Energy Bill [Lords]

Mike Weir Excerpts

Wednesday 14th September 2011 Commons Chamber

[Gregory Barker]

As this is defined as consumer finance, it will be the Office of Fair Trading, rather than the FSA, that will regulate this market. My hon. Friend makes a good point, however. It is our intention that there should be robust consumer protection, and we expect that the guidelines will be improved and refreshed to reflect the green deal. We will also expect the Office of Fair Trading to take a robust line from the very start, to ensure the integrity of the selling, and to ensure that any mis-selling is stamped out at the outset and full compensation is paid to any victims.

[Mr Mike Weir (Angus) (SNP)]

One of the problems with energy mis-selling was that it was a long time before many of the cases came to light. Does the Minister have any thoughts on ensuring that the standards that are to be imposed on those selling green energy are regularly inspected to ensure that any problems can be detected at an early stage, rather than finding a huge range of problems several years down the line, which is what happened following the doorstep mis-selling in the past?

[Gregory Barker]

I can assure the hon. Gentleman that we will keep all elements of the green deal under close review. We are embarking on a really new, large-scale proposition; there is nothing quite like it anywhere in the world. We are pioneering a new model for energy saving, at scale, and as a result we will need continually to monitor all aspects of it, especially those relating to selling and mis-selling. We will need to ensure that the legislation that we have put on the statute book, the codes of practice that underpin it and the secondary legislation that we will introduce in due course before the launch of the green deal remain pertinent. If we identify any areas in which we think improvements can be made, we will not hesitate to make them.

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[Charles Hendry]

We have chosen to use the word “prudent” not only because it is a concept that is established in law but because it was important to give the Secretary of State the ability to decide, in future, whether something has ceased to be prudent. We looked at some of the wording that had been discussed in Committee relating to unforeseen circumstances and moved away from that because we were concerned that the legal debate would then be about whether something was foreseen or unforeseen. If people could point to one speech by a Minister who had talked about such issues, then nobody could say that they were unforeseen because they had been discussed in this House. I will clarify that further in a few moments.

It is clear that over the years foreseen and, potentially, unforeseen events will occur that may require modification of the arrangements set out in the programme. The new clause is not limited to unforeseen circumstances, but when the Secretary of State enters the agreement he will need to be satisfied with the arrangements for modifying the programme when it is no longer prudent, be that in unforeseen circumstances or those which were foreseen. The new clause also allows the agreement to set out matters that may be determined by a third party, and for the Secretary of State, if he so agrees, to be bound by that determination. This provides reassurance to operators that there can be a mutually agreed and mutually binding process between the Secretary of State and the operator where disputes can be resolved in an impartial manner. Such a third party would need to be impartial and independent of the operator and the Secretary of State. In addition, both parties would need to be satisfied that the third party in question had the expertise to perform the role required of them. The exact terms of the agreement, including any process for third-party determination, and the method for appointing a third party will be decided on a case-by-case basis with the operator and after taking into account the programme submitted by that operator.

I turn now to amendments (a), (b) and (c) to new clause 11, which are in the name of the hon. Member for Brighton, Pavilion (Caroline Lucas). Under amendment (a), the Secretary of State would not be able to set out in the agreement when he would not use his section 48 power. This would leave him with broad scope to use his section 48 powers and so render the agreement ineffective from the perspective of providing investor confidence, which is the whole purpose. Amendment (b) would have the same effect. Amendment (c), which would omit the word “prudent” and insert

“adequate to protect the interests of the public and taxpayers”,

would not provide further protection for the taxpayer. Arguably, it would reduce protection by introducing a looser term that could be subject to conflicting interpretations and be inconsistent with the rest of the Act, for which the test is prudence.

New clause 17 would amend subsection (2)(c) of section 48 of the Energy Act 2008. That would have the effect of allowing others with obligations under the programme to propose modifications to a site operator’s programme without first seeking their consent. It is clearly unreasonable, we believe, to expect an operator to agree to this. In any case, the Secretary of State would need to seek the views of the site operator and take those views on board before deciding whether to approve the modification.

