Thursday, 11 July 2013.
Committee (4th Day)
Clause 132 agreed.
50J: After Clause 132, insert the following new Clause—
(1) The Warm Homes and Energy Conservation Act 2000 is amended as follows.
(2) After section 1 insert—
“1A Objective for addressing fuel poverty: England
(1) The Secretary of State must make regulations setting out an objective for addressing the situation of persons in England who live in fuel poverty.
(2) The regulations must specify a target date for achieving the objective.
(3) Regulations under this section must be made by statutory instrument; and a statutory instrument containing such regulations may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.
(4) The Secretary of State must lay a draft of the instrument before each House of Parliament within 6 months of the day on which section (Fuel Poverty) of the Energy Act 2013 comes into force.
“1B Strategy relating to fuel poverty: England
(1) The Secretary of State must prepare and publish a strategy setting out the Secretary of State’s policies for achieving the objective set out in regulations under section 1A by the target date specified in the regulations.
(2) The strategy must be published within 6 months of the day on which the first regulations under section 1A come into force.
(3) The strategy must—
(a) describe the households to which it applies,(b) specify a comprehensive package of measures for achieving the objective by the target date, and(c) specify interim objectives to be achieved and target dates for achieving them.(4) The Secretary of State must take such steps as are in the Secretary of State’s opinion necessary to implement the strategy.
(5) The Secretary of State must—
(a) from time to time assess the impact of steps taken under subsection (4) and the progress made in achieving the objectives and meeting the target dates,(b) make any revision of the strategy which the Secretary of State thinks appropriate in consequence of the assessment,(c) from time to time publish reports on such assessments.(6) If—
(a) further regulations under section 1A are made revising an objective or the target date for achieving it, and(b) the Secretary of State considers that changes to the strategy are necessary or desirable as a result of those regulations, the Secretary of State must revise the strategy within 6 months of the day on which those regulations come into force.(7) If the Secretary of State revises the strategy, the Secretary of State must publish the strategy as revised.
(8) In preparing the strategy or any revision of the strategy, the Secretary of State must consult—
(a) local authorities or associations of local authorities,(b) persons appearing to the Secretary of State to represent the interests of persons living in fuel poverty,(c) the Gas and Electricity Markets Authority, and(d) such other persons as the Secretary of State thinks fit.”(3) In section 2—
(a) in the title, after “” insert “”;poverty: Wales(b) in subsection (1), after “strategy” insert “as respects Wales”;(c) in subsection (2)(d), omit “England or”;(d) in subsection (8)—(i) in the definition of “the appropriate authority”, omit paragraph (a), and(ii) in the definition of “the relevant commencement”, omit paragraph (a).”
My Lords, these government amendments propose a change to the Warm Homes and Energy Conservation Act in order to put in place a new, rigorous and flexible framework for measuring the Government’s progress in tackling fuel poverty in England. As we move forward with ensuring a safe, low-carbon future we must ensure that everybody is able to benefit from our policies.
Last year, Professor Hills completed his independent review of fuel poverty and concluded that we had been measuring the problem in the wrong way. Our concern about how we measure fuel poverty has been driven by wanting to address the problem more effectively.
High levels of fuel poverty a decade or so ago were masked by official figures that suggested the problem had been solved. The sensitivity to energy prices of the definition, creating an ever changing picture of the households who are fuel poor, makes designing and implementing effective policies extremely difficult. We want to learn the lessons of this.
We will therefore be adopting the new definition of fuel poverty proposed by Professor Hills. This finds a household to be fuel poor if it is below the official poverty line and if it has higher than typical energy costs. It is a more accurate measure of the problem. It brings the major advantage of telling us not only how many fuel-poor households there are but how badly affected each household is. This will help us target policies much more effectively, as our recently published Fuel Poverty: A Framework for Future Action attests. Although this new definition is rightly at the centre of our proposals, it is clear that a single indicator is not sufficient to give us an understanding of this complex problem. We therefore intend to monitor fuel poverty through a number of key indicators.
One of the important conclusions of the Hills review was that fuel poverty is a long-term structural problem, requiring an ongoing effort to mitigate it. The current framework does not reflect this, focused as it is on ensuring that no person lives in fuel poverty, as far as reasonably practicable. We want to address this problem with the current framework by adopting a new target focused on improving the energy efficiency of the homes of the fuel poor. In this way we can ensure that our efforts are directed towards a key cause of high energy bills and make a real difference to people who are struggling to keep warm.
Amendment 50J therefore sets a duty for the Secretary of State to have an objective to address fuel poverty and for the details of this new target to be specified in regulations, rather than in primary legislation as it is currently. The regulations must set out the form of that target, the level that will be achieved and the date by which this will be done. The secondary legislation must be brought forward within six months of the provisions entering into force. The amendment also maintains the duty on the Secretary of State to have in place a fuel poverty strategy but makes this duty consistent with the new objective.
Amendments 56A and 58 are minor provisions to be clear on the territorial extent of the amendments, where our proposals would apply to England only, and the commencement date for the provisions, which will be two months after the Act receives Royal Assent.
While we want to give the new target statutory backing, it would not be wise to set it in primary legislation. We need to be flexible in our approach to fuel poverty as we reform the electricity market, seek to drive the uptake of renewable heat in our homes, and bring about major improvements in energy efficiency standards through the Green Deal and ECO. We therefore think it appropriate for the details of the target to be set in secondary legislation, subject to parliamentary debate and the affirmative resolution of both Houses.
As part of this change, we need to be realistic about how quickly we can make progress. The current target is 2016. The interventions necessary to address the problem as we understand it cannot be undertaken within that timeframe. The needs of the fuel poor must continue to be championed after that date. A sensible approach for the future is to align our efforts on fuel poverty with the action we are taking more widely in tackling climate change. As my noble friend Lord Deben knows, the Committee on Climate Change already has a responsibility to monitor the Government’s approach to fuel poverty. The two issues go hand in hand.
Our amendments will allow us to bring forward proposals for a new target, including its precise form and level, and a date for its accomplishment. We will ensure that the determination and insights of those on the front line, working day in and day out to help alleviate fuel poverty, are reflected in our approach.
We want to make sure that the target bites. Our amendments therefore retain the key primary duty to have a fuel poverty strategy that sets out how we will meet our future target. Our amendments require us to set interim targets that will ensure that we stay on track along the way. Our recently published Fuel Poverty: a Framework for Future Action already sets out a direction of travel and underlines our commitment to tackling fuel poverty in a meaningful way.
I welcome the support that our announcements and proposed amendments received from the chair of the Fuel Poverty Advisory Group and the chief executive of National Energy Action, given their expertise on the issue. I understand that there may be some who are concerned by a significant change to the long-standing fuel poverty framework set out in the Warm Homes and Energy Conservation Act. By fixing a framework for the long term, the amendments ensure that, far from ceasing to be of concern in 2016, fuel poverty will remain high on the Government’s agenda throughout the delivery of our ambitious programme for energy efficiency and the energy sector in the UK.
Our amendments provide for an ongoing focus on helping low-income, vulnerable households keep warm, and will help them stay ahead in the energy efficiency market rather than fall behind. I trust that noble Lords will recognise the seriousness of our intentions to make real progress in tackling this long-term problem and will support the amendments. I beg to move.
My Lords, I will make a few comments on what my noble friend said. The first is that we are extremely grateful to her and to the officials working with her for the briefing that some of us had fairly late last evening. All this was sprung on us at fairly short notice. The White Paper, Fuel Poverty: a Framework for Future Action, which is an immensely worthwhile document, contains a wealth of material. It is not always easy in a debate of this kind to do justice to it. It has been backed up by a paper produced in response to the consultation.
As the noble Lord, Lord Whitty, said in our debate on Tuesday when we discussed the problem of bills, not all of this is new. We have been aware of the Hills report, to which my noble friend referred, and the consultation paper. There were a good many responses to the consultation, which were referred to in the Government’s response. There is a wealth of material from which we can make an assessment of what the measures are likely to produce.
The first thing I will say on this is that the Government have been wise to recognise that the methodology of the previous fuel poverty target—how it was measured and what the appropriate responses were—has now really been shown to be wanting. That has inevitably meant that, in the light of Professor Hills’s report, that target and the methodology that accompanied it must be changed. I welcome very much what the Government now propose as the approach to this. It is not just a question of energy prices and relative incomes. There is far more to it than that. Without going into all the details, because I am sure noble Lords will have made their own studies of this, it is clear that there is much more to be done. Indeed, it is only if you measure the problem in an appropriate way that you can really devise and decide on the necessary measures to deal with it. That is an approach which I warmly welcome. If it continues to be measured in the wrong way, of course the authorities and the industry would be tempted to continue to use what have turned out to be often very ineffective policies to deal with this, and would give a false view of the size and severity of the problem.
This is a welcome new approach. I have read some of the documents which have been issued in the past day or two by the interest groups which represent the fuel poor. Although some of them wisely recognise the merits of the new approach, there has been an almost instinctive reaction of, “Well, you are abandoning the targets and not putting anything in their place”. My noble friend has indicated that her amendment will in fact lead to new targets. The other complaint is that it is not now going to be in statute, it will be in regulations. The fact is that you are going to advance this policy properly, it will have to be dealt with over time. That can only be done by regulations. My noble friend’s amendment would introduce the power to do so. I have never read an amendment which includes the phrase “The Secretary of State must” so many times. This will be a considerable reassurance to those who have been anxious that the Government are in some way weakening in their policy on this. They are not. It is a very real social policy leading to considerable hardship. Anyone who has represented constituents recently or in the past will be aware of the problem. Of course, it has got so much more difficult with rising prices.
