Ongoing relative tariff differential

Domestic Gas and Electricity (Tariff Cap) Bill – in the House of Commons at 3:30 pm on 18th July 2018.

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Photo of Lindsay Hoyle Lindsay Hoyle Deputy Speaker and Chairman of Ways and Means, Chair, Panel of Chairs, Chair, Standing Orders Committee

With this it will be convenient to take Government amendment (a) in lieu of Lords amendment 1.

Photo of Claire Perry Claire Perry The Minister of State, Department for Business, Energy and Industrial Strategy, Minister of State (Business, Energy and Industrial Strategy) (Energy and Clean Growth)

As Members will know, the Bill has received very broad and very strong cross-party support during its passage through this House. I thank all of those who have spoken, who have worked behind the scenes, who have lobbied and who have voted for a very important piece of legislation. I repeat my thanks to Rachel Reeves, who is not in her place, for her excellent stewardship of the Business, Energy and Industrial Strategy Committee, which contains Members from all parties, and for her continued support on the Bill. The Committee did some excellent work during the Bill’s pre-legislative scrutiny.

I also extend my thanks to Dr Whitehead and the Labour Front Bench team for their extremely constructive approach to this Bill and for helping us to develop an amendment that we will come on to debate in a moment.

First, we must consider the amendment that was made in the other place about what will be done to protect consumers when the price cap comes to an end. That is an extremely important question. As the Government have made clear, the price cap is a temporary intervention to protect consumers on standard variable and default tariffs while other reforms continue apace to bring about the conditions for effective competition in the retail market. I understand the concerns, which have been raised by Members from all parts of the House and by Members in the other place, that there is a risk that some features of the market may remain that will need to be addressed. For instance, as the energy market is reformed, it is absolutely vital that the protection of vulnerable customers in this market is kept under review, and action taken if necessary to afford those customers the protections they need.

There are also concerns about the possible return of practices such as tease and squeeze, which is essentially enticing people onto cheap fixed tariff deals only to move them on to higher tariff deals when the fixed period ends. I agree wholeheartedly that we must seek to end those practices. However, introducing a requirement such as the Lords amendment seeks to do, which essentially commits us to an indefinite price cap, is not the appropriate solution. Instead, the Government propose amendment (a) in lieu of the Lords amendment, which will ensure that Ofgem must conduct a review before the end of the price-cap period into the pricing practices of suppliers and, in particular, identify whether there are categories of customers who are currently paying, or who may in future be at risk of paying, excessive charges for standard variable and default tariffs.

In reviewing the practices of suppliers and identifying whether consumers are paying excessive charges, the regulator must consider whether there are consumers who will be excessively negatively affected when they move from fixed rates to standard variable tariffs—the tease and squeeze problem—and also whether vulnerable customers continue to require protection. If it is the regulator’s view that protections are indeed required, then the amendment says that necessary steps must be taken to provide those protections, using a broad set of existing powers under the Gas Act 1986 and the Electricity Act 1989.

It is the Government’s view that amendment (a) therefore futureproofs something that we all care so strongly about in this place—the protection of consumers from excessive charges, particularly on SVT and default rate tariffs, and rightly provides in the Bill the necessary impetus and discretion to the regulator to consider the most appropriate response to those excessive tariffs under its existing powers.

Photo of Stephen Kerr Stephen Kerr Conservative, Stirling

Let me speak in relation to the amendment to the amendment. Amendment (a) says:

“customers who appear to the Authority”— that is Ofgem—

“to be vulnerable by reason of their financial or other circumstances are in need of protection.”

How will the data be made available for anyone to be able to make that assessment, because, currently, there is a restriction in the availability of that data to pinpoint the help that is necessary?

Photo of Claire Perry Claire Perry The Minister of State, Department for Business, Energy and Industrial Strategy, Minister of State (Business, Energy and Industrial Strategy) (Energy and Clean Growth)

I pay tribute to my hon. Friend’s work as a member of the Business, Energy and Industrial Strategy Committee and his doughty championing of consumers. He will be aware that the Government have taken through another piece of legislation, which was required to ensure that the regulator can work with Government datasets in order accurately to pinpoint vulnerable customers. I am sure that the whole House will be pleased to know that if that legislation has not yet received Royal Assent, it will do imminently. I look to my officials to ensure that that is the case.

