David Mannering: First of all, we have for some while endorsed a compulsory social obligation. We believe that the amounts of money involved now are sufficiently large for it to be appropriate to be done on a statutory basis. Secondly, it has come out of discussions with contacts at DECC that we are potentially at a watershed here in the regulation of the energy industry. An obligation of this nature may persist for some while and the level of the financial commitment is likely to be pretty substantial for some years and, therefore, it is extremely important to get it right now. Something that is in statute is much harder to change than something that is part of, say, a licence condition imposed by the regulator.
I guess that one of the main concerns is the definition of a benefit. My understanding of the Bill is that suppliers must pay customers a benefit. That has, potentially, a number of drawbacks. If your obligation is defined solely in terms of how much you give to customers, that might, first of all, fail to incentivise the provision of benefits entitlement advice because in doing that you are not yourself transferring a benefit to customers. Equally, if benefits exclude the administrative costs involved in providing the advantage to customers, it would discourage certain activities, such as providing benefit entitlement advice, because there you are not transferring any money. You are incurring an administrative cost in giving the advice but not transferring anything to customers, so that activity might be excluded from the scheme. We think that that would be unhelpful.
Another drawback of excluding the administrative costs is that it might distort competition. If one company has a relatively high share of customers entitled to a benefit prescribed by the Secretary of State, which, in turn, has more significant associated administrative costs, that company has the potential to be disadvantaged because those administrative costs are not part of any equalisation scheme