Some of the methodology which stems from the Hills report is distinctly complicated. I found myself on Tuesday night trying to understand some of the charts in the White Paper. A particular chart on page 18 required having a fair number of towels around one’s head to try to understand it; I think that I fell asleep over it. The Minister’s officials were able to describe the meaning of some of this in our meeting yesterday. It illustrates the complexity of the problem that has been dealt with. There are all sorts of reasons why some households suffer from acute fuel poverty. They need to be examined in all their detail. This is what the department has tried to do with the help of Professor Hills’s report. We shall have to see how successful that is. I had not realised what a difference it makes whether you are connected to the gas grid or not. Yet the figures in the chart show clearly that that is a major factor. If you do not have access to mains gas, you are far more likely to be in serious fuel poverty.
Of course, everybody knows that cavity wall insulation and loft insulation are of very considerable help in reducing your fuel bills. That is the basis for the whole of the Green Deal policy. Noble Lords may wish to look at that and how far it is getting, but I have always had doubts about whether the golden rule is ever going to be able to be sufficiently identified; the golden rule being that you borrow the money to make those improvements and you repay it back out of the savings in fuel bills that you will have had. I should confess that I have had cavity wall filling and loft filling. Recently I invested in a new condensing boiler. The advantage for a couple of elderly people is that we can keep our house rather warmer and the effect on the bills is that they are perhaps not as high as they otherwise would have been. However, there are some quite serious questions to be asked there. For some, it is a question of whether you have central heating and so on. It is all spelled out in this chart and at some stage it would be jolly nice to have a detailed description of what that actually shows. However, it indicates the complexity of the problem with which the Government have been dealing.
I was impressed yesterday evening by the descriptions and information given by the officials in charge of this. They really seem to understand what they are talking about. However, there is no question but that we will need to wait to see whether this is going to, one might say, cut the mustard. Will defining the measures better and tailoring them to it better help deal with the problem? When one is changing things, as one has to here—I hope I have indicated my view on that—it is impossible to stick to a target based on an old and obviously unsatisfactory methodology. The amendment makes it perfectly clear that the Government have to find new targets and do so within a reasonable time. That is something that we can support.
Before I sit down, I will mention one point that I raised yesterday evening. The Minister will therefore be aware of this. I have had immediate representations from the National Grid, which asked whether the change in methodology, or the change in the definition, will affect its investment policy, particularly in respect of extending the gas grid to communities which do not yet have it. It has a policy on this and has an investment programme broadly based on the old definition and the old methodology. This is something that will need to be examined very quickly. In responding to the ENA and its policy director, Tony Glover, after our meeting last night, I said that I got the impression that the department would be very willing to have probably not just one meeting but several to really thrash this out so that the networks can know exactly what they are going to be asked to do. It is clear, as I said earlier, that whether you are connected to the gas main is a major indicator of whether you are likely to suffer from fuel poverty. I think that National Grid and the various gas networks will try to do their very best to meet that requirement. However, they need to be satisfied that they are, as it were, reflecting the new definition of fuel poverty, the new target and the new methods that will be needed to deal with it. That may be a detail, but on the basis of the chart I referred to, it is quite an important issue.
Finally, I very much welcome this new approach. The Government deserve support for carrying it through and I hope that the Committee will feel able to give that support. It will need to be sold and presentation is very important. People need to be confident that the Government’s intention on this issue is as firm as that of previous Governments. However, I am sure that my noble friend and her honourable and right honourable friends will make sure that that is the case.
My Lords, I will be brief. I welcome the proposed new clause. Unfortunately, I did not have the opportunity to attend the briefing yesterday evening but wish to make a couple of points. I have had a lifetime’s involvement in fuel poverty, having come from an area where the fuel poor are always with us. Sometimes one of the key things you need when dealing with fuel poverty is not fancy targets or models but a soupçon of common sense. This is one of the areas that troubles me about the Green Deal. If you are expecting the fuel poor to front-end facilitations to their house, for example, they are not going to be able to do it because they cannot afford to do so. It is great having a wonderful model that says, “If you up-front the amendments to your accommodation, you will benefit in the longer-term”. However, if you cannot afford to turn your heating on, you are hardly going to be able to afford cavity wall insulation.
I make a plea for some basic common sense when dealing with this matter. I heard the praise of the noble Lord, Lord Jenkin, for the fact that the amendment repeatedly says:
“The Secretary of State must”.
Frankly, the Secretary of State needs some enforcement powers to encourage the industry to get involved actively in the campaign to move people out of fuel poverty, unless he is going to go down to B&Q and get a hammer, nails and some insulating material. We need to have enforcement. With this Bill, as always, a lot of the detail will be in secondary legislation. Until we see the nuts and bolts of the secondary legislation, we will not see whether my common-sense points will be met. I welcome the proposed new clause and will read the secondary legislation with interest when it comes along. However, I repeat that common sense matters even more than targets in relation to this. I urge officials to bear that common sense in mind when they craft the secondary legislation.
I am very happy to follow my noble friend. The fight against fuel poverty in the past 10 to 15 years has been bedevilled by loose definitions and arbitrary targets. The amendment goes some way to mitigate concerns that have arisen about that. It sticks in my craw to say this but the Government must be praised for obtaining support for the measure from Derek Licorice, the chair of the Fuel Poverty Advisory Group, and Jenny Saunders of the NEA. The fact that people are giving understandably cautious support, but none the less a blessing, for the measure is an indication that Ministers have sought to build bridges on this issue. Known targets and definitions have been taken away and a rather more complex Hills approach has been adopted. That approach has its drawbacks but does take account of the complexity of the situation. Therefore, it is desirable to move forward not using the bludgeon of statutory change but rather a regulatory approach, as that will enable subsequent Ministers of whatever political complexion to adjust and calibrate the policies.
It is also fair to say that for us in Opposition to try putting forward amendments at this stage would be somewhat premature—although, from what one can gather of the parliamentary timetable ahead of us, we will have time, probably over the Recess, to look at some of these issues. Obviously, the statutory instrument and regulatory approach will be the subject of consultation and discussion. One would hope that that need not take an unduly long period. None the less, it will give us some opportunity to look at the fine print of this.
Some of us would be happier about this if we were to see the colour of the Government’s money, or indeed money at all from the Government. Their approach to fuel poverty has been to withdraw state funding from this and make it a tax on the consumer rather than on the country as a whole. That is a flawed policy. It would not be difficult for the Green Deal to become more successful than it is at present, but if it does not become substantially better we will have to look again at the Government providing funds for some of the major programmes that will be required to address areas of fuel poverty. We are not talking about individual households but street after street after street. If approached on that basis, we could deal with an awful lot of the most deep-seated areas which Hills recognises are the core of the problem.
As I said, I do not wish to be grudging in my support for this approach. There will obviously be difficulties and flaws but this is not the time to identify them. The opportunity for that will come on Report and beyond, when we have had time to digest some of the indigestible graphs to which the noble Lord, Lord Jenkin, referred. If we can do that, we can perhaps make something of this. At the end of the day, somebody has to pay for it. At the moment, that will fall in the main on the shoulders of the consumer of gas and electricity. That is not a satisfactory approach to social injustice on this scale. Even with the Hills modification, the scale is intolerable for a society such as ours to leave to some kind of slipshod market mechanism, the like of which we have seen in the Green Deal. The Green Deal might work. It is the only show in town but it will have to start working very quickly or some of us will not be confident that the great ideas and reasoned approach in this White Paper, these documents and expressed in this amendment will be enough, without proper financial support, to tackle the major social problem we have here.
My Lords, I again declare my interest as chairman of the climate change committee, which has a specific responsibility to consider and concern itself with fuel poverty. It would be suitable for me to say a few words about this. I am very pleased that the Government have brought forward this amendment, not least because one of the difficulties of advising on fuel poverty has been the very peculiar mechanisms that we have used to measure it. To be able to measure it more effectively, to have a proper and accepted basis, will help us very much in giving advice. As noble Lords know, if you are a scientifically based committee, it is quite hard to move from making decisions on science, which is of course what we do, to making decisions on measurements that would not stand up to any kind of consideration from outside. This is a very good first step. All of us acknowledge the fact that there is widespread support for the principle but there is a lot to be worked through. I think most of us would agree with what the noble Lord who just spoke said.
It is worth realising, too, that it has much wider implications. As usual, we have been very much helped by the intervention of my noble friend Lord Jenkin. I am always amazed that he gets his head so easily around the most complex of issues and then lightly dismisses that by saying that he is not quite there yet. If when I get to the same stage of life, I am “there”—if I may put it so—as well as he is, I shall be very proud indeed. We owe him a huge debt of gratitude.
I want to emphasise the point he raised about the national grid, not because I want to avoid the issue of fuel poverty, but to remind the Government of the absolute necessity of certainty when it comes to investment. When the Government change—or appear to change—the basis upon which investors have invested, it has a knock-on effect on all other investment. I would say that, wouldn’t I? It is a very important issue, however, because we know that if we are to have the long-term investment, supply-chain investment and all the rest of it, certainty is crucial. I hope the Government will take very seriously the issue raised by my noble friend Lord Jenkin, because its knock-on effects are considerable.
My second concern is that whatever happens here has a much wider effect, not just on the investment basis, but because of the argumentation that we have elsewhere. The climate change committee has welcomed the possibility of our being able to frack for gas; we have made it clear in our prognostications, targets and budgets, that there is a proper place for gas in the portfolio of energy sources, not least for those who are off-line and will need gas delivered to them. That is another area. What the Government do in this part will therefore have an important influence. I am always concerned about those who think that there is a silver bullet; when I hear people talk about fracking, I want to say to them that I am in favour of it but, for goodness’ sake, we should not assume the best and that everything will be wonderful. There will be a place for it, but we need to look at how far it will help us as regards fuel poverty.