Photo of Jim Cunningham Jim Cunningham Labour, Coventry South

Perhaps I misunderstood the Minister; will Ofgem carry out a review constantly, or will it be a one-off review with a time limit?

Photo of Claire Perry Claire Perry The Minister of State, Department for Business, Energy and Industrial Strategy, Minister of State (Business, Energy and Industrial Strategy) (Energy and Clean Growth)

I can reassure the hon. Gentleman that the original provisions in the Bill give Ofgem very broad powers, from the date on which the Bill receives Royal Assent, to implement the cap and then to review it as often as Ofgem feels is necessary. When the cap is operating, it can be reviewed many times. We have instructed Ofgem to conduct a review when the cap ends to ensure that the groups of customers identified can be helped. My understanding is that there is nothing in Ofgem’s existing powers that will prohibit it from doing the same thing in future. The regulator was in the past given extremely broad powers under the gas and electricity Acts, and it would be within its discretion to carry out such reviews. However, across all parties we felt it was important to put on the face of this Bill, which is the first piece of legislation to introduce these sorts of tariff caps and to empower further the regulator to use its powers, the requirement to carry out the initial review.

Photo of Ian Murray Ian Murray Labour, Edinburgh South

On the same theme, what powers does the regulator currently have to ensure that energy companies are not artificially inflating prices ahead of the Bill coming into force?

Photo of Claire Perry Claire Perry The Minister of State, Department for Business, Energy and Industrial Strategy, Minister of State (Business, Energy and Industrial Strategy) (Energy and Clean Growth)

The hon. Gentleman refers to the regrettable series of price increases that we have seen from all the major, big six energy companies. Prices will of course go up because, as the hon. Gentleman will know, the wholesale price of gas in particular doubled—I believe; I will make sure the record is correct—in the last six months. The regulator can always define price rises as excessive, but the point of this very welcome cap is that those who are particularly vulnerable and who are on standard variable and default tariffs—often people who are elderly, perhaps less well-educated and furthest from the digital market, in which we all compete to switch—will be protected without having to switch. Indeed, the work that Ofgem is currently undertaking to ensure that the cap is set at a fair level will be vital to making sure that those protections come forward.

Amendment (a) will ensure that the legacy of the Bill, of which we should be extremely proud, is not undone by a return to business as usual by those suppliers that have thought up or carry out additional practices, such as tease and squeeze. I thank Members of this House, including Members from the Opposition Front-Bench team, for helping to create the amendment, which we believe is the most appropriate response to the concerns raised by members in this House and in the other place. I am delighted to see my hon. Friend John Penrose nodding during my speech. Along with Caroline Flint and others, he has been vital in driving this issue up to the top of the Government’s agenda and making sure that we get the Bill and this amendment right. I offer huge thanks to my hon. Friend and the others who have been involved.

Photo of James Heappey James Heappey Conservative, Wells

Will the Minister confirm that while the Bill has had to take this unexpected second lap of this place, Ofgem has been hard at work on its preparations for enacting what is likely to be in the Bill when it is passed? Will she join me in advising any energy companies that are considering legal action over the summer that it would be rather inappropriate for them to get in the way of legislation passed in this place quite legitimately?

Photo of Claire Perry Claire Perry The Minister of State, Department for Business, Energy and Industrial Strategy, Minister of State (Business, Energy and Industrial Strategy) (Energy and Clean Growth)

I thank my hon. Friend for that intervention, because it enables me to say four things. First, I am grateful to the noble Members at the other end of the House, because legislation is always better when it is scrutinised carefully. I think amendment 1 is helpful, so I am not unhappy to have the chance to talk about it.