There is also a legal issue involved in the new clause. The effect of modifying subsection (3) of section 48 in this way would probably be exactly the opposite of what the hon. Member for Brighton, Pavilion intends. Under the Act, if it were amended as proposed, the Secretary of State would be able to impose obligations only on an associate of the operator and not the operator itself. Modifying subsection (3)(a) and removing subsection (3)(b) altogether would mean that obligations placed on an associate of the operator could not be removed even if, for example, those obligations were no longer relevant because they had been fulfilled. This is clearly inappropriate and impracticable. On that basis, I hope that the hon. Lady feels sufficiently reassured to withdraw the amendments.

I will now speak to Government new clauses 12, 41 and 44, which relate to transmission of renewable electricity and the role that renewable generators in peripheral parts of Great Britain could play in meeting low carbon energy targets. Section 185 of the Energy Act 2004 allows the Secretary of State to introduce a scheme adjusting transmission charges in a particular area of the country to help to mitigate any material hindrance to renewables development caused by these charges. Section 185 was introduced to address concerns that a GB-wide charging regime for the electricity transmission network might hinder the development of renewable generation in a particular area of the United Kingdom—for example, in the north of Scotland and the Scottish islands. Under the regime, transmission charges are cost-reflective. In effect, the further electricity has to travel, the higher the transmission charges.

Any scheme introduced under section 185 can be applied for up to 10 years—an initial period of no more than five years with renewal for up to five further years. Currently, any scheme must terminate by October 2024. The new clauses merely extend that time limit until 4 October 2034. This power has never been exercised, and it is possible that a review of the transmission charging regime currently being carried out by Ofgem under Project TransmiT will address any perceived problems in other ways. However, it is not certain that Ofgem’s review will address all such perceived problems in every case—for example, renewable generation on the Scottish islands, where forecast transmission charges are significantly higher than elsewhere in Great Britain. The lead times of proposed developments also mean that no renewable generators on the Scottish islands will be connected to the transmission network by October 2014, and so they would not be in a position to benefit from the full possible extent of any section 185 scheme. It therefore makes sense now to extend the sunset clause by 10 years to October 2034. This will allow maximum flexibility to take account of the outcome of Ofgem’s review and give developers time to bring forward renewable generation and associated transmission links without concerns of exceeding the current 2024 deadline.

Government amendments 43 and 51 relate to the Home Energy Conservation Act 1995. As hon. Members know, having listened to concerns raised during the passage of the Bill, the Government were convinced of the desirability of retaining HECA in England, and this was agreed in Committee on 21 June. Schedule 3 makes a number of amendments that were necessary when HECA was being repealed. However, with HECA being retained, the consequential amendments listed in schedule 3 are no longer necessary. Government amendment 43 is therefore a purely technical amendment that I hope raises no issues of concern for hon. Members.

Regarding amendment 51, I would like to reassure the hon. Members for Kilmarnock and Loudoun (Cathy Jamieson) and for Rutherglen and Hamilton West (Tom Greatrex) that we have fully consulted colleagues in the Scottish Government during the development and passage of the Bill. The intention to repeal HECA in Scotland was at the request of Scottish Ministers, who indicated that they believe that the Climate Change (Scotland) Act 2009, together with the local housing strategy guidance, will be sufficient to ensure appropriate promotion of energy efficiency and the opportunities that the green deal will bring to this. On that basis, I hope that the hon. Members can withdraw their amendment.

[Mr Mike Weir (Angus) (SNP)]

Will the Minister confirm that the repeal was part of the legislative competence motion passed by the Scottish Parliament?

[Charles Hendry]

The hon. Gentleman is absolutely right. This is a devolved matter that we have discussed with the Scottish Government. We are implementing this measure as the easiest and quickest way of delivering on that.