My noble friend Lord Jenkin said how pleased he was that in this amendment the Government keep saying that the “Secretary of State must”. I cannot help reminding the Minister that there is another area where it says the “Secretary of State may”, which is as important, if not more so, than some of the areas that we have here. We would be happier if “must” were more widely used and not restricted to these particular amendments. I have to say to the Minister that this is not an issue that I will allow to fall. It is made more important by this proposal because it shows that, when the Government want to ensure that certain things happen, they phrase a proposal one way and, when they are less sure that they want certain things to happen, they phrase it another. I hope that my noble friend will understand that this is another piece of evidence in favour of the kind of amendment that was put forward by the noble Lord, Lord Oxburgh, when he so brilliantly introduced the question of a carbon-intensity target.
Furthermore, it is important to apply our knowledge and understanding of connection to the national grid to the rural areas of Britain. One of my worries about the discussion of fuel poverty is that, because of the numbers, it is concentrated in our urban areas. The noble Baroness, Lady Liddell, referred to her own background in Coatdyke, which I understand, but I remind the Committee that some of the worst fuel poverty in Britain comes thatched. That is why it is ignored—it seems somehow or other part of the wonderful, rural idyll in which we live.
I come from a very rural area. I represented it for a very long time, during which there was little improvement in fuel poverty. People lived in sub-standard housing bought by their parents before the war at practically no cost. Such housing is hugely valuable for incoming Londoners to turn into a country cottage, but as a place to live—at the end of a track with no possibility of getting meals-on-wheels and the rest—it is where you find some of the worst fuel poverty in Britain, and the most overlooked.
I hope my noble friend will understand that I shall be taking a great deal of interest in such people. Just because they are fewer in number, and outside the mainstream, does not mean they should be ignored. Thatch is no substitute for warmth when it comes to the winters you get in the east of England, when the wind blows directly from Siberia. Quite a few people living in that area come from Scotland, and they remind us that it is a darn sight colder in the east of England than in a lot of Scotland. However people do not remember that. So I hope my noble friend will take the rural issue into account. I finish by saying that I believe in common sense too, and we have to get our minds more effectively around some of the simple things that can be done to help people who may not be capable of knowing about them.
My Lords, I thank the Minister for responding so quickly to our pleas last week about fuel poverty. I welcome what we have before us today. I think it is quite clear, as my noble friend Lord Jenkin said, that unless we understand the problem properly we cannot design effective solutions for it. I am particularly grateful to my right honourable friend the Secretary of State, Ed Davey, for pushing this within the coalition, and I am grateful that he has managed to move it forward. My noble friend Lord Deben talked about “may” and “must”: I think the answer is that my right honourable friend managed to persuade them on one issue, but not on the other.
So we must help him to persuade others on the other issue, the decarbonisation target.
I will try not to be repetitive, because I agree with many of the things already said. I particularly welcome the fact that we are going to be monitoring things as they go along, that there will not just be an end target but targets in between, and we will see what is going on. The Warm Homes and Energy Conservation Act 2000, and the Home Energy Conservation Act before it, were both Private Members’ Bills. One of the problems with Private Members’ Bills is that they are not actually owned by the Government, and so they were not part of a big department getting together and putting legislation forward. Both those Bills suffered from that, because in many ways they were allowed to just drift along. That is a slight exaggeration, but the Warm Homes and Energy Conservation Act 2000, my own Act, drifted so much so that at the end the previous Government wanted to get rid of it completely. When the coalition Government came in—it was one in, one out—they thought it was ripe for the picking. We pointed out that you need that Bill if you are really into localism and are going to use local authorities—another thing I welcome in this regard. Maybe we will do a little better this time, because this has been an important piece of work done by a government department.
I commend to noble Lords the White Paper, Fuel Poverty: a Framework for Future Action. It will help people who have already contacted us because they were worried about one or two items that the noble Lord, Lord O’Neill, pointed out. It will answer some of their questions. This is not the final document and strategy. A more detailed strategy will come after the Bill has passed into law, so that we can co-ordinate it properly.
I will highlight one or two things. Everybody has talked about properties that are difficult to deal with for various technical reasons, but something that has always bothered me is that a large number of the fuel poor live in the private rented sector. Many things that we are trying to do are much harder to do in the private rented sector. I hope that, when the final strategy comes out, we can do something about that.
Some concerns that people have raised include the fact that we are changing the definition, and that it will be in secondary legislation. However, my experience of definitions being in primary legislation, in particular in the two Private Members’ Bills that became Acts that I talked about, was that it did not make any difference. Even though the target was in primary legislation, it seems that we are not going to hit it, so we have had to do something else. Therefore, history shows that that is not the total answer.
Many people who contacted us were worried about what the priorities and target dates will be. I hope that, as the noble Lord, Lord O’Neill, said, we will be able to look into that before Report. Clearly, a lot of detail will be in the final strategy, and we will be able to make our suggestions.
Another area that has been mentioned is how we will pay for this and how we can stop putting extra burdens on the fuel poor when we are trying to deal with climate change and decarbonisation. The document indicates that the Government are acutely aware of the issue, and that we need to look at how to deal with it. Perhaps my noble friend will be able to indicate some of the forward thinking on the issues that I have raised.
The other area that I particularly welcome is the commitment to much more cross-departmental working. That may be something we will touch on when we debate the next amendment about something else. We hear this phrase time and time again, but it does not always happen. Somewhere in the document it says that the Government will set up a body to work across departments. That has been tried in the past and has not been terribly successful.
I will touch on one issue mentioned by the noble Lord, Lord O’Neill, who talked about dealing with streets. One thing that has been discovered by those looking at who is fuel poor is that quite often they are peppered around streets. If you are trying to target your money at the fuel poor, sometimes you do not succeed if you take whole streets. This is not a worry with decarbonising, but trying to make money go around for the fuel poor is complicated. This is slightly disappointing, because it was talked about in the context of the Home Energy Conservation Act.
I will touch briefly on rural areas, to which my noble friend Lord Deben referred. As noble Lords know, I live in north Northumberland, which I think is even more rural than where my noble friend lives.
Perhaps through e-mails.
Our problem is that a lot of properties are farm cottages. I go back to my worry about the private rented sector. My husband is an MP there and sees a lot of tenants. The farm cottages are often in the private rented sector because there are not as many farm workers. Trying to tailor all the programmes to do something to these properties, and in particular to get the landlords to do something, is very difficult. I have gone full circle and come round to the private rented sector, which I hope we will deal with.
I am pleased that the Committee has, within days, got something in response to our pleas last week. I thank the Minister for introducing the amendment.
I, too, thank the Minister for getting fuel poverty into the Bill. Throughout the Commons proceedings, and the earlier stages of the proceedings in this House, there was considerable criticism that one of the major areas of concern in energy policy—fuel poverty—was not reflected in the Bill. We now have a clear indication of the way the Government are going on this. I also join the noble Lord, Lord Jenkin, and others in thanking the Minister and her officials for trying to explain this somewhat complex position to us last night. The penny may have dropped but I am not sure the shillings have yet on all of it.
Indeed, some of it is not clear and cannot be clear until the Government, in six or eight months’ time, come up with a strategy and the secondary regulations. I understand that. On the other hand, there are some problems with the approach as so-far revealed. The Minister said she wants to display a rigorous and flexible strategy under these provisions. There is a slight danger of being too rigorous and complex on definition and target issues and too flexible and unclear on what the actual strategy will deliver. I will come back to some of those points.
I thank the Government for getting us here. However, we should not ignore the fact that this is, for those of us who have been engaged in fuel poverty and those who suffer from it, quite a sad point. Although most of us have recognised that this has been the situation for some considerable time, we have now explicitly recognised that the statutory ambitions set, with all-party support, in the legislation originated by the noble Baroness, Lady Maddock, and the follow-through of that, have failed. That has implications for other targets that we set in this area. There is a necessity to be rigorous in not only setting targets but also checking, enforcing, reporting and adapting to any failure to meet those targets, however difficult that might seem.
This is also the point where we have accepted that achieving those statutory targets is not easy. Previous statutory targets talked about the eradication of fuel poverty. We have now abandoned that ambition and substituted reduction, and a reduction that will be made in order of priority. I understand why that is the Government’s position, but in terms of the campaign on fuel poverty it is quite a serious retreat. It might be inevitable. From now, we need to treat it as inevitable and ensure that the new policy, strategy and less ambitious targets are achieved but we should not let this pass without recognising that it is a quite a profound change in our approach.
It is also more of a technologically significant change in the measurement. We debated this and others have commented on it. Some of us had the suspicion when the Treasury, when obliging DECC to look at this area, hoped that the redefinition would define the problem away. Whatever else one may say about Professor Hills, he has definitely reinforced and underlined that fuel poverty is an important and distinct area of policy, one that requires rigorous and effective measures to tackle it. Even with his measurement, which excluded a number of things, we have 2.5 million households in England alone suffering from it. We owe Professor Hills a debt for his report. We are now trying to turn that into some measure of reality.
The first complication it presents is that we now have an English target which measured differently from that in Scotland, Northern Ireland and, probably, Wales. That makes a UK approach to it difficult. Indeed, there was some advance on the basis of the old measurement, which was relatively easily understood, even though it was itself quite complex. It was relatively well established and we were about to adopt it on a pan-European basis. Europe will also have to think again about any co-ordinated approach on this.
Let us accept that the Hills definition will be one of the main measurements. I cannot remember the exact reference, but quite near the beginning of the report that I received yesterday, it says that from now on the Government will establish the figures only on the basis of one of the Hills measurements—namely, the low-income/high-cost measurement. At least for a few years, we need not only to take in the other Hills amendment, relating to the depth of fuel poverty—which in some ways is a useful and more understandable measurement—but to continue to measure it on the old scale. That is the normal approach in a lot of statistical series. Eventually, we may not need that, but for the next five years the credibility of this strategy requires us to look at what we previously defined as fuel poverty, and what our colleagues in devolved Administrations are probably going to go on using as the definition, in order to see how well we are doing. On a purely statistical basis, we ought to retain that.
