Domestic Gas and Electricity (Tariff Cap) Bill

Michelle Donelan Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 30th April 2018 Commons Chamber

[Bill Grant (Ayr, Carrick and Cumnock) (Con)]

It is a pleasure to follow the hon. Member for North Ayrshire and Arran (Patricia Gibson).

It is clear that the energy market is not working for the consumer, and with that in mind, I am pleased to support the Bill. However, I firmly believe that these additional measures must be temporary. Permanent Government intervention in the energy market of the kind that is proposed in new clause 1 is, I believe, unnecessary. Indeed, things are already changing. As recently as 2010, there were only 13 energy suppliers in the United Kingdom; now there are well over 60. Independent suppliers are growing and, rightly, posing new challenges for the big six. They already account for some 20% of the dual fuel market.

The basis of healthy competition is enabling consumers to go elsewhere with relative ease if they find a better deal. Nearly 20% of households a year already switch suppliers. By making switching quicker and easier, we can make that figure even higher and force big suppliers to stop taking long-standing customers for granted as they have done for many years.

There are now about 10 million first-generation smart meters in operation in the United Kingdom. While the roll-out is progressing, there is a long way to go to meet the ambitious target of 53 million by 2020. In the context of the Bill, a key element is the roll-out of the SMETS 2 meters, which is due to begin this year. SMETS 2 consumers will benefit from quick and easy switching, and the meters should be intelligent enough to identify the lowest tariff. They have the potential to be a real force for competition in the energy market. At that point, there will be no need for the price cap, which is why it would not be prudent to introduce a permanent relative cap. It would be bad for customers, and it would work against the positive changes that will be made over the next few years.

New clause 1 is the product of a belief that markets simply do not work. As a Conservative, I believe that they can work. I note the progress that we have made, and the progress that we will make in the coming years. I acknowledge that the market needs the temporary cap, and I support the Bill as a means of protecting consumers, not only in my constituency but throughout Scotland and throughout the United Kingdom. I am sure that it will contribute to a reduction in the very real fuel poverty that some people endure.

[Michelle Donelan (Chippenham) (Con)]

I am delighted to speak about the Bill, having supported it throughout this Parliament and having been a member of the Bill Committee. I think it important that, when considering the new clauses and amendments, we consider the fundamental aim of the Bill, which is to guarantee protection for the 11 million households that are currently on the highest energy tariffs—as well as the 5 million vulnerable households that are already protected by Ofgem’s prepayment meter safeguard tariff cap—by introducing a measured temporary intervention to correct a market that is currently letting down and ripping off thousands of people in my constituency, and millions throughout the country.

New clause 1 would allow the Secretary of State to make requirements in relation to a differential between the cheapest and the most expensive rates offered by suppliers: in other words, a relative price cap. In practice, that would mean that once effective competition was in place in the market—or by the end of 2023 at the latest —and that tariff cap was removed, a maximum differential between the most expensive and the cheapest tariffs would be introduced. That goes against the principle of the Bill, which is to ensure that it is temporary. This should be a temporary measure to correct the market, and it should not allow Government intervention to remain permanent. This Bill is based on a mandate that came out of the Conservative manifesto, which set out a temporary intervention.