Domestic Gas and Electricity (Tariff Cap) Bill

Rebecca Pow Excerpts

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

[Rebecca Pow (Taunton Deane) (Con)]

I want to put to my hon. Friend something that has been said by MoneySavingExpert, which is that a relative cap would simply result in firms withdrawing the cheapest deals—the shadow Minister mentioned that—and create the “worst of both worlds”. We do not want to fall into such a trap, as some consumers on expensive tariffs would still be paying more than they need to while many firms would not offer the cheap deals they currently offer.

[John Penrose]

That argument has been advanced for both a relative cap and for an absolute cap; some people argue that it applies to both. We heard earlier a rather good explanation of why the argument does not really apply, which is that it would be commercial suicide, or a commercial kamikaze effort, for anybody to try to raise their prices in the switching market, which is highly competitive, because they would very rapidly start losing customers hand over fist. I understand that argument, but I do not think it would be relevant in practice.

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“If you have an absolute price cap, you will obviously see that the affordability of the lower tariffs for the big six will be less: you will see some shrinkage between the highest price and the lowest price. That is what we are trying to do.”––[Official Report, Domestic Gas and Electricity (Tariff Cap) Public Bill Committee, 13 March 2018; c. 5.]

[Rebecca Pow]

rose—

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

I call Rebecca Pow.

[Rebecca Pow]

Thank you, Mr Deputy Speaker; I am bringing up the rear, as they say.

[Mr Deputy Speaker]

I was not going to ignore you.

[Rebecca Pow]

Thank you.

I am delighted to speak in support of this Bill. It focuses on a temporary managing of the energy market, which has not been managed well enough, which is why we are talking about the whole concept of this Bill. I will speak briefly, and only to amendments 7 and 9. I do not disagree with the sentiment of, and intention behind, these amendments, and above all it is, of course, vitally important that we look after the vulnerable in society, in particular in terms of energy, and especially when the market is deemed not to be functioning properly.

It is crucial that people can keep warm and cook the right food and that they are comfortable and well, but this Bill already addresses that. It places a new set of duties and powers on Ofgem to protect consumers on variable and default tariffs, and Ofgem already has a duty under the electricity and gas Acts to have regard to the need to protect vulnerable customers. We should also remember that in 2016 the Competition and Markets Authority made an order, following its energy market review, to put in place a safeguard tariff for customers on prepayment meters, and about 4 million people have benefited from that. Last year, Ofgem took the decision under its principal duties in the electricity and gas Acts to extend the safeguard tariff to customers in receipt of the warm home discount.

Ofgem must have regard to the need to protect vulnerable customers when exercising its functions under these Acts, and I would argue that that is already being done. However, I agree with my hon. Friend the Member for Stirling (Stephen Kerr) that it is crucial that Ofgem uses its powers and uses them well and that its feet are held to the fire in this respect—to use an energy term. It also introduced an enforceable vulnerability principle into the domestic standards of conduct, making it clear that suppliers must do more to treat vulnerable customers fairly, and this must be done.

Realistically, therefore, these amendments seem to be overkill, placing new obligations on Ofgem that are not necessary; however, it must use the powers it has. Also, as many Members have said, the powers in this Bill are only temporary: the price cap operated by Ofgem is not intended to last beyond 2023, and I fully support that. By contrast, Ofgem’s powers to protect vulnerable customers under the electricity and gas Acts are not limited.

It is necessary to bring in the fairness that this Bill has right at its heart. Its main aim is to place a new set of duties and powers on Ofgem to protect customers on standard variable tariffs. That is what this is really all about; far too many people have been taken for a ride. In 2016, about 11 million people were paying a total of £2 billion over the odds for their energy; that is simply not right. Individuals are said to be paying about £300 too much. Many people falling into this category are the elderly, and I am speaking on this Bill in part because Somerset has a particularly ageing population, and they have been taken advantage of, as indeed have many young people who are in rental accommodation because they are tied to one form or another of payment.

We must not mess about any further with this Bill. We must be able to see the wood for the trees; we do not want to bring in another lot of suggestions and regulations that delay the Bill, because it is more important than ever that its measures come into operation this winter. It is essential that we protect the vulnerable, but it is not necessary to legislate further on vulnerability, as suggested by amendments 7 and 9. I hope that on this basis the amendments will be withdrawn.

[The Minister for Energy and Clean Growth (Claire Perry)]

I thank all colleagues here this afternoon for their intelligent and sensible contributions to a debate that has run for several years. We are now within striking distance of bringing this Bill to a conclusion and sending it off in good order to the other place. I particularly thank my relatively close—geographically speaking—party colleague, my hon. Friend the Member for Weston-super-Mare (John Penrose), whose dogged and intelligent scrutiny, along with that of his colleagues, has made this a much better Bill, and I pay the same compliment to the hon. Member for Leeds West (Rachel Reeves) and her Select Committee. This shows that when we work together we can deliver good legislation. I will respond to the amendments discussed today and my hope is that in doing so no Member feels obliged to press their amendments to a vote.

New clause 1, which we discussed at length in Committee and again today, seeks to introduce an ongoing, almost perpetual, relative price cap once the absolute price cap is removed. Like the Member speaking for the Scottish National party, the hon. Member for Kilmarnock and Loudoun (Alan Brown), I am a little perplexed by this amendment, as I said in Committee. The hon. Member for Southampton, Test (Dr Whitehead) has spoken so powerfully on many occasions against a relative cap and in favour of an absolute cap, and yet this new clause suggests bringing in the opposite: a relative cap on a perpetual basis. I will talk more about the issues we have with relative caps, but this is a little counterintuitive. It would also mean—this will be anathema to many colleagues who have spoken passionately today in support of a relative cap—effectively perpetual Government intervention in the energy market. There is strong agreement across the House in favour of competitive markets delivering the best for consumers. When those markets are broken, or regulation slips out of date, it is right to improve the powers of regulators, but perpetual Government intervention, particularly in setting prices, is not the way to deliver the best outcomes. Therefore, the new clause is not necessary.

Moving on to the comments on relative caps, Ofgem said in its evidence, which others strongly supported, that a relative cap will be gamed by the largest suppliers. If we introduce this hypothesis, it will be gamed. As my hon. Friend the Member for Eddisbury (Antoinette Sandbach) also pointed out, we also heard in Select Committee evidence sessions that there was overwhelming support for an absolute cap—now and then.