Monday 26 February 2018
Business, Energy and Industrial Strategy
We will today introduce the Domestic Gas and Electricity (Tariff Cap) Bill to this House.
We are taking this action because the energy market is not working for all customers. The Competition and Markets Authority 2016 investigation into the energy market highlighted that domestic customers of the Big 6 energy companies pay on average £1.4 billion a year more than they would in a truly competitive market.
We believe that competition is the best way to drive value and service for customers. Where this is not happening, the Government have a duty to act by ensuring regulation is effective and companies have the right incentives to provide value.
The energy market is not working for all consumers.
There is, in effect, a two-tier market in operation whereby active customers save money by switching suppliers, but those who cannot or do not switch remain on poor value tariffs. It is of particular concern that customers who do not switch typically tend to be more vulnerable than those who are getting the best deals. The difference between the cheapest available tariff and the average standard variable tariff (SVT) of a Big 6 supplier is around £300.
Earlier this month, 1 million more vulnerable consumers who receive the Warm Home Discount were protected from higher bills with the extension of Ofgem’s safeguard tariff cap. There are now 5 million households protected by this cap which was introduced in 2017.
The Domestic Gas and Electricity (Tariff Cap) Bill will, subject to parliamentary approval, put in place a requirement on the independent regulator, Ofgem, to cap domestic energy tariffs until at least 2020. Currently, some consumers are paying up to £300 more than they need to—this cap will help bring this overcharging under control. It will require Ofgem to set an absolute cap on standard variable and default tariffs, protecting the 11 million households in England, Wales and Scotland who currently buy their energy on this basis and who are not protected by existing price caps.
The Bill is part of a package of measures being introduced by the Government to increase competition in the retail energy market and lower prices for consumers. These include support for more and faster switching, initiatives to improve engagement and the roll-out of smart meters. We believe all of these measures will help create the conditions for more effective competition.
In setting the cap, Ofgem must protect existing and future domestic customers, but must do so in a way that creates incentives for suppliers to improve efficiency, sets the cap at a level that enables suppliers to compete effectively for supply contracts, maintains incentives for customers to switch and ensures that efficient suppliers are able to finance their businesses. The Government intend Ofgem to be able to set the temporary price cap by the end of this year so that it is in place by next winter.
The cap will apply until the end of 2020 when Ofgem will recommend to Government whether it should be extended on an annual basis up to 2023.
The introduction of the Domestic Gas and Electricity (Tariff Cap) Bill comes after the Business, Energy and Industrial Strategy Committee scrutinised the draft Bill as part of the Government’s work to ensure the Bill would be effective and would meet its objectives. This pre-legislative scrutiny took written and oral evidence from a wide range of stakeholders. The Committee made a number of recommendations about the Bill, which the Government have accepted in full, including the Committee’s recommendation that Ofgem reviews the level at which the cap is set at least every six months, and the recommendation to add in safeguards so that where consumers make an active choice to opt for green SVT or default tariffs, Ofgem is able to protect these customers but not stifle investment in green energy. Ofgem will also be required to consult on a potential exemption for green tariffs.
This Bill will give the regulator the powers to protect those consumers who are overpaying for energy, while ensuring that other initiatives such as switching, smart meter roll-out and consumer education continue to contribute to a more competitive market.
Exiting the European Union
General Affairs Council: 27 February
I will attend the General Affairs Council in Brussels on 27 February 2018 to represent the UK’s interests. Until we leave the European Union, we remain committed to fulfilling our rights and obligations as a full member.
The provisional agenda includes:
Presentation of the priorities of the Bulgarian presidency
The Bulgarian presidency is expected to present its four priorities during its six month tenure. These are: the future of Europe and young people, the Western Balkans, security and stability and the digital economy.
Annotated draft agenda for the European Council on 22-23 March 2018
Ministers will discuss the draft agenda for March European Council. This includes: migration; jobs, growth and competitiveness; the Western Balkans; and tax and the digital economy. Other relevant foreign policy issues will be added to the agenda in the run up to the European Council.
Rule of law in Poland/Article 7(1) TEU Reasoned Proposal
The Commission will present a summary of its “Reasoned Proposal” which, in accordance with Article 7(1), proposes a Council determination on the rule of law in Poland. The Commission will also update Ministers on the ongoing dialogue with the Polish Government.
Housing, Communities and Local Government
Local Government Policy
On 7 November I told the House that I was minded to implement, subject to parliamentary approval, the locally-led proposal I had received for improving local government in Dorset, and I invited representations before I took my final decision.
Having carefully considered all the representations I have received and all the relevant information available to me, I am today announcing that I have decided to implement, subject to parliamentary approval, that locally-led proposal to replace the existing nine councils across Dorset—two small unitary councils of Bournemouth and Poole, and the two tier structure of Dorset County Council and the district councils of Christchurch, East Dorset, North Dorset, Purbeck, West Dorset, and Weymouth and Portland with two new councils.
These new councils are a single unitary council for the areas of Bournemouth, Poole and that part of the county of Dorset currently comprising the Borough of Christchurch, and a single unitary council for the rest of the current county area.
I am satisfied that these new councils are likely to improve local government and service delivery in their areas, generating savings, increasing financial resilience, facilitating a more strategic and holistic approach to planning and housing challenges, and sustaining good local services. I am also satisfied that across Dorset as a whole there is a good deal of local support for these new councils, and that the area of each council is a credible geography.
In my statement of 7 November I noted that the nine councils were already working together in joint committees on planning possible implementation of the proposal, and that further steps were needed to secure local consent. I am clear that further steps have been taken, and that the nine councils are continuing to work constructively together on planning implementation.
I now intend to prepare and lay before Parliament drafts of the necessary secondary legislation to give effect to my decision. My intention is that if Parliament approves this legislation the new councils will be established on 1 April 2019 with the first elections to the councils held on 2 May 2019.1 also now intend to make and lay before Parliament an order to delay for one year, as requested by the Borough Council, the May 2018 local elections in Weymouth and Portland so as to avoid members being elected for only one year if Parliament approves the legislation establishing the new councils.
Finally, in my 7 November statement I said that once I had made my final decision on the Dorset proposal, I would decide whether to implement, subject to parliamentary approval, Dorset councils’ proposal for a combined authority. As a first step I intend now to ask the leaders of the Dorset councils how they would like to proceed with their combined authority proposal in the light of my decision on the proposal.