Domestic Gas and Electricity (Tariff Cap) Bill

Rachel Reeves Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 30th April 2018 Commons Chamber

[Antoinette Sandbach]

I rise to speak in support of amendment 9, which is in the name of the Chair and some of the members of the Business, Energy and Industrial Strategy Committee; I know that the Chair of the Committee is also going to speak to the amendment. Its purpose is to ensure that there is adequate protection for vulnerable people while the cap is in force and beyond and to probe the Government and the Minister on the matter.

During the prelegislative scrutiny of this Bill in January, the Committee heard evidence from the chief executive of Ofgem. When I asked him about the need to protect vulnerable customers, he conceded that

“there is likely to always be a need to protect customers who would not be fully able to engage even in a…more competitive market.”

What is more, Mr Nolan admitted that Ofgem had

“not done as well as we could have”

when it came to its statutory duty to protect vulnerable customers. In fact, he apologised to the Committee for Ofgem’s failure to act appropriately to protect vulnerable customers.

The sheer number of people on standard variable tariffs was quite shocking to the Committee, and many of those people will be vulnerable customers. I note that the Minister agreed, saying that

“the regulator also needs to change. It also needs to use the powers it has more effectively.”

That evidence session did not fill me with confidence about Ofgem’s effectiveness at protecting vulnerable customers. I believe that the amendment will act as the necessary encouragement to the regulator to do just that. The amendment will also ensure that in the longer term, those who are least able to afford high bills get greater protection. That is because the amendment continues the requirement for due regard beyond the length of a cap.

I want to push the Minister on working with DWP colleagues and others to mitigate the impact of the general data protection regulation. Although the amendment targets the regulator, the Government are well equipped to handle this area. They need to ensure that the required data exchange can take place, so that vulnerable customers can be identified and offered the support that the Government want to make available to them. I am sure that the Government agree with the principle behind the amendment, and I hope that the Minister will address my concerns in full.

[Rachel Reeves (Leeds West) (Lab)]

It is a privilege to follow the hon. Member for Eddisbury (Antoinette Sandbach) in this debate. I want to speak to amendment 9, which is in my name and those of hon. Members from across the House who are members of the Business, Energy and Industrial Strategy Committee. As the Minister knows, the Committee did a large amount of work on the prelegislative scrutiny of the Bill, and we are all pleased that it has reached Report and Third Reading in time to ensure that the energy price cap is in place for next winter.

During prelegislative scrutiny, the Select Committee proposed several changes, all of which were either accepted by means of amendments to the Bill or accepted in principle. We welcome the collaborative approach of the Minister and her team. Amendment 9 addresses an outstanding concern relating to vulnerable customers that I know the Minister shares. As she knows, 83% of people in social housing, 75% of people on low incomes and 74% of disabled customers are on standard variable tariffs. The aim of the Bill is to ensure not only that everybody has a price cap, but that it will help the most vulnerable, who are predominantly on the standard variable tariffs.

One million vulnerable customers are already on Ofgem’s safeguarding tariff. The Select Committee’s first recommendation, as part of its prelegislative scrutiny, was for the Government to provide details on plans to protect vulnerable customers from overcharging when Ofgem’s safeguarding tariff and the Government’s price cap are lifted. My concern, and the concern of other members of the Committee, is what happens when the whole-of-market price cap comes in for standard variable tariffs. Will Ofgem continue with the safeguarding tariff at the same time?

In response to that recommendation, the Government gave a long list of laudable policies that are today in place for vulnerable customers. We of course welcome that list of policies, but concerns linger. Ofgem has been clear, including in a decision letter on 7 December last year, that it plans to do away with the safeguarding tariff when the whole-of-market price cap on standard variable and default tariffs comes in. Ofgem has said that the warm home discount safeguarding tariff will end in December 2019 if it has not already been replaced by other price protection—that is, the price cap we are debating and voting on this evening.