It is of course also true that many points in Professor Hills’s strategy are not yet fully reflected in the Government’s actions. We will come back to that as we go on over the next few months. As expressed in the documentation now before us, there is clearly a triangle of effects on fuel poverty: household income, the energy efficiency of the home and the appliances within it, and the price of energy. All three are open to government intervention. The strategy shown by the Government so far focuses very much on intervention on the energy efficiency of homes. I am strongly in favour of such intervention but there is a danger of ignoring the other two sides of the triangle and the forces that define whether fuel poverty is going up or down.
It is important that we find a way of conveying the narrative on all three fronts to the population. Fuel poverty itself, the measurements involved and the nomenclature of the various intervention schemes are complicated enough, and we must find a clear narrative to explain what we are doing on all those fronts. At the moment, as the Commons Select Committee said only a few weeks ago, the Government are unable to convey what they are trying to do and why they are trying to do it when it comes to fuel poverty and energy efficiency interventions.
The new definition, as I say, has some advantages. It probably excludes a number of Members of the House of Lords who are on a reasonable income but live in rather draughty castles. I commend it from that point of view. However, although the Minister may contest this, it does not obviously take us hugely further forward in terms of operationally identifying precisely who those people are. It is pretty sound statistically but, operationally, we have no further clue as to whether such and such a house in such and such a town or village is actually suffering from fuel poverty or not. At one point, as mentioned last night at the briefing, the document refers to assessing the condition of housing at a local level. However, we do not actually have a register of the condition of every house—we only have a broad idea of what the SAP rating of certain kinds of housing is—nor do we have the identification of the household structure and the household income within it. I am not sure that we ever can have that. However, to make this provision work most cost-effectively, we need to see whether local authorities, or other local bodies taking the lead on this, can pin down the priority areas more precisely in terms of streets, houses or type of persons.
I thank the noble Lord for giving way. When I introduced the Home Energy Conservation Act, that was one of the things we were trying to get local authorities to do. In the early days, they were quite innovative. For example, Sutton had infra red photographs in its local library which showed where the relevant houses were. I agree entirely with the noble Lord that we need to be able to do that but there are other things that we can do and there is legislation to enable people to do them.
Yes, but this has not been a priority for local authorities and in the present period of austerity is unlikely to become so unless the strategy that the Minister comes up with in a few months’ time places that obligation on them and provides resources to enable them to carry it out. At the other end, the income end, the data-sharing arrangements which were introduced in legislation—two Energy Bills ago, I think—have not fully worked in enabling suppliers to identify which of their customers are likely to be on benefits, which, itself, is only a very rough proxy of the fuel poor.
The document and the Minister have indicated that we need to be more targeted in our approach. Indeed, there is a significant element of prioritisation, so if we need to identify, first, those who are in deepest fuel poverty and take action with them initially, we need to have more detailed information, at least in broad terms. If we are to have an area approach, there is a bit of a conflict between that and a prioritisation on grounds of deepest fuel poverty or, indeed, the other priority identified in the document of serious health problems, which poses even more difficulties and is subject to data protection problems.
Given the Government’s emphasis on intervention in regard to energy efficiency, it is important to obtain clarity about the resources being put in by the Government or being diverted from consumers’ bills to deal with this. I asked the Minister whether the Government could indicate the total amount to be spent on fuel poverty determined energy efficiency interventions over, say, the next five years. The figures that NEA has come up with, comparing 2010-11 to this year, show a significant drop in intervention because not only did Warm Front, which was taxpayer-funded, end completely at the end of last year, although some schemes are still being completed, SERT and CESP were dropped and we all moved onto the ECO. We have another group of amendments dealing with the ECO and I do not want to go into those in detail now, but even assuming that the ECO works, in aggregate more than £200 million less is being diverted via taxpayers’ money or cross-subsidy from the consumer into fuel poverty and energy efficiency schemes. I will discuss later whether, even within that, the ECO is working most efficiently.
It is important to move forward on this issue and the government amendments are a significant step in that direction. Some of the documentation is still not adequate and we are unlikely to see any more before the Bill completes its passage. It could be another six to eight months before the secondary legislation appears, which takes us well into the second half of next year. By that time, according to most prognostications, energy prices will have risen, low-income households will not have seen an increase in their income and the tariffs that are likely to be offered under Ofgem’s new arrangements will not have been geared to attacking the problem of fuel poverty. That is the other area that is not covered in the Government’s policy statement, which I spoke of at probably excessive length in our previous Committee session—namely, that you can use the tariff structure as well as energy-efficiency interventions in order to improve.
We probably need to accept that the Government have now determined the way in which we are going to go. There remain some very serious problems with what they have so far indicated to us of their strategy, but at least that strategy will have a primary legislative base. We will need to ensure that the Government live up to the intentions that that implies. But we should not forget that in addition to a strategy, you need a delivery programme and enforcement powers, as my noble friend Lady Liddell said. You also need clarity about how to prioritise the different groups of the fuel poor—those in hard-to-heat houses, which cost more; those off the gas grid; those in rural areas, as the noble Lord, Lord Deben, said; and those in the private rented sector—for which the area approach is not necessarily the most effective in reducing fuel poverty numbers.
The Government will develop this strategy. We now have a new definition and we will have new targets based on that definition. But we should not forget that we have had one serious failure in this area of delivering a policy that all parties in this House and another place supported. We are reducing our ambitions and there are still 2.5 million people in England alone who are fuel poor. There are arguments for and against having the actual target in primary legislation. We will see how it is expressed. The Government are clearly determined on their approach.
In parallel with the targets, we need a consistent and defensible strategy, which convinces not only those of us in Westminster who take an interest in fuel poverty but explains how it works to the rest of the country. That needs a simplicity about it although it is a complex problem. The narrative and the communication of this strategy are going to be almost as important as the substance.
I thank the Government for coming so far. I hope that I have not been too grudging in my welcome. I have some serious doubts about aspects of the strategy. But I am sure that when we come back here in a few months’ time to develop the statutory instruments and there are new shiny documents about the strategy, we will at least be reassured on that. Given where we were when this Bill left the House of Commons, we will have taken a major step forward in putting fuel poverty centre-stage again.
My Lords, I thank all noble Lords for their warm welcome—even though from the Benches opposite it was perhaps slightly lukewarm. The noble Lord, Lord Whitty, and I genuinely share a concern about fuel poverty and I am extremely grateful that he recognises that the target that was put in by the previous Administration has not worked to alleviate fuel poverty. Something needed to be done and we have an approach that has been reviewed and put forward independently.
I will start by responding to the wide range of interventions. I thank my noble friend Lord Jenkin for his extremely warm welcome for the amendments, and all noble Lords who took the time to attend yesterday evening’s briefing. My noble friend is absolutely right, as are other noble Lords, that we really need to address issues around fuel poverty, and about how important it is that we retain a flexible approach and respond to the change in dynamics across England. I am extremely grateful to my noble friend Lord Jenkin for laying out eloquently and with great precision what the Government are trying to deliver. I, like him, when I first came across some of the statistics at which we have to look, was quite puzzled. I have been extremely grateful to my officials for explaining to me, perhaps for longer periods of time than to noble Lords, exactly how they work.
My noble friend also mentioned the gas grid, and the policy of gas grid extensions. Through the fuel-poor network extension scheme, which is part of the new price control arrangements known as RIIO, the gas distribution networks will be required to connect 80,000 fuel-poor households to the grid over the period of 2021. I can confirm that this is not adversely affected by the new definition. We can of course work with the sector on this, including the fuel poverty advisory group, to ensure that those who would benefit from being off-grid can access and benefit from our proposals.
My understanding of the concern of the noble Lord, Lord Jenkin, was that there was an implication that the figures to be connected to the gas grid were going to be far greater. Therefore, that would have a difficult impact upon the existing investment programme for the national grid. Are we being told that they are getting exactly the same number of households connected but possibly in different places?
Perhaps I can help the noble Lord, Lord O’Neill. The point that has been put to me on behalf of the national grid is that it does not yet see what the change in the target would mean for their investment programme. I endorse very much my noble friend Lord Deben’s point that there is now an element of uncertainty. It is that which needs now to be resolved as quickly as possible. I am sure that they will respond firmly to the invitation which has been issued for discussions to take place. Certainly, I do not know and have not been told whether this means investment in different places for different communities. They do not yet know enough about it to be able to make that sort of decision.
My Lords, to continue with my responses, the noble Baroness, Lady Liddell, asked about ECO and what was contained within it. Within ECO, energy suppliers will provide fully subsidised measures under the affordable warmth obligation to low-income, vulnerable households. We estimate that around 230,000 low-income households can be supported each year through ECO, so there will be no up-front cost through the affordable warmth obligation to low-income households.
Again, I am extremely grateful for the support of the noble Lord, Lord O’Neill, although I would say that, rather than sticking in his throat, it was a gentle hiccup. Through the Green Deal and ECO we are endeavouring to reach out and get to those households that would benefit the most. Again, I point the noble Lord to the £540 million that is being made available though the affordable warmth obligation and the carbon-saving communities obligation. We also have the warm home discount, with the overall effect that all consumer bills will be lower than they otherwise would have been had these measures not come into place.
The noble Lord also asked about the reduction in government funding for fuel poverty. Funding for fuel poverty has not been reduced over the spending review. Total spending on fuel poverty is being increased and by 2014-15 we expect to see spending on the warm home discount at £310 million and spending on ECO will be at least the £540 million that I said—up around 10% on 2009-10.
My noble friend Lord Deben rightly recognised fuel poverty in poor rural parts of the country. I completely agree with him that we need to make sure that the measurements we take help us to respond to those in rural households facing fuel poverty so that they are also able to benefit from our measures. The average fuel poverty gap in poor rural areas is £558 compared with £361 in other areas. In underpinning the new target, we need to reflect in other strategy how we will approach the fuel poor in rural areas. When it comes to consultation, I hope my noble friend will be able to assist us in that.