Secondly, the new chair of Ofgem, Martin Cave, who will shortly take up his post, is a brilliant campaigner in support of the idea that customers should benefit from this regulated energy market. Indeed, I think he proposed the original idea of a tariff price cap. His appointment and the Bill will both help to strengthen Ofgem’s powers. Members will know that he wrote to the Chairman of the Business, Energy and Industrial Strategy Committee—I think it was only last week—setting out Ofgem’s determination to use its powers as widely as possible.

Thirdly, I reassure my hon. Friend that I have come to the House from a meeting with Ofgem, at which we discussed its progress on the price cap. That is well under way, and Ofgem has an extremely good team working on it. Ofgem has already published various technical papers setting out the methodology behind the cap calculation, and it intends to publish in full the details of that in very short order. That will give everybody a chance to scrutinise the cap and make sure that there is nothing untoward.

Fourthly, I wrote to the chairmen of the big six—I think they are all men—last week setting out that the Government would take an extremely dim view of companies that sought to frustrate the introduction of the cap, for which we have all worked so hard, by some sort of legal challenge; and that instead they should work with Government in this exciting time in the energy markets and look to their own activities to see how they can drive down costs, and drive up efficiency and customer service.

Photo of Rebecca Pow Rebecca Pow Conservative, Taunton Deane

On that note, does the Minister believe that the Bill will narrow down competition, and thereby affect prices, or increase it? Competition is generally viewed as good for a market, because one tends to get lower prices as companies try to attract customers.

Photo of Claire Perry Claire Perry The Minister of State, Department for Business, Energy and Industrial Strategy, Minister of State (Business, Energy and Industrial Strategy) (Energy and Clean Growth)

I strongly believe in competitive, well-regulated free markets. Indeed, in this market there are now more than 60 energy suppliers, all bidding for our business. I have recently switched again to a company that appears to be offering a very good green tariff. However, the problem, and the reason for the Bill, is that there is a very large group of customers who are sticky—who stay on expensive standard variable and default tariffs because they do not know how to switch, or they are not aware that they can. We can all think of grandparents, parents and others who fall into that category—it also includes young people who are renting accommodation—and they tend to be the furthest from the white heat of the switching market.

Understanding what the Bill does to the economic conditions in the market is, of course, an important part of Ofgem’s role. To go back to the original CMA report, however, we also know that the current pricing practices result in £1.3 billion of what it described as “excessive” returns, and we expect that number to come down. If you will indulge me, Madam Deputy Speaker, I wanted to make sure that the House was aware of that.

It is important that we have a level playing field for companies in the market. I have received representations stating that the customer accounts threshold for offering warm home discounts and ECO should be dropped to ensure that more companies can offer them to customers. We introduced legislation recently to reduce that threshold from 200,000 to 150,000, in increments of 50,000. Customers in receipt of warm home discounts will have a lower chance of losing them if they switch.[Official Report, 4 September 2018, Vol. 646, c. 2MC]

I hope the House agrees that amendment (a) is the most appropriate response to the concerns that have been raised, and that it will be welcomed by Members in this place and the other place. I hope that we will be able to move swiftly on this issue and keep our remarkable outbreak of cross-party consensus going, because I think the Bill is an absolutely vital piece of legislation.

Photo of John Redwood John Redwood Conservative, Wokingham

Can the Minister give us some indication of the kind of saving we that we could expect from the managed market, as a result of the amendment, compared with where we are at the moment?

Photo of Claire Perry Claire Perry The Minister of State, Department for Business, Energy and Industrial Strategy, Minister of State (Business, Energy and Industrial Strategy) (Energy and Clean Growth)

I do not know whether my right hon. Friend is referring to the per-household saving. We have been quite careful not to talk about that, because although we can understand that a total maximum excessive disbenefit of £1.3 billion is created by current pricing practices, how much of that is saved and passed on to consumers will depend on all sorts of things, including changes in the wholesale market and the efficiency of companies. I can reassure him, though, that the absolute price cap that was brought in to protect customers on pre-payment meters and those classified as vulnerable has led to savings of about £60 per household since it was introduced. Of course, prices go up, but customers are still better off than they would have been. Our expectation is that both overall and per household, consumers will see bills lower than they would otherwise have been.

