady Smith, shakes her head, but it is clearly going to go on for a while to judge from the Minister’s Statement. Is the new scheme going to be better at targeting the vulnerable people? Under the energy company obligation, I think that it will be better.

My last point on the Green Deal concerns the issue of who will bear the cost of consumer defaults. The provider of an approved Green Deal plan will advance the money to pay the approved installer; the energy supplier will be notified and will then recover the debt by adding instalments to the customer’s energy Bills. That is fine if it all goes according to plan, but if the customer’s debt is not allowed to be secured on his property, as is clear under the terms of the Bill, and he defaults, who will bear the cost? Is it the provider whose money has financed the up-front costs, or is it the energy supplier who is trying to collect the instalments? Again, my consultations suggest that there is some considerable concern about this. Clause 15 seems to suggest that the supplier will have to bear the cost. I am not sure that that is fair. All the preliminary assessments and the arrangements for the financing have been done by the provider, and these arrangements are entirely outwith the supplier’s knowledge until he is notified what he has to add to the Bill by way of payment in instalments. As I understand it, the Government have power under the bill to deal with that uncertainty, and I hope that my noble friend will give us some assurance on that, because I assure him that there are uncertainties out there in the market.

So far I have spoken about only the Green Deal, but I will mention one other point that arises under the security of energy supplies. Clause 77 gives Ofgem—in the Bill it is called GEMA, the Gas and Electricity Markets Authority, which I sometimes find quite confusing—the power to modify the uniform network code covering gas supplies so as to be able to deal with a gas supply emergency, which my noble friend referred to in his speech and which could lead to a dangerous fall in gas pressure if measures are not taken. Paragraph 218 of the Explanatory Notes says:

“For the pressure in the network to be maintained there has to be a balance between gas supply and demand. Gas taken from the network by consumers has to be replaced by gas flowing into the network from producers, gas processing facilities, storage facilities, interconnector pipelines and Liquid Natural Gas (LNG) import facilities”.

I draw particular attention to the word “storage”. Like the issue raised by the noble Baroness, Lady Finlay, that is not in the Bill. We will need more gas storage to deal with emergencies such as the possible cutting off of a source of supply or the huge gas consumption across the country that we face at the moment. It has been put to me that there needs to be an enhanced public service obligation on gas suppliers so that they can deliver new gas storage facilities, perhaps over the next five to 10 years, to strengthen the UK’s future energy security.

One must ask what paragraph 21 of the summary impact assessment means. If you have increased incentive to ensure the supply of gas, does that not necessarily imply some kind of enhanced public service obligation so as to encourage more supplies? I give my noble friend notice that I may table an amendment on this, to make provision for such an enhanced public service obligation. This is not the moment to express all the arguments in favour but it is quite amusing that last night, as I was drafting my speech, my mobile phone buzzed. I picked it up and it was a communication from British Gas, my gas supplier at home in London, which said:

“Severe weather is impacting normal service in your area. If you have a central heating problem, please visit britishgas.co.uk for tips from our expert engineers”.

Well, I am not a great expert on the internet, but I tried. I could find no tips. However, it prompts me to ask whether, if the UK had more gas storage, British Gas would have needed to put out that warning. Perhaps it would not need to cut off businesses with interruptible supplies. That message certainly strengthens my determination to persuade the House that Clause 77 needs to be strengthened by promoting new incentives to provide gas storage. In his opening speech, my noble friend referred to sharpening incentives for that. If that does not mean some kind of enhanced obligation on gas suppliers, I am not quite sure what it does mean. Perhaps we will be able to explore that further in Committee.