Domestic Gas and Electricity (Tariff Cap) Bill

Baroness Winterton of Doncaster Excerpts

2nd reading: House of Commons
Tuesday 6th March 2018 Commons Chamber

[Several hon. Members rose—]

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. As Members can see, many colleagues are trying to get in on this debate. If Members could stick to eight minutes, we will be able to get everyone in without having to impose a time limit. I call John Penrose.

Domestic Gas and Electricity (Tariff Cap) Bill

Baroness Winterton of Doncaster Excerpts

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

[Dr Alan Whitehead (Southampton, Test) (Lab)]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Dame Rosie Winterton)]

With this it will be convenient to discuss the following:

Amendment 5, in clause 1, page 1, line 3, leave out “after this Act is” and insert

“, and within five months of this Act being”.

This amendment would require the Authority to insert the standard supply licence conditions within five months of Royal Assent.

Amendment 2, page 1, line 9, at end insert—

“(1A) A cap imposed by tariff cap conditions shall be calculated so as to require that the difference between the cheapest advertised tariff and the most expensive standard variable or default tariff offered by a holder of a supply licence is no more than a specified proportion of the cheapest advertised tariff.

(1B) The proportion under subsection (1A) shall be specified by the tariff cap conditions.”

This amendment would require the tariff cap to be calculated with reference to the difference between supplier’s cheapest tariff and most expensive variable or default rate.

Amendment 3, page 1, line 24, at end insert—

“(c) “cheapest advertised rate” means the lowest rate or amount charged for, or in relation to, the supply of gas or electricity under any contract available to the customer.”

This amendment is consequential to Amendment 2 and provides a definition of “cheapest advertised rate”.

Amendment 4, page 2, line 15, at end insert—

“(e) the ability of the Authority to accurately forecast and model wholesale energy prices, and the need to minimise the impact of inaccuracies on domestic customers and holders of supply licences in the future.

(f) the difference between the cheapest advertised rate and the most expensive standard variable or default rate offered by a holder of a supply licence.”

This amendment would extend the matters Ofgem is required to consider when setting the tariff cap to include the matters listed in the amendment.

Amendment 6, page 2, line 15, at end insert—

“(e) the need to ensure that customers on standard variable and default rates have their annual expenditure on gas and electricity reduced by no less than £100 as a result of the tariff cap conditions”

This amendment would require the Authority to ensure that the tariff cap conditions result in customers on standard variable and default rates having their annual expenditure reduced by no less than £100.

Amendment 7, page 2, line 15, at end insert—

“(e) the need to ensure that adequate protection exists for vulnerable domestic customers, including ensuring those customers who currently benefit under a cap imposed by the Authority on rates or amounts charged for, or in relation to, the supply of gas or electricity because they appear to the Authority to be vulnerable, retain those benefits.”

This amendment would require the Authority to have regard to the protection of vulnerable customers, including ensuring those who currently benefit under a safeguard tariff continue to do so.

Amendment 9, page 2, line 15, at end insert—

“(e) the need to ensure that adequate protection exists for—

(i) customers who benefit from a cap imposed by the Authority on rates or amounts charged for, or in relation to, the supply of gas or electricity on the basis that they appear to the Authority to be vulnerable;

(ii) in circumstances where a cap described in sub-paragraph (i) has been withdrawn, customers who would have benefited from such a cap had it still been in force; and

(iii) other vulnerable domestic customers.”

This amendment would ensure that when exercising its functions under this section, the Authority must have regard to protection for vulnerable customers, including those who are protected or (in circumstances where it is no longer in force) would have been protected by a safeguard tariff.

Amendment 8, in clause 7, page 4, line 39, leave out from “must” to end of line 40 and insert “have regard to the extent to which—

(a) progress has been made in installing smart meters for use by domestic customers,

(b) incentives for holders of energy supply licences to improve their efficiency have been created,

(c) holders of energy supply licences are able to compete effectively for domestic supply contracts,

(d) incentives for domestic customers to switch to different supply contracts are in place,

(e) the barriers which prevent the customers from switching from different supply contracts quickly and easily are addressed,

(f) holders of supply licences who operate efficiently are able to finance activities authorised by the licence,

(g) holders of supply licences have eliminated practices that are to the detriment of customers in their tariff structures,

(h) District Network Operator costs and dividends are proportionate to expectations and the impact of that on domestic supply contracts, and

(i) vulnerable and disabled customers are adequately protected.”

This amendment sets out additional matters that the Authority must have regard to when conducting a review of competition for domestic supply contracts.

Amendment 1, page 4, line 39, leave out from “which” to the end of line 40 and insert “—

(a) progress has been made in installing smart meters for use by domestic customers; and

(b) holders of supply licences are using available data, whether collected through smart meters or through other means, to—

(i) assess the energy consumption patterns of domestic customers; and

(ii) use such data to identify, and move domestic customers onto, the most competitive tariff.”

This amendment requires Ofgem to consider the progress made by energy companies in offering domestic customers the cheapest available rate based on their individual consumption patterns when determining whether there is an effective market.

[Dr Whitehead]

We support the Government’s aim to introduce a temporary absolute price cap as set out in the Bill. We claim some intellectual property rights in this, in that Labour proposed a temporary price cap before the 2015 election, which was famously denounced by the then Prime Minister as

“wanting to live in some sort of Marxist universe.”

It is good to see that the Government have not flinched at the possibility of the apparition of its former leader returning to denounce this price cap in the same terms, but then we live in interesting times.

It is necessary to introduce an absolute cap, not a relative price cap, as soon as possible and for a limited period beginning no later than this winter. We have noted the continuing anomalies in the market, the continuing opportunities to game the market, and indeed, the report by the Competition and Markets Authority that customers were being overcharged by £1.2 billion over the recent period as a result of those anomalies. Therefore, a price cap and a pause in price increases, other than those agreed by Ofgem and relating to wholesale price movements, is the right thing to do now, providing, as we have always said and as we said when we introduced the idea of a price cap previously, that action is taken to correct those anomalies during the period of the cap, so that the market resumes at the end of it under circumstances that do not just result in prices running away again and our all being here a little further down the road, finding that nothing has changed and that perhaps a further cap is necessary.



We want to ensure that the Bill does just that—that the terms under which Ofgem operates the price cap give due attention to the current market problems; that the basis on which the cap is ended is clear in the legislation; and that, subsequent to the cap ending, there are measures in place to ensure that some of the more egregious problems of the present market arrangements are not repeated in the future. That is the basis on which we are judging the Bill and on which we are suggesting amendments, as we did in Committee. We do not want to overthrow or weaken the Bill, and we understand that it needs to be robust against possible challenges. Our amendments would therefore have the sole effect of strengthening the Bill and its purpose, and they would ensure that its architecture fully reflects that purpose.