Electricity and Gas (Carbon Emissions Reduction) (Amendment) Order 2010

Lord Reay Excerpts

Monday 26th July 2010 Grand Committee

The Government have an opportunity to look again at this and see whether or not something could be done. The green deal—one can look at the coalition policy document, which I have somewhere here, and see that there is some recognition in it of this—has to deal with this in a more effective and user-friendly way than has been done in the past, and I hope that it does. This offers us some hope for the future. I have here what was said during the election in the Conservative manifesto, but that has been replaced by the coalition deal. We have a chance now of making this a simpler and, in the end, a more effective programme to achieve the Government’s aims.

[Lord Reay]

My Lords, this order extends the scheme in both time and scope to promote various energy efficiency measures to be carried out on residential properties, principally insulation measures, designed to reduce domestic users’ consumption of heating fuel. In so far as they have that effect, they will reduce the carbon emissions attributable to the domestic sector. In so far, however, as consumers choose instead to enjoy a greater measure of what the department calls “thermal comfort”—that is, choose to use the same amount of heating fuel in order to maintain a higher temperature in their homes—it will have no effect on carbon emissions.

What effect this will have in the event is apparently to be assessed in a review to be conducted by Ofgem at the end of the scheme in 2013. Even then, though, assessing the effect on carbon consumption of the energy-saving measures adopted under this scheme will largely be a matter of guesswork. Therefore, how will we be able to distinguish the effect of energy-saving measures from the effect of variations in energy prices, of variations of people’s real incomes or even of variations of winter temperatures on the amount of heating fuel that households choose to consume?

I will not go deeply into one of the issues that my noble friend took up. I will leave on one side the question of whether it is worth while performing the extraordinary intellectual gymnastics contained in the order’s 77-page impact assessment in order to justify measures that in the best case will provide a reduction amounting to an infinitesimally small fraction of present global carbon emissions. I will instead agree that using fuel more efficiently and promoting that efficient use is inherently a good thing, but still needs to be viewed in the light of its cost.

The cost of carrying out measures such as cavity wall insulation is largely to be borne by the supplier—entirely so, in the case of the new super priority group—but in some cases the consumer apparently has an option to contribute. As the impact assessment says on page 61, the share of costs borne by suppliers depends on the householder’s willingness to pay. What happens when the householder does not wish to contribute? Does the supplier then pay all the cost, or do the measures then not get carried out? Will the Minister give us any assessment that his department must have made of the likely take-up rate of consumers of this choice?

The suppliers’ costs, of course, are recouped by the additional charges that they can put on customers’ bills, so although giving special treatment to the priority group and the special priority group may help with alleviating fuel poverty, everyone else therefore has to pay a higher price, which, apart from anything, else, will result in additions to the ranks of those in fuel poverty. The impact assessment is frank about this. On page 23, it estimates that,

“for the average UK house, the costs of higher fuel prices on their annual fuel bills would be £46 in 2011 and £61 in 2012”.

Those are not negligible increases, although it would be interesting—as my noble friend was trying to learn—to know what the total estimated cost for the measures might be. I could not find it in the impact assessment, although it must have been assessed in order to produce the figures about the effect on individual bills. I realise that it will be based on a pyramid of assumptions, as are all the other figures in the impact assessment, but the Minister should have it.

--- Later in debate ---

My noble friend asked about CESP legislation and its current status. CESP legislation goes through to December 2012. There are 12 live CESP schemes. Obviously we are constantly reviewing legislation, and this will also be reviewed. He asked whether businesses will be eligible for this support. The answer is no, this is for domestic customers only. We think that that is the right method.

[Lord Reay]

Before the Minister leaves that point, will he say whether suppliers are able to charge business users to recoup the costs of the scheme, or may they charge only domestic consumers?

[Lord Marland]

The answer is that they may or they may not. There is no fixed method by which to use the commercial levers that are available to them, as you would expect. I hope that that answers my noble friend’s question.

My coalition friend, the noble Lord, Lord Teverson, rightly mentioned that he has changed his place and now has to look at a new picture. I agree that it is nice to see a different prospect and I do not have to work out whose foot that is, lying there wearing the sandal; hopefully, the intelligence of the noble Lords, Lord Hunt of Kings Heath and Lord Woolmer, will work that out for us. I certainly know who wears the trousers in our household, but I have never worked out who wears the sandals.

He mentioned the counterintuitive nature of the current CERT arrangement. I agree with him that it is counterintuitive; again, the green deal—sorry to bang on—should help to cope with some of that counterintuitivity.

The noble Lord asked what the uplifts are, compared with existing targets. The pro rata extension of the reduction of 108 million lifetime tonnes of carbon dioxide represents a 3 per cent reduction of household emissions from the non-traded sector in 2013. I hope that that deals with his question.

The noble Lord, Lord Woolmer, dealt with what the noble Lord, Lord Hunt, calls “enveloping”. I was wryly pleased that he asked that question; it was the first question that I asked our officials when this was brought to my attention. The answer is that it is the best way of coping with this, and it is the most cost-effective way for the supplier to deal with small groups in certain areas. We should encourage this. I take on board fully what the noble Lord said, but I am amused that we should have thought of the same thing together. I am grateful to him.

The noble Lord, Lord Hunt, whose baton I am merely picking up on this issue—I am glad I did not get as hard a time as I might otherwise have done—went on about cost. With all due respect to him and to others, there are more than 11 pages in the document outlining the costs. I know that the breakdown is complicated and split into various measures, but I commend it to noble Lords because it is comprehensive, and I am grateful to my noble friend Lord Taylor for talking me through it.