Finally, I refer to a small set of Government amendments regarding consultation—Government new clause 13 and consequential Government amendments 35, 37, 38 and 39. The purpose of the new clause is to ensure that consultation with key stakeholders carried out before, as well as after, Royal Assent can contribute towards fulfilling the various statutory consultation duties that arise under, or by virtue of, the Bill. Consulting stakeholders is an important part of developing and implementing any policy. Throughout the Bill, there are several provisions that impose a statutory requirement to consult before exercising powers to make secondary legislation. These include, for example, consultation with devolved Administrations or energy companies. In many cases, the consultation requirement can be satisfied by a consultation that takes place before, as well as after, the passing of the Bill. The new clause seeks to ensure parity of approach throughout the Bill.

I hope that I have assured hon. Members that the Government have listened during the passage of the Bill, and I urge them to support our amendments. Similarly, I hope that I have reassured them sufficiently that they feel able to withdraw their amendments.

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[Huw Irranca-Davies (Ogmore) (Lab)]

I love it when we get to technical and miscellaneous amendments. They sound innocuous, but, as the Minister knows, there is a great deal of meat within the details—it is the sort of stuff that we love to agonise over. As we heard from both the hon. Member for Brighton, Pavilion (Caroline Lucas) and my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson), there are substantive issues within these proposals.

I shall turn my attention purely to one proposal—we support the Government’s proposals—because I want to pay the Minister and his team some compliments. In respect of Government new clause 11, there was a great deal of debate in Committee on the necessary balance to be struck between certainty for the investor community, and—this is paramount—protection for the taxpayer against the foreseen and unforeseen costs of decommissioning. After a great deal of debate and encouragement from the Committee, the Minister, quite worthily, agreed to remove his measure from the Bill and went away to discuss the options that he could bring back to the House.

I thank the Minister for the way in which he has engaged with Committee members and others, including my hon. Friend the Member for Southampton, Test (Dr Whitehead)—I must single him out. Some of his ideas, including on third-party engagement, have contributed significantly to the ideas behind, if not the drafting of, new clause 11.

The new clause is not perfect, and it never will be, but it makes a very good fist of striking the right balance between looking after the needs of different stakeholders, and—I say this categorically—ensuring that we protect taxpayers. I look forward to the Minister’s response to the remarks of the hon. Member for Brighton, Pavilion, because she made some interesting points. I think the Minister has explained very well the use of the word “prudent”, but I am sure that he will address that and other issues that have been raised.

I thank the Minister, because this is how a Bill should evolve—through constructive engagement. Ministers should take measures away, think about them and listen to all the ideas on the table. He has come back with something that might not be perfect, but it is a massive improvement, on which he and his team are to be congratulated.

[Mr Weir]

I agree with my hon. Friend the Member for Brighton, Pavilion (Caroline Lucas) on nuclear power, which probably does not come as a great surprise to the Minister. I have nothing to add to what she said, because she made her case very well indeed.

I am glad to be able to support Government new clause 12, on transmission charges. It is a very sensible change. I await with interest the outcome of Operation TransmiT. Will Ofgem finally see sense and deal with transmission charges? I am not overburdened with confidence that it will do so, but one lives in hope.

I want to address the points that the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) made about the Home Energy Conservation Act 1995. I received a briefing on that from Friends of the Earth, the World Wide Fund for Nature, and the Association for the Conservation of Energy. I would normally be favourable towards those organisations, but I was not impressed by their briefing, which does not give a reason, other than an emotional one, on why HECA should not be repealed.

Very fairly, the hon. Lady said only that some organisations opposed the repeal of HECA, because some do not. Energy Action Scotland, for example, is much less convinced of HECA’s worth. That is the crux of the matter. She and I probably want to get to the same place, and my argument should be seen not as a political one, but one about the methods of getting there.

As I understand it, the Scottish Government want the repeal of HECA simply because they feel that it did not deliver. HECA places a duty on local authorities to set targets, but nothing over and above that. Out of the 32 local authorities in Scotland, only nine have set targets in the 16 years that HECA has been in operation. Despite the fact that the briefing I received describes HECA as the “main driver” for local authority action on energy saving over the past 15 years, the fact that so few local authorities set targets suggests that it was not particularly effective.