My noble friend Lady Maddock asked about the private rented sector and fuel poverty. Again, I recognise as she does the importance of ensuring that we work closely on regulations so that the private landlord sector is not omitted. From April 2018, landlords will not be able to rent out any property that does not meet the minimum efficiency ratings, subject to the provisions already present in the Energy Act 2011.
The noble Lord, Lord Whitty, said that while he sort of welcomed the measures instead of shillings pennies were being dropped. I will try to convince him that rather than shillings we need to talk about pounds being dropped. We recognise that we have to eradicate any kind of poverty but current methods—targets—are not working. Realistically, we need to see how we can reduce it to get to the point of seeing poverty eradicated. I need to make it clear that we are not abandoning fuel poverty targets. We are improving them and enhancing our delivery of meeting them. Our amendments increase certainty that successive Governments will keep this issue at the top of their agendas. This is a cross-party issue. I think all those sat in the Committee today recognise that successive Governments have failed. We need to make progress.
On publishing fuel poverty statistics, I am happy to reassure the noble Lord, Lord Whitty, that we intend to use the Hills fuel poverty gap and publish the relevant statistics. We will also use our annual fuel poverty statistics publication to record figures using the old 10% indicator.
The noble Lord also asked about the operational aspect of our definition. Targeting is always difficult but we hope that the new definition will open up new improvements. We currently use a number of proxies for fuel poverty, such as receipt of certain means-tested benefits. That will need to continue for some time but we know, on the ground, that local authorities and others are using a range of technologies and techniques to identify fuel-poor households. We are currently evaluating the outcome of the £31 million fuel poverty fund that we made available to English local authorities last year, with a view to seeing what works best in terms of targeting.
The noble Lord also asked about devolved Administrations. The measurement of fuel poverty is a devolved issue. The devolved Administrations are able to measure the problem in their own ways. We continue to work very closely with our colleagues in the devolved Administrations and have explained our proposals to them.
To finish on the noble Lord’s question on the total expenditure on fuel poverty, we have recently made available information on our spending on fuel poverty, which is going up. That was in an Answer to a Question in another place, which I will share with the Committee in writing as soon as possible. With that, I hope noble Lords will accept this amendment.
Amendment 50J agreed.
51: After Clause 132, insert the following new Clause—
“Carbon monoxide detection
(1) The Secretary of State shall make regulations to provide that any person who undertakes work on a carbon burning appliance within a property shall ensure that—
(a) the premises is equipped with an appropriate carbon monoxide alarm, or(b) in the absence of such an alarm system, the occupier or a person acting on behalf of the occupier is advised of the requirement to install such a system.(2) The Secretary of State shall make regulations that any person replacing or installing energy efficiency measures which alter the air tightness of a building, where a fuel burning appliance is situated, shall ensure that—
(a) the premises is equipped with an appropriate carbon monoxide alarm, or(b) in the absence of such an alarm the occupier or a person acting on behalf of the occupier is advised of the requirement to install such a device.(3) The Secretary of State shall make regulations to provide that—
(a) no person shall replace or install a meter or a smart meter in any premises unless he is equipped with a personal alarm monitor for detecting carbon monoxide gas;(b) where a person replaces or installs a meter or a smart meter he shall ensure that—(i) the premises is equipped with an appropriate carbon monoxide alarm, or(ii) in the absence of such an alarm the occupier or a person acting on behalf of the occupier is advised of the requirement to install such a device.(4) The Secretary of State may by regulations amend the Gas Safety (Installation and Use) Regulations 1988, to ensure—
(a) the premises is fitted with an appropriate carbon monoxide alarm where any carbon burning appliance is in situ, (b) at intervals of not more than 12 months check that alarm system to ensure it is fully functional,(c) its power source is in good order for a further 12 months, and(d) proof of purchase of any alarm is retained for the period of that alarm’s lifetime, as specified in the manufacturer’s instructions.”
My Lords, these amendments concern carbon monoxide detection. I want to explain why carbon monoxide needs to be detected, why the Energy Bill is the place that should have this amendment, and to explain the amendment briefly. I am grateful to the Minister for meeting me yesterday and giving me so much of her time.
Carbon monoxide is a colourless, odourless gas emitted when carbon, however produced—whichever fuel it is in—is incompletely burned. Domestic sources are usually faulty or improperly installed cooking and heating devices. At concentrations of 12,800 parts per million, death occurs in one to three minutes. At lower levels, ongoing damage may persist for years. The problem is that because you cannot see or smell it people often have no idea that they are being killed by it. Hospital episode statistics for England and Wales show that at least 40 people a year die from carbon monoxide poisoning, and about 4,000 people attend A&E departments with carbon monoxide toxicity. The inquiry that I chaired on behalf of the All-Party Parliamentary Group on Carbon Monoxide found that, based on the Government’s approximate figures, these incidents together are probably costing the nation well over £117 million a year.
However this is only the tip of the iceberg. The most authoritative estimates suggest that carbon monoxide poisoning is much more prevalent than previously thought. The majority of those who have discovered that they have been poisoned have never attended A&E and are thus excluded from official figures. Indeed the overwhelming majority of people poisoned by fossil fuel combustion are completely unaware that they are being or have been poisoned. They present with non-specific symptoms, which makes it difficult to diagnose; these include headache, chronic fatigue, mood disorders, poor memory, dizziness, poor or disturbed sleep, poor concentration, tummy ache, diarrhoea, pins and needles and recurrent infections. I should think every Member of your Lordships’ House has had some of those symptoms at one time or another. The effect on the brain is particularly marked: in chronic low level exposure the cognitive changes result in disordered chaotic thinking, which persists. The changes are irreversible and brain changes can be seen on MRI scans years later.
There have been studies into low level exposure. In 2011 Liverpool John Moores University, working with Mersey Fire and Rescue Department, visited 2,180 homes. Over 90% had a fire alarm but fewer than 10% had a carbon monoxide alarm. They left CO logging monitors in 109 homes for six months. These monitors scan to detect whether there is CO present every minute. The findings were horrifying: 24 homes—over 20% of the total—had CO levels at some time that were greater than 50 parts per million—the level at which symptoms develop. A further 53 homes—almost half—showed CO levels between 10 and 50 parts per million. So, half of the homes had chronic low level exposure, and the residents were completely unaware of it.
A study by University College London found that 2% of 597 homes visited had a “very high” risk of carbon monoxide exposure, and a further 4% were at “high” risk. Its study showed that the presence of an unsafe gas appliance was linked to neurological symptoms.
A joint study by Public Health England and Hackney Homes looked at all the homes managed by Hackney Homes which had a carbon monoxide alarm fitted, more than 22,000 homes. Between November 2011 and April last year, there were 106 alarm activations. In 0.4% of households the alarm had gone off: 29% were due to a defective cooker; 9.8% to a defective boiler; and 25% to a defective fire of some sort. In 10.6% of cases there was misuse of a cooker or cooking methods. Some families seemed to put tinfoil over the top of the heating area, which decreases the airflow and raises carbon monoxide levels. In 38.5% of cases the alarm had gone off because the battery was defective and needed to be replaced—so the battery detection was working.
Public Health England concluded that carbon monoxide exposure in local authority homes could be causing substantial ill health across the country and that the problem is seriously under-diagnosed. CO alarms are cheap. I will not ask for a show of hands of how many of your Lordships have got them in their homes, but an alarm with a seven-year battery life costs less than £20; in other words, protection for one year is cheaper than one cup of coffee on the high street. It is not expensive. Everyone in this House could afford several alarms in their home.
Why should we tackle carbon monoxide in the Energy Bill? We have already debated how people will struggle to pay their bills. Poverty puts energy safety at risk because servicing appliances is less likely to be a priority than paying the bill for running that appliance, whatever it is. Alternative fuels such as solid fuels and biomass are typically more dangerous in terms of carbon monoxide exposure than gas. It is classically thought that it is related to gas but actually the bigger problems now come from other fuel sources.
This amendment is concerned with detecting that carbon monoxide. Today in Derby there is a conference involving 113 organisations concerned about carbon monoxide detection and the effects of poisoning, and they all are supportive of this amendment. Industry and victims’ groups have been consulted and have had input into the wording of this amendment, specifically: the Energy Networks Association, Energy UK, HETAS, the Institution of Gas Engineers and Managers, OFTEC, the All-Party Parliamentary Carbon Monoxide Group, the Chartered Institute of Environmental Health, the Gas Industry Safety Group, the Gas Safe Charity, the Gas Safety Trust, the Heating and Hotwater Industry Council, the Council of Gas Detection and Environmental Monitoring, UKLPG, the Carbon Monoxide Survivors, Activists and Victims Group—which has been very active in this area, understandably—and Skanska. This amendment has not come out of the blue.
The first part of the amendment will require an engineer undertaking any work on a carbon-burning appliance to check on the suitability of the CO alarm in the property and make recommendations. It is not burdensome on businesses and can cover all appliances in all situations.
The second part relates to energy-efficiency measures and indoor air pollution. Energy-efficiency measures such as the Green Deal aim to make properties better insulated. But an unintended consequence of this is that hermetically sealed houses increase the risk of carbon monoxide poisoning by decreasing the “advantageous air” ventilation that is required to safely operate many appliances. Of all the noxious gases causing indoor air pollution, carbon monoxide is the most dangerous.
The co-chairs of the All-Party Parliamentary Carbon Monoxide Group, of which I am one, have been working closely with the right honourable Greg Barker, the Energy Minister, who fully recognises the concern and has worked to try to improve the Green Deal. But the Green Deal documents do not go far enough, focusing on existing rather than new alarms. This provision will clear up any confusion for installers of energy-efficiency measures and will meet the Minister’s commitment more comprehensively than the Green Deal.