Photo of James Heappey James Heappey Conservative, Wells 3:45 pm, 18th July 2018

Will the Minister reassure the House that she does not see this price cap as “job done” in terms of reducing people’s bills, and that she and her team in BEIS will continue to drive forward innovation in the energy markets so that new tariffs can come forward, and continue to focus on energy efficiency measures so that we can drive down people’s bills in those ways as well?

Photo of Claire Perry Claire Perry The Minister of State, Department for Business, Energy and Industrial Strategy, Minister of State (Business, Energy and Industrial Strategy) (Energy and Clean Growth)

My hon. Friend uses his great experience in this area to point to this being two halves of an equation in making sure, first, that energy is going into a property at the lowest possible price, and secondly, that consumption is as low as can be.

With ECO now at over £600 million, we are targeting that entirely at fuel poverty. The consultation has closed and we have the responses to come out. There is the whole challenge of getting energy efficiency levels up so that, overall, households are more energy-efficient. I am looking at Christina Rees on the Opposition Front Bench. I very much enjoyed a visit to her constituency to see an energy-positive home. That is an incredible innovation funded by her local excellent councillors, looking at how to design homes that return energy to the grid and are cool and lovely to live in. That is the kind of technology and innovation that we want to see.

I hope that we can all agree on this amendment, send it up to be agreed in the other place, and get on and pass the Bill before this place rises, because the regulator has told us that it will need up to five months to calculate the mechanism. It is absolutely vital, as my hon. Friend James Heappey said, that that mechanism is absolutely watertight so that energy companies do not seek to frustrate further the introduction of this measure. We want it in place by the end of this year so that people can start saving on their energy bills this winter.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change)

Labour Members are delighted that the Bill to institute an absolute price cap on energy costs is about to pass into law, mechanisms notwithstanding, this afternoon. We are delighted because of the parentage of the Bill, which emanates from the Labour Benches. If hon. Members are worried about the authenticity of the parentage, I can produce a birth certificate: the motion that was debated in this Chamber on a Wednesday afternoon, at exactly this time, on 6 November 2013. It said:

“That this House
calls on the Government to freeze electricity and gas prices for 20 months whilst legislation is introduced to ring-fence the generation businesses of the vertically integrated energy companies from their supply businesses, to require all electricity generators and suppliers to trade their power via an open exchange, to establish a tough new regulator with the power to force energy suppliers to pass on price cuts when wholesale costs fall, and to put all over-75-year-olds on the cheapest tariff.”

That motion was in the name of my right hon. Friend Caroline Flint. When it was debated that afternoon, it did not, I have to say, receive a terribly positive response from the Government of the day.

Photo of James Heappey James Heappey Conservative, Wells

How times have changed.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change)

Indeed.

Five and a half years later, we are almost there. I hope that the procedures on the market issues that we have discussed during the Bill’s progress ensure that while there is a price cap those issues are addressed so that we can, as the mechanism in the Bill suggests, come out of the price cap with market conditions resolved in a much better way for customers. Indeed, just as was suggested in that motion, the Bill provides for a procedure to declare the market in place, at which time the cap is ended. That could be about 20 months or perhaps three years, but nevertheless there is a mechanism for that.

What happens at the end of cap conditions is important, and that is what the amendments that have come from the other place at the end of the Bill process deal with, rather than the principle of the absolute cap—the central principle of the Bill—which, I am delighted to say, was received in the other place as warmly as in this House. On termination of the cap, the Lords amendment would put in place a relative tariff differential that would limit the price range between the highest and lowest tariff a company can charge—the so-called “tease and squeeze” problem that the Minister mentioned. That would be not within the absolute cap but part of the return to market conditions that would nevertheless shape how the market subsequently works for the benefit of customers.

I am delighted that the Government have responded positively in the shape of their amendment in lieu, which I am pleased to say the Opposition not only were given sight of but had the opportunity to work on in detail, to ensure that between us we had a resolution to the outstanding issue from the other place. We can endorse the amendment and recommend that their lordships consider it a worthy response to the message we received.

