Energy Price Caps

Lord Stoneham of Droxford Excerpts

Monday 3rd July 2017 Lords Chamber

[Lord Prior of Brampton]

My Lords, in my right honourable friend the Secretary of State for BEIS’s letter to Dermot Nolan, the chief executive of Ofgem, he says:

“You will have seen that the Conservative manifesto proposed to ‘extend the price protection currently in place for some vulnerable customers to more customers on the poorest value tariffs’”.


That is what my right honourable friend has asked Ofgem to do. It will now go through a period of consultation and decide how best to do that.

[Lord Stoneham of Droxford (LD)]

My Lords, on this side of the House we appreciate and welcome the measures that are obviously designed to help poorer customers. I will ask the Minister two questions. How much of this £1.4 billion does he assume is going to be redistributed back to customers as a result of these measures, and what is the shortfall on that? Secondly, his party, despite its election manifesto, has never seen a way of resolving these problems by price cuts. What is he going to do to improve competition? That is the way to control prices in this sector, and clearly they are not going to be controlled when you have a six-body cartel that is operating against customers’ interests.

[Lord Prior of Brampton]

My Lords, the Secretary of State has made it clear that, in judging whether Ofgem’s proposals go far enough, he will be looking at that figure of £1.4 billion—which, as the noble Lord knows, was identified in the CMA report of 2014. Clearly that is the figure that the Secretary of State has in mind. The noble Lord is absolutely right, though, that for the long term getting real competition into the market will drive prices down. Some 20% of the market is now supplied by companies other than the big six. I think that they now number 50, so there are signs of growing competition. The CMA is quite categoric in its diagnosis that customers are not yet feeling sufficiently well informed or enabled to make the switch. I went on to uSwitch today to have a look and I can understand that—one’s brain sort of hazes over a bit when you go into this sort of field. So I think it will take some time before competition really works in this market—which is why the Secretary of State decided to ask Ofgem to review the situation today.