The third part relates to smart metering. This will allow smart meter installers also to install a carbon monoxide alarm when they visit each property. It also protects the engineers themselves. Northern Gas Networks and Scotia Gas Networks have found unexpectedly high levels of carbon monoxide when their engineers have visited customers’ properties while wearing these personal alarms. Fortunately, most gas distribution networks have either provided or are piloting the provision of personal alarm and air monitors to protect their own staff on home visits. Industry has advised us that it would prefer that proposed new subsection (3)(b)(i) said,
“gas detection equipment capable of detecting carbon monoxide”.
I would suggest that the amendment as it is currently worded should not be accepted. The wording should change to allow for new detection devices as they are developed. Visits by smart meter installers to every home provides a specific window of opportunity to install a carbon monoxide alarm; that will be a fraction of the cost of the smart meter rollout and will save lives. Industry contacts have told us that they are keen to be involved in this because smart metering may provide an opportunity to save lives.
The fourth part focuses on landlords. We have heard already about landlords and how those renting property from private landlords are at higher risk—they have a fivefold higher risk of carbon monoxide incidents than members of the population in other dwellings. The Downstream Incident Data Report has provided data on this. Domestic carbon monoxide alarms are now required when a new or replacement appliance burning solid fuel is installed and, in Northern Ireland, this extends to all newly installed appliances, irrespective of the fossil fuel. This amendment gives specific protection to those people who are at risk because they rent where they live and are often in a poorer group of the population. It will require private landlords to have carbon monoxide detection in their properties. I hope that the Minister will accept these amendments, possibly with some modification of the wording, because they are extremely important. There is a typographical error, for which I apologise, in the proposed new subsection (4): it refers to the date of the regulations as 1988 but it should be 1998. I beg to move.
My Lords, I support the noble Baroness in her efforts in this area. I had better indicate that—I cannot remember—I may be a co-chair of the All-Party Group as well. I cannot remember what the job was last time. The noble Baroness has introduced the amendment so well and with all the facts that I do not need to say very much at all. I first became aware of this problem when I was a Member of Parliament in Christchurch and a family in the constituency was affected by it. One of the family members died because of a flue wrongly installed by a builder. I have been aware of this matter ever since and have campaigned a bit but, I have to say, the noble Baroness has taken this much farther forward and with much more energy than I have ever done and I am grateful to her.
One of the problems that we have come across over the years—and I have proposed amendments to other Bills about this—is that the Government always say, “It’s not us”, and, “It’s not appropriate in this Bill”. I have a feeling that this may be what the Minister will say today. Interestingly, I notice that there are some people who know about it, because the civil servants behind her changed between the first and second amendments that we are discussing. Somebody in her department clearly knows something about this. It is time that we took this seriously—we have that opportunity now, as we have so many programmes where people go into other people’s houses and install equipment that might have faults in it of the kind we are discussing, when they could easily fit something else or easily detect where carbon monoxide is. Not only should we be doing this, but we should keep much better records; as the noble Baroness, Lady Finlay, said, one of the problems is trying to get records of how many people there are. The worst thing is that sometimes even doctors do not recognise the symptoms. There have been cases where someone has turned up at a surgery but the symptoms have not been diagnosed and they have gone home and died. We need to take this more seriously and to stop making excuses about why we cannot do some of the things that are—as the noble Baroness, Lady Liddell, said earlier—common sense.
If the Minister cannot accept the amendment, I hope that she will help us get something that we can put down on Report that will deal with this once and for all. We can have the cross-departmental working that we are going to have on fuel poverty on this as well.
My Lords, when we were discussing the previous energy Bill, I asked the Minister whether it included the word “ventilation”. Heating and energy involve insulation, heat and ventilation. The Minister asked the people behind him, who said that the Bill did not have that word in it. I was then assured that ventilation would be covered in secondary legislation or regulations. This matter is partly to do with ventilation. If it would be easier to accept the amendment by saying that it is an application of ventilation, which is part of energy, so be it.
My Lords, we ought to help the Minister on this. I suspect that I know what advice she has been given, and it is important to warn her about it. I will express that warning very carefully.
In the 19th century there was a scandal when people bought wallpaper that had a colouring based on arsenic. Large numbers of people died. The Government consistently refused to outlaw arsenic in the manufacture of that wallpaper. In the end, it was the fact that people ceased to buy the wallpaper that stopped the damage. The Government did not change the law until 1974. Therefore, there is a history of Governments not doing what they ought to do at the time they ought to do it. I was fascinated to read some of the evidence that the Government gave about why they were not doing it. Noble Lords will not be surprised that the argument was, first, that there is no need for regulation in this area; secondly, that it will be expensive; thirdly, that there is no call for it; fourthly, that people ought to be able to make these decisions themselves; and, fifthly, that the science is not quite proven. Have we not heard those arguments before, and will we not hear them again?
I suggest to my noble friend that this is a genuinely serious issue that could be solved. Lives can be saved at a cost that is significantly lower than it used to be, because government is enabling people to go into these premises for all sorts of other reasons. If the Minister has been advised that it is inappropriate to have legislation in this area—of course, I do not know whether she has been—I would pick up on the comments of the noble Lord, Lord Hunt. Anyone who has a gas fire installed is always forced to install further ventilation, even if it is utterly unnecessary. We already have legislation of a very detailed kind. If you wanted to put a gas fire in this Room, even though it may be very draughty, you would have to put a ventilating spot at the top there because that is what the law says.
I am not suggesting that we should be in any way as prescriptive as that. We should not say what kind of alarm there should be, except to say that it should be effective, and we should certainly be willing to allow alterations to the text of the amendment, because I am not expert enough to know whether it would do the job. I hope my noble friend will understand that this is one of those issues in which everybody involved has to say to themselves, “Am I prepared to allow people to die when I could stop it?”. That must be of great importance. We have to ask ourselves, individually, as Members of the House of Lords, officers of the department and Ministers, “Am I prepared not to act when action will save lives?”. That is not acting in some extreme way, or some awful health and safety nonsense. The very simple fact is that modern equipment needs this. It ought to be part of the deal. No deal should be done without it. In other circumstances, it is precisely like stopping people working in unsafe conditions in factories. We do that as a matter of course.
Lastly, it would be quite wrong not to use the opportunity of the Bill to do this on the basis that there might be another opportunity, another Bill or another place. We can use this Bill—the provision falls within the Long Title. There is no reason why we should not do it here; it is an appropriate place to put it. I very much hope that my noble friend will accept what is a really valuable contribution and play her part—and ours—in ensuring that next year a whole lot of people who would have been dead are alive.
My Lords, I, too, support this amendment. After the eloquent contributions we have heard, there is little more to be added. I simply say to the Minister that if, in spite of the eloquence of noble Lords, she does not feel able to legislate for this here, when will the Government do so? Will she give a firm undertaking that legislation will be introduced? For the very reasons that the noble Lord, Lord Deben, gave, people are dying and we must do something about it.
My Lords, we follow other noble Lords in also using our words in support of questioning the Minister on when such necessary legislation might come forward, if not included in the Bill currently before us. We agree that it mirrors to a large extent regulations that require the fitting of smoke detectors in all residential new builds, yet would go further than that in making it mandatory to install these alarms in all homes with any gas appliance.
We entirely agree that greater public awareness about the dangers of gas and of carbon monoxide poisoning is extremely important. After rising incident rates, it is encouraging that last year the number of such incidents fell. I understand that last year there were 46 incidents with casualties and one death. That still highlights that the problem persists. The noble Baroness, Lady Finlay, was correct to point out that there is severe underreporting going on and that incidents can affect health in many small, unnoticeable ways.
It is also striking that evidence suggests that those renting from private landlords are more at risk than those in other occupancy types. This deserves very careful consideration by the Government today. Like others, we understand that detectors cost only about £30, so this does not represent a huge cost to the household. The charge might also be absorbed by the plumber or fitter because it would seem to be him that would be liable under this clause. However, could the Minister clarify, as is it not entirely clear from the wording under subsections (2)(b) and (3)(b)(ii), if the occupier, although being made aware of the requirement, could refuse to pay the cost?
I am extremely grateful to the noble Baroness, Lady Finlay, for moving this amendment, and other noble Lords for participating in what has been a genuinely important debate on carbon monoxide poisoning. I am extremely grateful to the noble Baroness, whom I regard as a friend, for meeting me yesterday. Let me say from the outset that the Government take this issue extremely seriously.
For example, in my own department, following debate during the passage of the previous Energy Bill, prompted by the noble Baroness, we have procedures for checking and recommending carbon monoxide monitors in DECC programmes, including the Green Deal. In particular, the Green Deal adviser is trained to check for the presence of carbon monoxide detectors, and the Green Deal provider includes CO monitors in the specification of works. We are also looking into the Green Deal quality monitoring processes to determine whether we are checking the effectiveness of our policies with respect to carbon monoxide monitors.
We are sympathetic to the aims of this amendment. However, we do not believe that the proposed new clause would deliver these aims. Existing building regulations allied to the licence conditions for gas suppliers and the codes of practice established for boiler installers, meter installers and Green Deal installers ensure that occupiers are advised of the need for a carbon monoxide alarm in situations where the risk of poisoning is highest. Building regulations already require carbon monoxide alarms for solid-fuel boilers. They have also been updated to take account of the risks associated with the increased air tightness that can come with improvements in energy efficiency.
We are also taking steps to ensure that operatives are sufficiently competent to complete smart meter installations safely. Meter installers, where appropriate, will already inform the customer about the dangers of carbon monoxide and the need to have gas appliances serviced and checked. All meter installers will be required to be accredited by the National Skills Academy for Power as having completed their training, which includes gas safety elements.
Those working on dual-fuel or gas-only meters will also be required to be gas-safe accredited. In addition, condition 29 of the gas suppliers’ licence conditions considers gas safety; in particular, it states that the licensee must take all reasonable steps to provide free-of-charge information about the dangers of carbon monoxide poisoning and the benefits of fitting an audible carbon monoxide alarm.