The amendment is slightly different, using an Ofgem mechanism to bring about a solution to tariff ratios, but from the amendment’s drafting I am confident that Ofgem would receive the message in no uncertain terms of how it should use its powers, should the report it is required to write before termination of the cap comes about demonstrate a continuing problem in tariff differentials.

The Bill has always had more than a tinge of Labour parentage to it and now its offspring has further elements of Labour input, which I, for one, very much welcome. It is now a Bill that all sides can agree does the right thing on energy prices and how the market works. That signal of unity from all sections of the House sends an important message to all those affected by the legislation—that this is a serious piece of work, which will work, and that we are all determined to make it happen. If the Bill can pass back to the other place for its final procedures on that basis, that will strengthen considerably the efforts that we are embarking on to ensure that prices are maintained in the interests of customers over the next period through the freeze mechanism.

I thank the Minister very much for the constructive and open way in which she has conducted discussions on the Bill hitherto, and I at least note in distinguished messages the input of John Penrose, and of course my right hon. Friend the Member for Don Valley, who I mentioned at the beginning of my comments, whose role in the Bill’s parentage should be not underestimated at all; indeed, it should be written up in dispatches.

Photo of John Penrose John Penrose Conservative, Weston-Super-Mare

We are nearly there. With fingers firmly crossed, it looks as though this is the last, or last but one, trot around the track for the Bill before it goes off for Royal Assent. I echo the thanks that have come from all sides for the combined and cross-party efforts to get us here. The fact that everyone is rushing to claim a degree of authorship shows the truth of the old saying that success has many parents, whereas failure is an orphan. Thankfully, this is not a failure.

I was extremely concerned by the Lords amendment as it came to us before the amendment in lieu was tabled. That was not because I disagreed with the principle of a relative cap—in fact, I spoke strongly in favour of relative caps at earlier stages—but because, in trying to install a relative cap, their lordships had made it an open-ended intervention in this market. For people like me—perhaps more on the Conservative side of the House—who are avowed free marketeers, a temporary intervention is very important. An open-ended commitment would create a great deal of unease among many of us, on the grounds that the opportunity for regulatory meddling would be extremely strong, and that the temptation would prove too hard to resist over time.

I am therefore delighted to see the proposed amendment in lieu. Not only does it not add any fresh powers—it asks Ofgem to use its existing powers, giving it a firm and direct mandate from this House that those powers should be used—but it refocuses the Bill. I for one—I do not think I am alone in this—had become a little bit concerned that the Bill had gone a little off track or off topic in its passage through Parliament.

The Bill was proposed in the first place in response to an underlying mischief or immorality—that of “tease and squeeze” behaviour. People could start off on a razor-keen introductory tariff and then, without taking any firm decisions, they might find that when the tariff came to an end after one or two years, they had in a surreptitious way become liable for a sky-high default tariff. That would happen without their saying yes to anything, because of the tease and squeeze tactics, particularly of the big six. The central behaviour, which is deeply embedded in this market, of taking advantage of people’s loyalty and inertia—their stickiness, as my right hon. Friend the Minister said—was griping everybody and making them feel that customers were being taken advantage of. That was why the Bill was first conceived, and why it rightly garnered so much support throughout the House.

The amendment in lieu brings us back to that central point. It reminds us why we are here and, most importantly, it means that Ofgem will no longer have an excuse to look the other way. We all want this temporary price cap, when it comes to an end, not to be needed any more because the market—the big six in particular, but also the market as a whole—will have learned the error of its ways and will stop behaving in the way that has griped everybody, so that there is no need for further interventions. However, I do not think I am alone in being a little bit cynical and saying that that might not happen, even with all the other interventions and reforms that Ofgem is rightly introducing to try to sharpen competition, improve consumer choice, and both improve the behaviour of suppliers and help us as customers to use our freedoms more actively.