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[Mr Weir]

I agree that it is important that targets are set and delivered, but I do not agree that energy saving would necessarily be a lower priority under the guidance system, and I shall explain something about that. As the hon. Lady will know, the Scottish Parliament has often taken a different road from the UK Parliament—the central heating scheme is a classic illustration. Both the previous Administration in Scotland and the current Scottish National party Administration have taken different routes from the UK Government to deal with those matters.

The Scottish Government have decided that they will focus their efforts on each local authority’s housing strategy. As the hon. Lady rightly says, guidance has been issued. They are seeking to make it clear that that strategy and guidance are the driving force behind determining levels of investment in each local authority area—I believe that a significant piece of work was done in the highlands and islands on that basis.

The Scottish Government have also introduced Scottish housing quality standards, which every local authority and housing association must achieve by 2015, and for which an additional £1.5 billion will be spent over the next three years. In a recent case in my constituency, there was a difficulty with lack of insulation, and I took that up with the housing association. It is clear that it is very much aware of the need to react to the 2015 standard. I hope that that problem is resolved before the onset of winter, although time is running out.

The standard has already been achieved in 40% of housing in Scotland. There is still a long way to go, but that is a significant achievement. The standard assessment procedure rating achieved is 7, so clearly the standard is delivering what is necessary in those houses—it is much more effective than HECA in doing so.

In addition, the Scottish Parliament has passed the Climate Change (Scotland) Act 2009, which is acknowledged as world-leading legislation. The Act will drive much of what is done in Scotland. The £33 million energy assistance package has helped 150,000 people on low incomes to reduce their bills since 2009. One in six Scottish homes—a total of 145,000—have been visited for a home energy check, and there have been almost 18,000 installations. The EAP has been extended to help the most vulnerable. In addition to helping pensioners, the scheme has been extended to include disabled families with children under five, disabled children under 16, those with severe disabilities, and those who are terminally ill. The £50 million warm homes fund will also be introduced to help.

In addition to the EAP, the Scottish Government are providing £12.5 million in 2011-12 to support local councils to deliver area-based insulation to save households money, reduce emissions and tackle fuel poverty. It is hoped that councils will target areas across the country that are most in need of free insulation and other energy efficiency measures. The Scottish Government are working with local authorities to help to target the areas that are most in need, which is very much welcomed by Energy Action Scotland.

I am pleased to hear that the hon. Member for Kilmarnock and Loudoun will not press amendment 51 to a Division, but I ask hon. Members to realise that Scotland is doing things differently. In many ways, HECA has been overtaken by events in Scotland, which is why the Scottish Government want it repealed. They want repeal not because of a desire to avoid the implications of HECA, but because they have moved in another direction. Interestingly, the Scottish Government and the Labour Government in Wales have taken a similar view. We might be going in different directions, but I hope that we are all going towards the same goal of making our homes warmer and eradicating fuel poverty among our populations.

[Dr Whitehead]

I want to comment briefly on new clause 11 and, in doing so, echo the remarks of my hon. Friend the Member for Ogmore (Huw Irranca-Davies). With hindsight, it has been recognised that the clause concerned, which was originally pretty flawed, has been substantially strengthened and clarified as a result of its withdrawal, the discussions that followed and its emergence on Report as new clause 11. In Committee, widespread concern was expressed about that flawed clause on the grounds that it sought to replace an arrangement under the Energy Act 2008 that enabled the Secretary of State unilaterally to invoke sections 48 and 49 of the Act for the modification of a decommissioning programme regardless of any agreement made previously.