We understand the scope of the gas safety regulations to be limited to gas safety, rather than any carbon burning device, as set out in the amendment. In the case of gas, as mentioned, the onus is already placed on the licensee to take all reasonable steps to provide free-of-charge information about the dangers of carbon monoxide and the benefits of an audible carbon monoxide alarm. It is not clear that a requirement on all landlords to install a carbon monoxide alarm is proportionate, but that is something I will take away and reflect on.
Across government, we are continually monitoring the effectiveness of our policies and processes regarding carbon monoxide. However, I have listened to the comments that have been made. This is an issue which my department in particular needs to understand better. I invite the All-Party Parliamentary Carbon Monoxide Group to come and meet me and my officials to discuss these issues further. I have also noted that my department is currently not a member of the cross-government group on gas safety and carbon monoxide awareness. I will ensure that officials from my department join the group and contribute to its meetings in future.
I know that my responses would perhaps not have satisfied noble Lords to the extent that they would have wished. Having said that, and reiterating my opening remarks that I take this issue incredibly seriously, I hope that the noble Baroness has found my explanation reassuring and will, on that basis, withdraw her amendment.
My Lords, I thank everybody in the Committee for their unconditional support. I recognise that the Minister realises the importance of this. I will warmly welcome officials from her department to our All-Party Parliamentary Group, as will my co-chair, the noble Baroness, Lady Maddock.
This is the second Energy Bill that we have put this amendment down on. We have explained previously why this presents a unique opportunity. It would be a dereliction of our duty to the nation not to use this opportunity to widen the scope of protection from the pockets of protection that are there.
I do not know how any of us could accept not putting this in the Bill and then look the bereaved in the face. These are young people dying. I will tell the Committee about two boys: one went up to university; a year later his brother went to the same university so that his older brother would be there to look after him. They found a flat; the second night in that flat it was cold and they put the heating on. They did not wake up the next morning—two bright, much loved university students dead because their landlord had a faulty appliance there and there was no alarm. An audible alarm costing less than £20 would have saved both their lives. That is why this is so important.
I hope that the Minister will meet with us very soon. I would really welcome getting some wording, whatever it is, to signal that this is a major problem that needs to be addressed. The regulations can follow but we really should not let it drop. I accept that the wording here is not right. With that and with gratitude, I withdraw the amendment.
Amendment 51 withdrawn.
51ZA: After Clause 132, insert the following new Clause—
Within twelve months of this Act coming into force, the Secretary of State shall bring forward regulations providing for forms of collective redress for consumers of gas and electricity.”
My Lords, Amendment 51ZA is a probing amendment, although it is one that the Government could give some commitments to taking forward, if not precisely in this form.
The Government are rightly giving Ofgem the power, in cases of breach of licence condition, to require licence holders—that is, supply companies—to pay compensation to the consumers who have suffered detriment, as well as raising a fine. I am not entirely clear whether that power also covers Ofgem requiring compensation for straightforward breach of general consumer law, rather than strict breach of licence, but it would make sense if it did.
The level of consumer complaints in the energy sector is one of the highest—in some years, the highest—of all sectors in our economy. The level of complaints dealt with by the consumer organisations, the ombudsman and, on occasion, by the courts, as well as by Ofgem, remains high despite significant improvements made or claimed by the supply companies.
It is clear that the complaints systems of several of the large energy companies are not really up to scratch. The ombudsman and Ofgem remark on this from time to time. Tens of thousands of consumers suffer from the effects of mis-selling, misleading information and misleading advice on choice of tariff and other conditions relating to tariffs; for example, on the cost determination. If you switch tariff, you have to pay a significant cost but that is rarely conveyed to you up front in an understandable form when you sign up for the tariff. It is a significant inhibition to many consumers switching and therefore to there being a proper consumer-led market in this sector.
One of the other areas of complaint is contested bills, particularly the estimated bills. As we were saying the other day, these are by definition wrong but are often insisted upon by the companies. On many occasions, eventually a settlement is reached, but it is on an individual basis. It may involve an ombudsman case but it reflects the general approach of the company to its consumers. In the impact assessment of the Bill, the provisions to improve Ofgem’s powers in this area are not given an accurate assessment. However, it is implied that the effect will be positive, and certainly I think that it will be. However, the size of detriment in the energy sector is potentially very large, and the inhibition on taking individual cases is also substantial. You have to go through a complaints process, and if you are not satisfied, you have to go to the ombudsman, take a case to court or get help from the various consumer and interest group organisations. That ends up costing a lot of time and often a lot of money, with not necessarily a coherent outcome to each case.
This situation is not confined to energy but, because of the high level of problems within energy, there are general aspects of provider behaviour from which a large number of consumers suffer. It is difficult to prove on an individual basis, but it is important that we recognise that there ought to be better systems for getting redress for consumers. By and large, consumer law in this country does not include collective provision, unlike in the United States, where there are significant class action provisions. Successive Governments have gone part of the way down the road towards greater collective provision, recognising that, for example, the PPI scandal in financial services would have been much better dealt with had there been a collective redress system rather than often quite aggressive complaints-handling companies taking up cases of varying degrees of authenticity, which led to differential outcomes case by case.
That was recognised by BIS in some of the discussion that surrounded the presentation of the draft consumer rights Bill that is now under pre-legislative scrutiny in another place. You have to get quite a long way into the Bill before you find it, but it is a significant breakthrough. It comes in paragraph 7 of Schedule 14 to the Bill and is the beginning of a provision for general collective redress in this area. It is on an opt-in basis, which is still somewhat narrower than the provision in the Financial Services and Markets Act of the previous Government, which unfortunately had to be dropped in its original form. It had a whole section on collective redress in the financial sector, which could have been taken out and generalised into other sectors and was particularly apposite for areas such as energy, where there is a regulator, regulated provisions and licence conditions, as well as general consumer law.
I attempted to get that written into the Enterprise and Regulatory Reform Bill, given that parliamentary counsel had already cleared it two years earlier. I have not bothered to provide the three pages for this Bill, because it covers esoteric matters relating to energy. I have set myself the slightly less ambitious target of requiring the Secretary of State to come forward 12 months after the Act is passed with some provision for collective redress in this area. I am encouraged by the fact that the Government have provided for at least one form of collective redress through the consumer rights Bill. Therefore, I hope that in 12 months’ time, the attitude of the House of Commons to that Bill and the Government’s reflection on it will give some guidance on how to do this with energy.
Therefore, it is an open-ended requirement on the Secretary of State in terms of the precise provisions. However, it is a signal that in this area of quite substantial consumer detriment and very substantial consumer distrust of the whole system we take this opportunity to make it clear that the Secretary of State must, at some future date, provide a means of collective redress within this sector.
There is a second amendment in this group to which I should refer. Amendment 51ZE seeks to delete the limit of the redress to detriment that occurred more than five years ago. The reality is that some of the mis-selling in energy, just like some of the mis-selling in the financial sector, started a long time ago, and the decision to apply a five-year limit is completely arbitrary. Indeed, that does not apply in the financial services sector. If a practice started seven years ago and was still happening within the last five years, there is no reason why the earlier detriment should not be taken into account. I am being quite modest in suggesting a 15-year limitation. I would be delighted if the Minister accepted my substitution of 15 for five; I would be even more delighted if he said that on reflection the Government would prefer to delete the limit altogether, because there are some long-standing wrongs in this area and the five-year limit does not seem sensible. I beg to move Amendment 51ZA.
My Lords, I support my noble friend in his amendment. The amendment seems particularly sensible and apposite, because at the time that this legislation was being crafted we were not aware of some of the mis-selling issues that were to emerge from the customers of energy suppliers. The last time I checked, there was something like 27 cases still pending with Ofgem, and that was before the announcement of the fines relating to mis-selling affecting Scottish and Southern Energy. Given the number and complexity of tariffs, many people will be checking whether they have been mis-sold.
It has been suggested that there is a danger that the mis-selling of electricity and energy in general could reach a stage where it matches the mis-selling of PPI and some of the financial services mis-selling. This would be useful for the Government to have in the armoury should that situation emerge. It is not radical; it is actually quite a simple measure. If we take into account that the most recent instances of mis-selling had been in the pipeline at Ofgem for around four years, my noble friend’s proposal to extend the time period from five to 15 years is measured and logical. I do not see this as greatly controversial but as a way of dealing with a problem that may be coming over the horizon and that would save recourse to additional legislation in the future. If the Minister cannot make a commitment today to support my noble friend’s amendment, perhaps this is something we might be able to return to on Report.
Following on from my two colleagues, it seems that mis-selling is endemic in certain areas of our public services—public with a small p rather than in the sense of Government-run.
A bank is as much a utility as the provider of electricity or gas. Mis-selling results in fines and punishments, which seem to be absorbed, and the public end up paying the fines through higher prices. We do not normally see a reduction in dividends as a consequence of this, but we might see a reduction in investment, which is one of the difficulties that we have if we clobber the utilities that want to invest. We require them to invest in order to sustain our supplies of power, gas and the like and, if we fine them very heavily, however understandable that is, we perhaps endanger some of that much needed investment. On the other hand, we are talking about the legitimate concern customers have in getting some kind of redress that they have not had in the past. That should also act as a deterrent to the companies so that they do not go about setting tariffs in the misleading and cavalier fashion that they have in the past.
We are talking about organisations that are persistent offenders when it comes to overcharging and misleading the public and, at the moment, we do not seem to be capable of deterring them. If we had simpler means for the public to get redress and for ensuring that these offenders are punished, we might begin to develop a deterrent culture, under which they would be a lot more reluctant to jump headlong into fiddling tariffs in the way that they have done recently—usually at the expense of not just the vulnerable but the whole spectrum of society. As we do not always know the full character or nature of the abuse, it is about time that we tried to introduce some more blanket form of deterrence. To my mind, a blanket form of deterrence in the form of easier access for the public to seek redress would be a major caution to these potential persistent offenders, which are in the dock at the moment as far as a large section of the community is concerned.
