Domestic Gas and Electricity (Tariff Cap) Bill - Report

Part of the debate – in the House of Lords at 5:30 pm on 27th June 2018.

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Photo of Lord Grantchester Lord Grantchester Shadow Spokesperson (Energy and Climate Change), Shadow Minister (Environment, Food and Rural Affairs), Shadow Spokesperson (Business, Energy and Industrial Strategy) 5:30 pm, 27th June 2018

I thank all noble Lords who have spoken on this amendment. I am very grateful for the support of my noble friend Lady Kennedy of Cradley, who has underlined most forcefully how egregious this behaviour is and how widespread it has become, with the effects landing on those least able to counter it.

I certainly understand the remarks of the noble Lord, Lord Hunt, that we must get the Bill right. However, I did rather think that his remarks might be more pertinent to the appeals section amendment that had already been debated. Nevertheless, I agree with him that we must get it right, which means, I take it, that he is looking for further improvements, such as this amendment, to be brought forward.

I suggest that the noble Lord, Lord Redesdale, has perhaps misunderstood the relative price mechanism, in that the relative price mechanism will not be applied across the piece; it applies only to the standard variable tariff and default tariffs, as the Bill does. Ofgem would not necessarily apply a minimum tariff; it is setting a differential that will apply between tariffs. In that regard, I am grateful to the noble Lord, Lord Teverson, for correcting his noble friend in his explanation of the amendment.

I also thank the Minister for his response, to which I have listened most carefully. However, I do not believe that it will cause any delay in the implementation of the Bill, as this proposal would come in only at the end of the price cap conditions.

I wanted to understand more how this tariff would operate in practice and how much work Ofgem had put into examining how it could be brought in. In this regard, I am very grateful to David Gray, chairman of Ofgem, who responded so promptly to our request for a meeting, following an invitation from my noble friend Lord Lennie. It is my understanding that Ofgem already has the power to set a relative cap mechanism via individual licences. It is often, though, perceived that in these licensing caps Ofgem fails to take action—to the dismay of so many, especially consumer bodies.

Britain’s consumer regulations are some of the best in the world, but here we have opaqueness that can be remedied immediately by this amendment. Not only must Ofgem be assured that it can do this, but it must implement it at the end of the price cap conditions, within which competition will thrive.

I stress once again that, the more competition there is, the narrower the gap will be. Against the charge that the market would move up in tandem, I suggest that the market is then not working competitively and that Ofgem would have the power, by this setting of the differential, to counteract that behaviour. I understand that Ofgem has begun to look at the various measures needed to be implemented.

I repeat again that, as the noble Lord, Lord Hunt, said, we must get this right. The Bill is before your Lordships’ House today, and I am very grateful to the Minister for the triple commitment he outlined in his remarks, but I stress that it is somewhat vague at this stage and nothing that could not have been done in any case. That being so, I beg leave to test the opinion of the House.

Ayes 193, Noes 192.