Some might say that that is fine, because the new price cap will replace the safeguarding tariff for customers on the warm home discount. That will only be the case, however, if the new price cap is at the same level or lower than the safeguarding tariff already in existence today. If it is not, then energy bills will rise for the 1 million most vulnerable customers when the price cap comes in. That would mean that the very legislation to protect consumers may hurt those who most need protection, and I know that the Minister, along with Members across the House, does not want that to happen.

[Alex Sobel (Leeds North West) (Lab/Co-op)]

My hon. Friend knows very well that in Leeds we have set up White Rose Energy, a municipal energy company. Its main mission is to protect those vulnerable consumers. When consumers move away from the cheapest tariff, it informs them repeatedly to ensure that vulnerable consumers are protected. Is that not a model of good practice for all energy companies?

[Rachel Reeves]

I am pleased that my hon. Friend and fellow Leeds MP mentions White Rose Energy, which is doing fantastic work. It ensures that customers in Yorkshire have a greater choice of energy companies and genuinely puts customers first. During prelegislative scrutiny, we heard from other small companies, including Bulb and Bristol Energy who are also trying to support their customers.

No one in this House wants a situation where the most vulnerable customers see their prices rise because of the price cap. Perhaps Ofgem could operate the safeguarding tariff and the price cap we are debating today simultaneously. That seems entirely possible and desirable to try to avoid the issues that National Energy Action and others have raised from coming into effect.

I hope we will receive assurances from the Minister this evening that these risks will not be allowed to materialise. In that case, I will not press this amendment to a Division. Let me urge the Minister, however, to ensure that the Bill does its job of protecting customers and that energy companies are not able to use any loopholes that would mean prices rising for the most vulnerable customers: those we have the greatest duty to protect.

[Stephen Kerr]

It is a great privilege to follow the hon. Member for Leeds West (Rachel Reeves), the Chair of the Business, Energy and Industrial Strategy Committee.

There was no shortage of energy—or capping of energy—at yesterday’s Stirling Scottish marathon. There was, however, a lot of evidence of determination, particularly as competitors approached the finishing line despite the agonies that some were obviously going through. There was a great deal of grit on display. In addressing amendment 9, it is a lack of grit and determination—almost supine passiveness—that is causing me to have grave concerns about how Ofgem goes about its business.

During prelegislative scrutiny of the Bill, the Select Committee held an evidence session, to which my hon. Friend the Member for Eddisbury (Antoinette Sandbach) referred earlier. I am sorry to have to say this, but I was unimpressed by the evidence presented in January by Dermot Nolan, the chief executive of Ofgem. He did not come across as a person with an appetite for what I feel needs to be done. He lacked that grit and determination. He admitted to my hon. Friend that, in respect of Ofgem’s statutory duty to protect vulnerable customers,

“I accept the point that we could and should have done better on vulnerable customers. We have relatively recently put in place principles for vulnerability, which will give a stronger level of protection.”

When the hon. Member for Hove (Peter Kyle), who is not in his place, challenged Dermot Nolan on what was in effect an admission of failure on his part to fulfil his statutory responsibility towards the protection of those who are vulnerable, he answered:

“We have not done as well as we could have. I fully accept that.”

This perturbs me. It perturbed me then and it perturbs me now. The hon. Gentleman, who is an esteemed member of the Select Committee, seemed to me to hit the nail firmly on the head when he said to Dermot Nolan:

“If you do not mind me saying, throughout the testimony here and before, you have been describing what is happening in the market; you are the single most important player in the market, because you have the most extraordinary powers as a regulator, yet your testimony sounds so incredibly passive. Do you ever just roll your sleeves up and get stuck in? I do not really see the evidence of that.”

I share the concerns expressed so vividly by the hon. Gentleman.

Since becoming a Member of this House last year and having the privilege of being appointed to the Business, Energy and Industrial Strategy Committee, I have had the opportunity to hear first-hand evidence and testimony from a number of regulators. I have, in all honesty, been underwhelmed by every one of them.