It is just possible that, even after all the changes introduced by Ofgem during the period of the cap, the market is not yet properly reformed. We are all here because Ofgem has in the past refused to use the powers it has. I have had conversations with senior people in Ofgem, as I am sure have many others in the Chamber, asking, “Why don’t you get on with it? Why don’t you use these powers? You’re being weak-willed, and you are pathetically—like wet lettuces—not doing what you are there for. What’s the point of having an economic regulator if you aren’t going to stick up for people who are vulnerable and people who are being taken advantage of?” We all got fed up with arguing that it should do so, and it would not do so, and that is why the Bill came into being. The amendment in lieu should solve that because, for future reference, it should ensure that Ofgem has a backbone statutorily inserted into it.

We all hope that those powers are not needed, and that the reforms designed to sharpen competition mean that they will never be needed, but the amendment in lieu means that they can be used in the future. With any luck, as with a good nuclear deterrent, no one will ever have to press the button, but my goodness me, they will know that they are there. That is the crucial point. With that, I welcome the amendment in lieu. I hope that the message goes out loud and clear to Ofgem that we will not put up with its being weak-willed in the future. It is up to Ofgem to ensure that this market functions properly, not just during the temporary period of the cap, but on an ongoing basis in the future. With any luck, after that none of us will ever have to worry about the energy market’s mispricing again.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Energy) 4:00 pm, 18th July 2018

It is a pleasure to follow John Penrose, and I pay tribute to his work, as well as that of Caroline Flint and my hon. Friend Patricia Gibson. The hon. Gentleman lost me a wee bit at the end when he compared the amendment in lieu to the nuclear deterrent. Apart from that, I concurred with his comments.

I will be brief, because there seems to be consensus across the House, and will simply outline my thoughts on the Lords amendment and the Government amendment. When Labour originally tabled the Lords amendment, I chose to abstain because, as I said at the time, I remained unconvinced by their arguments. Labour was against a relative cap, so it seemed anomalous to me to introduce a relative measure on a permanent basis. The risks and arguments are the same about the relative aspect—it really does risk increasing the price of standard variable tariffs and there is a further risk that if that came into operation in the absence of an absolute cap, we might see prices creep up again, which would be counter-productive.

The Business, Energy and Industrial Strategy Committee was against the absolute cap when it did its pre-legislative scrutiny. Consumer organisations were against it and even the Competition and Markets Authority has outlined where relative aspects have not worked in other sectors, so why would they work in this situation? That was certainly the concern. There seems to be cross-party agreement that an absolute cap is a temporary measure, so this would effectively be a temporary Bill. Why introduce a permanent measure into the Bill?

One good thing about the Lords getting the amendment through is that it has clearly allowed the Government to rethink and it is clear that the Government have worked with the Opposition to strengthen the Bill. They have agreed to introduce these measures, which basically instruct Ofgem to review the operation of the absolute cap and how it affects customers, including the most vulnerable, and to ensure that the companies take action to protect those customers. I welcome the Government’s amendment and, given the cross-party consensus, it is time to get on with it and get the Bill finished, and for the Government to concentrate on getting cheaper energy through renewables and by scrapping nuclear.

Photo of Stephen Kerr Stephen Kerr Conservative, Stirling

I join others in paying tribute to the work done by my right hon. Friend the Minister in leading the Bill through the House. I also pay tribute to the Opposition spokesman, Dr Whitehead, and to my hon. Friend John Penrose. There has also been mention of Caroline Flint. I agree with much—indeed everything—of what I have heard, including from the Scottish National party spokesman, which is always noteworthy, as I think he would agree.

I want to take this opportunity to comment on the nature of the marketplace because, as my hon. Friend the Member for Weston-super-Mare rightly mentioned, this is a marketplace where consumers are punished, or at least treated as suckers, by the companies they are loyal to, and that surely cannot be allowed. I am therefore proud to stand in support of this Bill, and to see it progress quickly from this place to the other place and, very quickly after that, into law. A lot of significant issues have been discussed as the Bill has made progress through pre-scrutiny, Committee and back to the Floor of the House.

