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Energy: Tariffs

Volume 733: debated on Tuesday 6 December 2011


Asked By

To ask Her Majesty’s Government what action they will take to ensure that all energy companies provide a straightforward and easily understood tariff structure for customers, in the light of the report by Ofgem published on 1 December.

My Lords, the Government welcome proposals published last week for consultation by Ofgem to simplify tariffs and billing information. The proposals should make it much easier for consumers to understand and compare tariffs. It is for Ofgem, as the independent regulator, to take forward the proposals.

My Lords, some things work better in principle than in practice. Is the Minister aware that Ofgem admits that its proposals to do the very things he just outlined may not be implemented until after winter 2012, and even then, only if the industry fully gets behind the changes? Given that the Daily Telegraph today reports that energy company profits are higher now than at any time since privatisation, and have risen by 40 per cent in the last three months alone, are the Government ever going to do anything to tackle this problem and help customers?

The Government are going to do a lot to help customers. Ofgem’s proposals to simplify bills and make them transparent are ground-breaking—particularly the proposals to have standing order charges on the bill and set by Ofgem. Make no mistake: the Government’s entire policy is based on what is to the benefit of the consumer. That is at the heart of every decision we make. In the consultation process, this Government will be talking through the proposals with Ofgem. It is not surprising that they will not be implemented until 2012 because they are under consultation. Until the consultation is over, and Ofgem has had reports from the electricity companies, we will not be able to see the final outcome.

My Lords, does the Minister agree that the Government’s plan to roll out smart meters over a five-year period from 2014, rather than have the current dumb ones, is the real way to give consumers control over their energy charges? Should smart meters not automatically be able to tell consumers the best tariff?

I totally agree with my noble friend. We intend to start rolling out smart meters in 2014. Our department is spending nearly £40 million on the development of smart meters, which will be state of the art. By 2019, every home should have a smart meter that should provide this vital information for people to be able to compare the tariffs.

My Lords, how are we getting on with proposals for a rising block tariff system of energy prices whereby low volume consumers of power pay a lower price per unit than high volume users of power?

I am grateful to the noble Lord for explaining high block tariffs. Clearly, it is an issue which finds favour with both sides of the House and I have noble friends on this side who are very keen to see this happen. We have facilitated consultation with Professor Hills, for example, on this subject, so that he can take it into account in the fuel poverty review he is carrying out at the moment. It is something of great consideration. The noble Lord has a long history in raising this point and I am grateful to him.

My Lords, in the interests of the transparency to which the Minister has referred, will the Government ensure that on their bills to consumers, all energy companies include an accurate list of all the costs of government obligations—for example, under the renewables obligation?

It is not for the Government to insist on what is on the energy bills. It is up to Ofgem to insist on that, which is why it is bringing in this consultative period during which it can review what is on such bills. I am sure that Ofgem will be extremely pleased to hear from the right reverend Prelate on this very constructive suggestion.

Will the Minister encourage the energy companies to desist from making unwanted, unsolicited and deeply irritating calls to householders attempting to entice them to change supplier and suggest instead that they should concentrate on improving their services?

It is an area of grave concern, which I share completely with the noble Lord. It is particularly important when we look at things such as the Green Deal groundbreaking legislation that we are bringing in to ensure that the consumer is protected against mis-selling and is not taken advantage of in overselling. We shall look carefully with Ofgem at that.

Will the noble Lord tell this House exactly how much bills are increased by government action on their green energy plan? Will he also confirm or deny reports that have appeared in the press that the Energy Secretary wishes to build 32,000 more wind turbines? Does he realise that if that is achieved, it will provide 64,000 megawatts of power, which is equivalent to rather more than the present capacity of the electricity industry?

I do not think that my colleague, the Energy Secretary, is in for building wind turbines yet. Clearly, there is a framework for doing so. It will not be a decision made by him: it will be for communities to decide whether they want to have onshore wind in their community. But it is part of the Government’s policy that we should continue to have them. That I think answers the second question.

On the first question, this Government are committed to green energy policies. It is part of our endeavour to have security of supply, which we had in the good old days of oil on tap but do not have any more. It is very difficult to compare what the price of green energy would be against the cost of the increased oil price which we no longer have.

My Lords, is this not a matter of such urgency that it should not wait until 2012? With this winter seeing the highest fuel and energy prices, and given the increasing levels of fuel poverty identified by Professor Hills, could not the Government look at the level of cuts they are now imposing on winter fuel payments?

I do not think the Government are making cuts in payments to the vulnerable, which I think is the general tenor of the noble Lord’s question. Let us be fair. We have the warm home discounts worth £120 which go to 600,000 homes; we have Warm Front which is still at around £100 million; we have winter fuel payments worth around £100 for those of retirement age, and if you are 80, it is £200; we have cold weather payments worth £25; and we have CERT worth £5 billion. This Government, and in fairness the previous Government, have taken a real and consistent approach to the vulnerable to ensure that through these difficult and cold winters, everything that can be done to support people is done. I think that that is a great credit to both Governments.