The original clause would have replaced that provision with an arrangement that appeared to enable the Secretary of State to waive the ability to make programme modifications, if circumstances changed, by making an agreement when the licensing agreement was first adopted binding him or herself in perpetuity regardless of the objective circumstances in place after the original agreement. That was clearly not satisfactory. I accept that, for logical reasons, it is difficult to place the words “unforeseen circumstances” in legislation—clearly we do not know what those would be—but I think that the question of when a programme ceases to become prudent could be better addressed.

I would be grateful if the Minister clarified a couple of issues relating to the wording of the new clause that might be referred to should a modification action be undertaken by people seeking to understand what the clause really means. I appreciate that, as I have mentioned previously, the background to the new clause is similar to the Marx brothers’ form-guide sketch in “A Day at the Races” in which they have to refer to a large number of separate documents to understand where they were in the first place. Nevertheless, I would be grateful if he confirmed that the Secretary of State may act, by him or herself, to point out that a decommissioning programme subject to the new clause had ceased to be prudent and say, “It appears to me that this programme has become imprudent and therefore needs modification.”

What those modifications might consist of would be a matter for negotiation and discussion with the site licensee. If points in the modification programme could not be agreed, a third party could come in, under proposed new subsection (3D), to determine how those points might best be resolved. When the third party—as the Minister emphasised, it would be an independent party—has resolved those previously unresolved issues, the Secretary of State would, under the proposed new subsection, be

“bound by such a determination”.

It is clear, however, that under administrative law the Secretary of State would not be able to undertake an agreement unless he was satisfied that there was adequate provision for the modification of the programme, including the understanding that the site licensee would also be bound by what the third party had determined.

It would not be logical or reasonable for the Secretary of State to undertake a programme that would enable the licensee to escape being bound by the consequences of a determination of modification and therefore simply not undertake any action relating to those modifications, even after they had been agreed. That is my understanding of the new clause. I would be grateful if the Minister confirmed that and placed it on the record that the process would lead to an agreed modification programme that could be instituted by the Secretary of State, but mediated by a third party, after a programme had been judged to be no longer prudent on a different programme of decommissioning.

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[Mr Baron]

My hon. Friend makes a fair point. Undertaking market research into the two proposals and getting energy suppliers to abide by the findings of the research in time for next winter would have the advantage of making it much easier for a customer to get a figure from their company, based on their actual usage, because the message would be tailored. That would make comparisons with other companies much easier. At the end of the day, all we can do in the House is legislate to try to help consumers as much as possible to gain the necessary information for them to make informed choices. If they have that information, direct comparisons with other companies could help competition and consumers generally.

[Mr Weir]

To pursue the point made by the hon. Member for Ynys Môn (Albert Owen), does the hon. Gentleman not accept that the real problem with the off-grid market is the fact that there are no differential tariffs, as there is a set price for oil and gas? There are no social tariffs as there are for gas and electricity, so does he agree that that must be tackled before his excellent proposal could take effect in that market?

[Mr Baron]

The hon. Gentleman has a point, but his proposal goes only so far. My problem is that energy bills are far too complex. I want to set hon. Members’ minds at rest: I do not stay up at night studying my energy bills, despite what Ministers think, although I might create the impression that I spend my time doing nothing else. The essential information is often contained on one page, followed by five or six pages of bumpf which compares usage with neighbourhood usage, and even usage overseas and so on. It is a lot of nonsense. What we want is clear information to cut through the 300 existing tariffs, which can be confusing. We need greater clarity, and there is no better way of getting that than making sure that we have information on a bill that says in pounds, shillings and pence how much would be saved if that customer was on the company’s cheapest standard tariff, taking into account actual usage and payment method. If that information was clearly laid out in no more than four or five lines, we could cut to the quick very easily indeed.

