Domestic Gas and Electricity (Tariff Cap) Bill

Part of the debate – in the House of Commons at 2:36 pm on 6th March 2018.

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Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy 2:36 pm, 6th March 2018

My hon. Friend is absolutely right. We have already had the pleasure of debating that issue. Dr Whitehead has spent many hours in Committee scrutinising the Smart Meters Bill, which will contribute to making the energy system more interactive and therefore more resilient.

The Bill follows precisely the advice to set a non-renewable price cap for a short period while competition increases. Address the problem was one of the commitments made by the Prime Minister when she entered Downing Street. I recognise the important campaigning work done by my hon. Friend John Penrose and, indeed, by Caroline Flint.

The Bill comes to us today having been scrutinised in draft by the Select Committee on Business, Energy and Industrial Strategy. I am very grateful to the Committee, and to its Chair and members, for their swift yet thorough scrutiny. The Committee took evidence from a wide range of stakeholders and produced a well-considered report. It agreed with the CMA’s minority report and with the Government’s proposed approach.

The Bill has been supported by consumer groups and, indeed, by many energy suppliers. Citizens Advice has said:

“We welcome the…Bill, which will prevent loyal customers being ripped-off”.

Octopus Energy, one of the newer and more innovative entrants to the market, has called the Bill:

“A crucial step towards a fair energy market in which energy suppliers compete to offer their customers the best value and service”.

The Bill constitutes a sensible intervention to address a specific problem in the market. The Government are not setting prices, and this is not a price freeze. Such a freeze could disadvantage consumers by leaving them stuck on high prices when underlying costs fall, or force energy suppliers to face the entire risk of international commodity markets. Subject to parliamentary approval, the Bill will require Ofgem to cap domestic standard variable and default tariffs until 2020. It will be for Ofgem to decide the methodology and the level of the cap, as appropriate. The cap will stay in place until the end of 2020. Ofgem will then be required to assess the conditions for effective competition in the market and make a report and recommendation to the Government, which I am sure the House and its Select Committees will consider as well.

The price cap can be continued for one year at a time up to the end of 2023, when a sunset clause will come into effect. The Government have no wish for the price cap to become a permanent feature of the landscape. The inclusion of the sunset clause relates directly to the point made by my hon. Friend Rebecca Pow that we need to address the problem by increasing competition. Ofgem currently has the power to impose a cap for vulnerable consumers, and is taking steps to do that. When consumers make an active choice to opt for green standard variable or default tariffs, they will be able to continue to pay extra for such tariffs if they choose, to prevent unintended consequences. That was a very helpful recommendation from the Select Committee, and I can confirm that all of its recommendations have been accepted in full and are reflected in the Bill before the House today.

The Government want the market to thrive. We continue to promote competition as the best driver of value and services for consumers.