I genuinely cannot understand the justification for the Lords amendment. I agree with Alan Brown. The idea that we could legislate in a temporary Bill for an energy market in 2023 seems to me to be quite absurd. Sitting here today, we have no idea what the energy market will even look like in 2023-24. Perhaps the noble Lords have a crystal ball that allows them foresight that we do not enjoy in this House, but somehow I doubt that they do. With the rate of change in the market being what it is, we can comfortably expect that, when we get to the sunset year, 2023-24, the landscape will be much changed from what it is today.

While we have debated many issues on the Bill, I would disappoint the Minister if I did not mention smart meters, as a sideline. I know that the Bill is a temporary measure to fix the energy market, which is badly broken, but it also gives consumers control. It should also give them the right to see how their energy usage is affected by their choice of appliance and how they use their appliances. One way we will do that is through the roll-out of smart meters. I support that but continue to have what I hope are felt to be genuine concerns about the nature of the roll-out and how it is being conducted.

The SMETS1 meters are a poor substitute for the real thing. We have not heard recently how many SMETS2 meters are installed and connected to the Data Communications Company but, bearing in mind the £11 billion cost and that this is a vital part of our national infrastructure for the energy networks of the future, I feel that it is appropriate to mention in passing that we need a stronger handle on where the SMETS2 programme is, its cost and all the issues surrounding it.

Photo of James Heappey James Heappey Conservative, Wells

I very much agree with my hon. Friend. Rushing into the deployment of SMETS2 meters before the technology has been properly proven and the Data Communications Company is fully up and running might lead to a collapse in consumer confidence in smart meters generally, which would have an adverse effect on the smart programme.

Photo of Stephen Kerr Stephen Kerr Conservative, Stirling

I agree, and that is why it is important to discuss the real-time issues surrounding the SMETS2 meter and the future smart meter network, which is so important to the future of our energy market.

In conclusion, at the heart of this issue is the need for lower energy prices, and helping consumers to understand how much energy they are using and how they can save money by changing supplier. I look forward to the day when through an app, or rather, with one click, it will be possible for consumers to make smart choices painlessly. If we do this right—and I think we are—this tariff cap measure can fall away in 2023 without causing any problem, and more consumers will be engaged and able to make the right decisions for their households. We will also be able to see the energy companies properly competing and creating the competitive market that the Bill seeks to create.

Photo of James Heappey James Heappey Conservative, Wells

What a joy it is to be in this Chamber when consensus abounds, after a couple of days of tearing strips off one other. It is really rather nice to be in here, all agreeing. That has rather characterised the progress of the Bill throughout its time in this place and in the Bill Committee, on which I had the privilege to serve. I think it is right that we seek to remove the amendment that the Lords have sent back, but I am glad that a compromise has been agreed between the two Front-Bench teams and I think that the amendment in lieu that we have proposed is very sensible.

Since the Bill has been delayed by this extra lap in Parliament, I think it is worthwhile to rehearse the arguments once again. The price cap is only a part of the challenge, so I want to add a few other things to the exhortation from my hon. Friend Stephen Kerr about smart meters. The Government must push on with those very urgently, because the savings from them will be far greater than the savings that we will achieve for our constituents from this Bill.

First, on decentralised generation, putting storage in behind the meter and aggregated demand-side response, I know that the Minister is looking at what comes after feed-in tariffs when they start to run out next year. I hope that she can see merit in finding a mechanism to replace them that really unlocks the market for people who want to install generation in their homes or businesses, storage, demand response and the capacity that comes from electric vehicles.

Secondly, I hope that we can send a strong signal to industry and the regulator over the delivery of heat as a service. Heat as a service is a huge opportunity for energy efficiency to become the responsibility of the supplier, not out of obligation, but because it sees an opportunity to make bigger margins by providing energy more cheaply and efficiently. If we can make that happen, we will secure huge savings for consumers. Thirdly, as we replace the green deal, let us allow storage to be a part of this so that again people can find savings. Fourthly, on replacing the ECO, the consultation has been completed and responses have been had, and I know that plenty of tech companies have made representations for smart thermostats and other clean tech to be included within the ECO catalogue. Let us make that the case.