Before I accepted a series of interventions—hon. Members were right to make them and I hope that I have answered their questions—I described the three proposals suggested by the billing stakeholder group: two for this winter, the letter and the generic message; and one for next year, which would be an obligation on suppliers, following research on which is the clearest message, to put that in place for winter 2012-13 . Ofgem supports the billing stakeholder group’s general direction of travel, but I am aware that it is about to publish detailed proposals, following consultation, as part of its retail market review. One measure that it is considering is increased prescription on suppliers’ communications with customers in bills and annual statements. Having discussed that with the Minister, I understand that he has asked Ofgem to publish its findings before Christmas. He and I have therefore agreed that we will wait to see what those findings are before the billing stakeholder group and the Minister consult on whether Ofgem’s recommendations go far enough. If not, the third recommendation, in subsection (c) of new clause 19 will be triggered.

I therefore seek assurances from the Minister that the recommendations from the billing stakeholder group, as reflected in the new clause, will be agreed by the Government, with the qualification that we await the findings of Ofgem’s proposals in December this year before deciding whether to trigger subsection (c). The Minister has kindly indicated in previous discussions, following my letter to him of 8 September this year containing the stakeholder group’s recommendations, that he supported the proposals—something that I very much welcome, and for which I thank him. I therefore look forward to his response.

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[Mr Weir]

That problem also arises in many other parts of the country, particularly in Scotland. The traditional response of Governments when asked to address the issue of tariffs was that there were too many suppliers, but it is clear that we are now moving towards a situation in which this market is controlled by just a few companies, as in the energy market, which is dominated by the big six. Does the hon. Gentleman agree that it is time that the Government looked at an equivalent to social tariffs in this area?

[Guy Opperman]

I would certainly welcome hearing what the Minister has to say on that. The point, however, is that there is regulation of the big six energy companies, but there is no regulation of the heating oil companies and others. I accept that we must wait until we know the results of the Office of Fair Trading investigation, however. After that, we might want to come back to the House and argue that changes must be made.

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[Mr Weir]

I very much agree with the hon. Gentleman. I, too, have called for those changes. Earlier, I was trying to make the point that new clause 19 will not help those people at all because there are no tariffs in that market: there is a set price for the oil that they buy. One of my constituents told me that last winter the supplier would not quote them a price. They had to buy the oil, paying the price set on the day of delivery, as prices were volatile. Unlike gas and electricity consumers, they do not receive a bill so that they can look at those things; they are given a price, and so much oil is delivered.

[Albert Owen]

The hon. Gentleman is absolutely right, which is why those people need greater protection. The Office of Fair Trading is undertaking a review, and I hope that, rather than just refer something to the Competition Commission, it will come up with proposals and take action. I hope—and I know that the Minister is listening, because this is a serious issue—that people who are off-grid receive better protection in future. I shall certainly work with the Government—and I know that the Select Committee on Energy and Climate Change will do so, too—and help them to try to reach those people.

The hon. Gentleman made an important point about the contracts and the sums that individuals have to pay. The hon. Member for Hexham touched on that. I have received anecdotal evidence from my constituents that, during the big freeze in December last year, an individual in an isolated hamlet applied to have their tank filled up. They were told that they could have only half the amount that they usually received, and they were charged 50p a litre. Six weeks later, the company came to replenish the tank, and charged them 70p a litre. Members up and down the country will be familiar with such examples. Those people are suffering real hardship and are in fuel poverty, which is why we should all work together to ensure that people who are off-grid receive the proper protection afforded to those on the gas and electricity mains.

The new clause is a good measure, and we are moving towards clearer bills that include such information: informed people can make informed choices, as I have said. We need that information, and the choice of suppliers should extend beyond the big six. That has been mentioned, and the Government and Ofgem are looking at it. The proposal has cross-party support, because the monopoly enjoyed by the six companies that generate 80% of electricity and gas yet supply 99% of consumers does not produce a fair market. That is why we need intervention and tighter regulations, to achieve the outcome that we all want to achieve: price stability and clarity, so that people know from their bills what percentage of what they pay is going to fund energy efficiency measures, and what percentage is used for external measures such as transmission and so on. Transmission has not been discussed at great length, and it is ironic that people who live at the periphery of the United Kingdom, in areas that generate much of the electricity that goes to the grid, pay more for their electricity and gas than people in other areas.