Contracts for Difference (Electricity Supplier Obligations) (Amendment) (Coronavirus) Regulations 2020

Baroness Bowles of Berkhamsted Excerpts

Thursday 2nd July 2020 Lords Chamber

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, the government loan and delayed payback mechanism in this statutory instrument gives the electricity suppliers time to work unexpected higher charges through to customers. By delaying four quarters rather than three, the extra cost can be fed into the retail price cap to ensure that higher prices do not hit in the winter months. It is all very logical but, in the retail price cap, will any account be taken of the fact that it is not domestic energy consumption that dropped due to lockdown? Working from home, having children at home, extra cooking, baking, computer use and other household activity has led to increased consumption, and putting these levy-related costs on to domestic supply later on is retail picking up the tab for disruption in industrial consumption.

For those on low income, where fuel poverty is a serious matter, any rises are dreaded. What planning is being done for how the levy cost blip will be reflected in the price cap? Will the retail share of the levy blip be limited to cover, say, 30%, or whatever the 2019 domestic percentage of household electricity consumption is, and not the higher percentage that will probably happen in 2020 due to lockdown? Will it be reversed out of the baseline in later cap updates?

My back-of-envelope calculation for the spring quarter, based on the £100 million cap, has a possible maximum levy of around £125 million, over 28 million households and using 30% of total electricity. That share would come out at only about £1.50 per household for the quarter. Will that be the kind of maximum increase allowed? To some, even that is significant. Further loans are presently ruled out, but is it not the case that an elevated levy is likely in later quarters, as overall consumption and market prices remain depressed?

The Government said in their consultation that suppliers should absorb some of the costs, that being the reason for not giving 100% cover, and the payback will then be mutualised among suppliers extant in a year’s time—not least in case some go bust. Once the price rise comes in, all levy costs will surely be clawed back, but what will be the effect on consumers if some suppliers go under, including where there are advanced payments? Are those lost as unsecured creditors? Finally, have the consultation responses been published? I looked for them on the BEIS website but did not find them, and it is not really a public consultation without seeing the responses.