Domestic Gas and Electricity (Tariff Cap) Bill

Lord Mackay of Clashfern Excerpts

Committee: 1st sitting (Hansard): House of Lords
Monday 11th June 2018 Grand Committee

Moved by

[Lord Mackay of Clashfern]

5: Clause 1, page 2, line 20, at end insert—
“(8) Subject to subsections (9) to (12), sections 11C to 11H of the Electricity Act 1989 and sections 23B to 23G of the Gas Act 1986 apply to modifications of the standard supply licence conditions made under this section.(9) Any appeal against modifications to the standard supply licence conditions made pursuant to this section—(a) may not challenge the decision to impose a price control in principle; but(b) subject to paragraph (a), may relate to—(i) the principles applied in setting the tariff cap conditions in question,(ii) the methods applied or calculations used or data used in setting the tariff cap conditions, or(iii) what the provisions contained in the tariff cap conditions should or should not be (including at what level the tariff cap control should or should not be set).(10) The decision of the Authority to modify the standard supply licence conditions to include tariff cap conditions is to have full effect pending the determination by the Competition and Markets Authority (CMA) of any appeal.(11) Paragraph 2 of Schedule 5A to the Electricity Act 1989 and paragraph 2 of Schedule 4A to the Gas Act 1986 do not apply to modifications of the standard supply licence conditions made under this section.(12) Notwithstanding section 11G(1) of the Electricity Act 1989 and section 23F(1) of the Gas Act 1986, the CMA must determine an appeal against modifications of the standard supply licence conditions made under this section within the period of 4 months beginning with the day on which it accepts the appeal.”

[Lord Mackay of Clashfern (Con)]

My Lords, I want to raise a very specific point about the possibility of an appeal against the decision to fix the tariff at a particular level. I declare an interest: I have a minute shareholding in Centrica, which I think is a residue of Mr Therm, and of course we are all participants in the market in that we get gas and/or electricity.

The question that the amendment addresses is whether there should be a statutory form of appeal against the level at which the tariff is set by the authority. I think it is agreed that some kind of judicial challenge is available. Judicial review is said to be the challenge. It is interesting to see how the Select Committee approached that. I do not think it was a fundamental or central point of the committee’s consideration. It asked something like 500 questions, of which four were about the appeal provision. The committee’s main interest in appeal was to prevent delay in bringing in the tariff. I can see the very cogent reason for that. We want the tariff to come in as soon as practicable. If it is to be valuable, it certainly must come in in time for the next winter.

I will show that what I am proposing is a good deal better from that point of view than what the committee thought. The committee seemed to have been concerned mainly that there would be no effective legal challenge of the judgment. In a way, I am rather sad about that because it rather suggests that legal challenge does damage to a decision. My belief is that the aim of legal challenge is to improve a decision; if necessary, to make it fairer than it is already. I need not elaborate on that, because both the Government and those noble Lords who support this amendment agree that a judicial challenge of some kind is available.

I will go through our amendment in a little detail, to show what we are trying to do. First, the sections referred to are a code which allows for appeals in the particular situation of modifications of the licence conditions. That is a general code, introduced by the words:

“An appeal lies to the CMA against a decision by the authority to proceed with a modification of a condition of a licence under Section 23”.


Of course, that includes price variation and that is clear from Section 23E, where a price control decision is effectively mentioned. The committee said that judicial review was a reasonable way of challenging a price control. If that is the point of view of the Government—and of preceding Governments, many of whom contributed to this code—it is strange that they have a code for price control at all. This is quite an elaborate code, with provision for rules and all that kind of thing, and with the CMA experts—who know something about this area—dealing with the matter.

The Government appear to be questioning the idea of an appeal on this level, on the ground that it might cause delay. The amendment seeks to deal with all these things. It makes it clear that there is no question of attacking the principle of the cap. That is a political decision to be made by Parliament and, therefore, the appeal decision may not challenge that point. However, it may challenge the principles applied in setting the tariff up. As I pointed out at Second Reading—I shall not repeat myself—it is quite a difficult decision. The conditions the authority has to satisfy in reaching a decision are quite difficult. I can see that there is certainly room for a difference of opinion on exactly what emphasis there should be on these various matters.

The Government made a point about the possibility of delay and that question concerned the Select Committee. The amendment deals with that by proposing new subsection (11), which takes out the power in the existing code to set aside a price control decision until a decision is taken by the CMA. To make it thicker, proposed new subsection (10) says:

“The decision of the Authority to modify the standard supply licence conditions to include tariff cap conditions is to have full effect pending the determination by the Competition and Markets Authority (CMA) of any appeal”.


There is, therefore, absolutely no question of any delay in this procedural matter. Of course, if it was successful, it might have an effect in respect of settling matters afterwards, but the tariff will come in on the date when the authority decides that it should.

We have thought about the possibility of delay in relation to the decision-making of the authority. The authority has the usual limit of six months. In view of the urgency of this matter, although it is not absolutely vital, we have suggested four months for the authority’s decision. These are perfectly simple matters, I think, and they answer all the Government’s objections to this form of appeal.