We have put in an awful lot of time, in this place, the other place and in Committee, to deliver a saving to our constituents of around £100. That is not to be sniffed at, but we can prove to an awful lot of people that an enduring price cap is not the answer by getting all sorts of other things right at the same time. Energy efficiency, storage, the flexibility of demand response and decentralised generation have the potential to slash bills to a fraction of what they currently are. Let us not let this price cap distract us from the real prize, which is huge savings for our constituents from clean tech.

Photo of Rebecca Pow Rebecca Pow Conservative, Taunton Deane

I welcome the Bill, as it places consumers at its heart. That is really what we are talking about. In particular, I welcome the amendment in lieu, which is a tweak but a valuable tweak that makes the Bill really work. I also reiterate what my hon. Friend James Heappey said. How wonderful it is to have unity in the Chamber after these last few days. It is welcome and a lovely feeling.

Photo of Alex Chalk Alex Chalk Conservative, Cheltenham

It’s quite unsettling.

Photo of Rebecca Pow Rebecca Pow Conservative, Taunton Deane

Quite unsettling, yes.

I believe that pressing for an absolute cap over a relative one is the right way to go. As the Business, Energy and Industrial Strategy Select Committee stated, a relative cap could force cheaper energy tariffs to disappear, harming consumers, not protecting them. That would run counter to the sentiment of the Bill. As we have heard, Ofgem will be given the task of making the cap work effectively with its formula and will be responsible for setting the cap and reviewing it every six months. As outlined by my hon. Friend John Penrose, it is beholden on Ofgem to get this right and hold people to account, otherwise it will not have been worth while. It is vital that energy companies do not take advantage of any price cap and lift their tariffs to the maximum allowed. As I mentioned earlier, the energy sector needs more price competition to encourage lower prices, and an absolute cap can help to achieve this.

I am delighted that the Government will require the Gas and Electricity Markets Authority to protect consumers beyond the end of the energy price cap. Energy companies must not slip back into their old habits as soon as the cap is lifted, putting ordinary people back in the position they were in before the cap and leaving them paying over the odds. The Bill will ensure better value for money for many people who, frankly, have been taken for a ride and been paying over the odds for the self same energy that the person down the road has been getting cheaper.

As the Minister stated, it cannot be fair that between 2012 and 2015 customers paid £1.4 billion more than they ought to have done. In 2016, this escalated to an incredible £2 billion. As I have said before, many of these people fall into the “vulnerable” category. Many are elderly. My constituency and wider Somerset have a great many elderly people. The number of over-75s is set to double in the next 10 years and they could be the people who would have been adversely affected. The Bill will help them. They are the people who do not switch very often, as are younger people and tenants. My children, in their 20s, have raised this with me. The Bill will help them. It is right that the cap system should be temporary. It is an artificial lever to control the market for a short while and is being applied in the interests of consumers. This is the right way to go, as it will still enable competitiveness in the market, which is essential. We want the market to work better for everybody.

As other Members have said, it is essential for us to engage all the different methods in the energy market, such as smart meters—and we must get them right—and technology, including data-driven technology. What has not been mentioned before, however, is the need to encourage people to use less energy. There are now many devices on the market that we can put in our homes to ensure that we do not waste so much of it, and I shall be presenting a ten-minute rule Bill on that subject fairly soon. We also need even more investment in renewables. If we are to hit our clean growth strategy targets, we must do all those things, and I am delighted to say that the Government are indeed doing them. We are going in absolutely the right direction.

As I have said, I fully support the Government amendment, which will make the Bill really work for those for whom it was designed: the consumers. It is a valuable addition to the Bill, and I congratulate all those who have brought it this far and will make it into law.

Photo of John Bercow John Bercow Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Commons Reference Group on Representation and Inclusion Committee 4:15 pm, 18th July 2018

Marvellous. The hon. Lady has completed her oration? Yes. [Interruption.] Well, it was an oration. That is a good thing.

Lords amendment 1 disagreed to.

Amendment (a), in lieu of Lords amendment 1, agreed to.