The noble Lord, Lord Grantchester, has tabled an amendment on costs. Perhaps your Lordships know already that there is a provision about costs in the scheme under the existing Act, and it may be that some modification of that is required. The other point that comes out very forcefully from his amendment is that appeals are made not just by the licence holders. The appeal is there also for the consumer. When you look at the conditions, you see that there is certainly a possibility that the tariff might be too high. I am not saying for a minute that the authority will not do its best to get the right tariff—I am assuming that it will—but appeals are perhaps intended to review that kind of decision. Therefore, it is vital that the consumer representative, which is the citizens advice bureau, Citizens Advice Scotland or a combination of both, has the right of appeal.

I do not think there is any possible answer to this as against judicial review. Apart from anything else, judicial review is not a very technical type of review, in the sense that the judges are extremely skilful and talented but not many have a detailed knowledge of the gas and electricity industry. That is part of the scope of an appeal, as is set down under the statute: that the appellate authority is already equipped with the kind of expertise that is needed to decide this question. The Government kindly wrote me a very full letter saying that, in a judicial review, the judge could appoint assessors. As you can imagine, I am rather aware of that. However, it tends to show exactly what I am saying: that you should have an appeal that is supported by the relevant expertise. The very need for an assessor, which is suggested as a possibility—although I concede that the judge might not require it—goes a certain distance in that direction. That the Government have said it shows that this is an extremely useful and appropriate form of appeal.

We put the four-month period in to make sure that everything is looked at. I do not necessarily say that it is absolutely essential, and it may be that a correct decision is worth more than a hurried one. Still, we are showing our certain desire to have this disposed of as soon as possible. For that reason, in my submission to your Lordships, this amendment is eminently reasonable and one for which the Government so far have produced no reasoned alternative. I beg to move my amendment.

Amendment 6 (to Amendment 5)

Moved by

--- Later in debate ---

[Lord Henley]

My Lords, as I made clear, they would be using the CMA to delay this process, and we do not think that that would be right. I do not think that that would be the case with judicial review, but, as I said, I am more than happy to discuss these matters later. We have set out our position here and in the letter that my right honourable friend sent to my noble and learned friend.

[Lord Mackay of Clashfern]

My Lords—

--- Later in debate ---

Amendment 6 (to Amendment 5) withdrawn.

[Lord Mackay of Clashfern]

My Lords, I find it difficult to know exactly what the basis is on which the Government now stand in relation to this. I would be extremely happy to have further discussion involving as many of us here as would wish to take part. I am sure that the Government would welcome that.

The situation is that an appeal under these provisions requires the permission of the CMA. The idea that some tariff licence holders would try to exploit this in some way is well met by the procedures that are laid down in this scheme. My noble friend began with the rather frightening suggestion that I needed to add something like 12 clauses to the Bill. It may be wrong, but subsection (8) of our proposed new clause states that:

“Subject to subsections (9) to (12), sections 11C to 11H of the Electricity Act 1989 and sections 23B to 23G of the Gas Act 1986”—


my noble friend’s production, with modifications, of course—

“apply to modifications of the standard supply licence conditions made under this section”.

That seems to put all the conditions in the tariff arrangement into the Bill for the purposes of dealing with the tariff. I cannot understand what more is required. I am in favour not of prolixity but rather of trying to be brief. That seems to me to do it briefly.

The whole procedure is involved. The only thing we are doing is modifying the procedure to take account of the concerns that the Government have expressed about delay and the power that the CMA has to postpone the coming into effect of the tariff under appeal. That is what we have tried to deal with, to resolve the issues that seemed to concern the Government in the letter that the Minister kindly sent me a little time ago.

I am extremely happy, as I said, to be involved in any discussions about this. At the moment, I find it very hard to see why the Government should want to have judicial review more than this, because some people think that exploitation can happen under judicial review. I remember some time ago reading out a passage from a colleague’s book about this and his experience of judicial review in relation to his education policy. I am not saying whether that is right or wrong, but I am saying that this procedure we are proposing is as protected against any kind of exploitation as it could be, because the permission of the authority is required and it will be very astute to know if it is just exploitation for the sake of some big member of the licence holders group. So I do not honestly think that that is a very serious objection.

As I said at the outset, I do not think the Select Committee was really concerned about anything except the delay that it thought would be involved in any kind of procedure. It would apply to judicial review—indeed, probably more than any other—because I doubt it would be right to try to remove the power of the judge to suspend the thing if he thought that that was required, whereas we expressly remove the statutory power of the CMA to put that in.

I think we have answered, as best we can, every possible concern that the Government have, so I would be glad to explore this—I was just about to say “exploit this”—at a meeting between now and Report. I am very keen that we should get ahead with this. We do not want to delay the passage of the Bill through this House, not at all—the sooner it gets through, the better, and the sooner the cap is in place the better, if it is going to be worth while.

Amendment 5 withdrawn.