My Lords, first, I thank the noble Lord, Lord Whitty, for tabling these probing amendments, as he described them, and therefore providing this opportunity to continue the careful scrutiny of this part of the Bill. I have listened carefully to what noble Lords have said. I believe that we all want to secure the best for consumers but suspect that we may diverge on how that is best achieved.
Amendment 51ZA would require the Secretary of State to bring forward regulations to allow collective redress for energy consumers. We agree that consumers should be able to get the compensation that they are due when things go wrong. The consumer redress order powers we have put forward in the Bill will provide energy consumers with what we believe is the most appropriate and cost-effective way of obtaining this. In principle, collective redress can provide benefits in some sectors, but I am concerned about the potential impact such powers may have on the time and cost involved for energy consumers seeking redress through this route, and the impact of any additional costs on all consumers.
The most effective redress mechanism ensures that consumers receive timely and cost-effective compensation, and I was particularly interested in what the noble Lord, Lord O’Neill, said about balance in these matters. Under existing arrangements, energy consumers can already obtain redress through the courts, but the legal process does not typically offer a quick or cheap remedy for consumers who have suffered a detriment. In part, the concern that I have about the proposals from the noble Lord, Lord Whitty, on collective redress is that it would not speed up the process; indeed, it may, perversely, lengthen it, although I am sure that is not his intention. Consumers will also be required to identify themselves as potential claimants and join an action. Consumer redress order powers overcome these barriers by allowing Ofgem to take action on consumers’ behalf, without them needing to initiate action or incur costs.
Allowing collective redress via these amendments would benefit intermediaries involved in bringing such cases, who will seek awards that allow them to recover their costs—which would be borne by claimants or, where costs are awarded, by all consumers as energy companies seek to recover these sums. Collective redress could also encourage litigation on fine points of law, creating higher costs for energy companies, which would again risk increasing prices for consumers as a whole. In contrast, the consumer redress order powers contained in the Bill offer a speedier resolution to consumer detriment, which does not require consumers to come forward and take action, is proportionate to the sums at stake and minimises the potential costs for all energy consumers.
The noble Lord, Lord Whitty, asked whether the Bill’s provisions cover regular breaches of consumer law. The intention is that they will. If the breach is also a breach of licence conditions, such as mis-selling, that would be included.
The noble Lord’s Amendments 51ZE and 51ZF would increase the time limit for consumer redress order powers contained in Schedule 14 from, as the noble Lord has mentioned, five years to 15. I naturally have sympathy with amendments designed to ensure that consumers can obtain redress. The intention is certainly not for these time limits to be arbitrary. The time limit is consistent with the existing time limit for Ofgem imposing penalties on energy companies. In some cases, both penalty and redress may be appropriate, and so it is important that the enforcement regime that we establish allows Ofgem to balance both penalties and redress when looking to put things right.
This five-year time period for penalties was introduced as recently as the Energy Act 2010, following, as the noble Lord will know, two high-profile cases which showed the limitation of the then one-year limit for Ofgem to investigate and take action. There has been no case involving an energy company either before or since where it is alleged that this five-year time limit would not have provided ample opportunity for Ofgem to take action.
On that point, I declare an interest as chairman of the Association of Professional Financial Advisers. I say to the noble Lord, Lord Whitty, that very long periods allowing for what is by then retrospective action can have a damaging effect on the confidence of an industry. We have to be very careful to get this balance right. The reference to the financial services industry made by the noble Lord, Lord Whitty, is a mistake because many people now recognise that that has done and will do significant harm, and is against any sense of human rights. There comes a point at which those who have been involved are now so far removed from those who are operating that it does not make sense. Five years was chosen, and it seems not a bad choice. I hope that the Minister will resist any temptation to go further. I say that as somebody who has no interest whatever in energy provision companies.
My noble friend provides an excellent prelude to further commentary on why the Government are concerned about the extension to 15 years. There are indeed jurisdictions with longer time limits than those afforded to energy consumers though these powers. Of course, there are others which are significantly less. These variations reflect various factors, including the length of time required to detect and act on wrongdoing, the scale of the sums at sake and the likelihood of sufficient evidence being able to investigate and determine a claim.
The powers are drafted to balance—a word that was used by my noble friend—these considerations without placing unnecessary additional costs on consumers. My noble friend has mentioned business. We are certainly seeking to provide an appropriate balance to all these matters. For those reasons—although I can assure the noble Lord, Lord Whitty, that his amendments have been given proper consideration—I hope that the explanation I have given is sufficiently compelling at this time that he might feel able to withdraw his amendment.
My Lords, I find the explanation on the five-year period extraordinary. I think it was my noble friend Lady Liddell who mentioned that the notorious recent Scottish and Southern case had gone on for four years. It would not have needed to go on for more than another six months for it to fall foul of this restriction. There may be something in the argument of the noble Lord, Lord Deben, that you need some restriction. Indeed, that is why I proposed a 15-year period rather than delete the provision entirely. I do not accept that there should be a shorter jurisdiction for energy than there is for financial services, nor do I accept the argument put forward by the noble Lord, Lord Deben, that it is a bad thing for people to be entitled to redress for the mis-selling of, for example, PPI and pensions in the financial services sector which happened a long time ago, albeit that continued until relatively recently. As for confidence, there is no consumer confidence in the energy sector. It is all very well saying there will be no business confidence if companies think they are going to be fined for something which happened 15 years ago, but at the moment there is almost nil consumer confidence. The energy sector has the worst record among the allegedly competitive markets in terms of consumer confidence. That is partly because over time consumers have had difficulty understanding whether or not they have been misled or mis-sold products and have faced grave hurdles in trying to remedy that. Sometimes they have—
For the correction of the record, the problem is that the further you extend something, the less you can prove the case, the greater the chance that the people who are now involved had nothing to do with it and the less the chance that the circumstances in which it took place can reasonably be identified. You have to have a balance; that is all. There are many examples of cases where the conditions that obtained 15 and 20 years ago are unprovable and very different from the conditions obtaining now. In the end, you have an unfair circumstance. Therefore, some way or other, you have to have a decent balance—otherwise, you find that people’s confidence and willingness to invest in industry reduces. That is the experience and that is why so many fewer people now provide services to the public than used to be the case. We have destroyed confidence. You have to have confidence on both sides; that is all.
I am very grateful to my noble friend for giving way but the noble Lord, Lord Deben, referred to the financial services industry. The whole issue around the mis-selling of personal pensions covered a period of between 15 to 20 years. One of the reasons why there had to be redress there was because the entire financial services industry had been damaged. Our energy suppliers are being damaged at the moment. I remind noble Lords of the statement by Warren Buffett that it takes 20 years to build a reputation but five minutes to lose it. We owe a debt to the industry to make sure that it operates with the highest possible standards. One way of doing that is to support the amendments that my noble friend has put forward.
My Lords, my noble friend has expressed the position far more precisely than me. I underline her comments. I will not pursue the point today but I ask the department to reflect on it and on how it will justify to the public that there should be a lower level of potential redress in the energy sector than there is in the financial services sector. I just ask that question.
In relation to collective redress, I believe that the Government, the Minister for Consumer Affairs and the noble Baroness, Lady Verma, who is replying for her department, have moved some way to recognise the need for consumer redress to be dealt with on a collective basis on occasion. It is particularly important that that is provided for in the regulated sectors. The amendment that I am proposing would allow the Minister to come forward with a whole range of potential forms of collective redress. Most of those would be less expensive than individuals taking cases themselves and would take less time. They could, indeed, be pursued by intermediaries, but the aggregate cost to consumers and the industry would be significantly less than if every single consumer, or even 10% of consumers, started to take individual cases through the courts, with each one taking time to reach a conclusion. I cannot see that collective redress is ever going to be more time-consuming and costly than having a range of thousands of individual redress cases, whether they are taken through the ombudsman, the economic regulator or the courts.
I hope that the Government will consider further the issue of collective redress. Perhaps they will not do so until the draft Bill in the Commons, to which I referred, has come to fruition. At that point at least, I hope that there will be reconsideration of the benefits of collective redress. Probably this week I should not be talking about opt in and opt out, but the opt-out situation is even clearer. It would be even cheaper than what is provided for in the draft of the consumer rights Bill. Whatever the form of collective redress, it is very important that this sector looks at the option and that, in the light of general progress on consumer rights, we come back to this at a later stage. For the moment, I beg leave to withdraw the amendment.
Amendment 51ZA withdrawn.
51ZB: After Clause 132, insert the following new Clause—
AEnergy company obligationEnergy company obligations
Subject to the review provided for in section (Energy company obligations review) the provisions related to the energy company obligation shall in principle be extended to 2019.”
My Lords, we have touched on this. The ECO is central to the Government’s strategy for delivering on their fuel poverty targets. We have had a lengthy debate on the context in which they will do so, and the targets and strategies that they will adopt. Clearly, their main attack on fuel poverty will be through the measures they bring to improve the energy efficiency of the homes of the fuel poor. The ECO is intended to be the main weapon for them to do this.
I have had some exchanges with the noble Baroness about how we are going on the ECO at the moment. I have received information from various sources that there are serious problems. This follows quite a good year—the last year of the old scheme, if I may put it that way—when a significant increase was recorded by the climate change committee in many types of interventions, including cavity wall insulation, solid wall treatments and loft insulation. All those schemes have now come to an end. They are all being replaced by the ECO, which in aggregate terms is less than the aggregate of the others—although the Minister pointed out that you also have to take into account the warm homes discount. That is on the other side of the equation—the income side—whereas in aggregate under the ECO, the number of schemes that will be delivered, and the aggregate cost and resources devoted to the schemes, will be less than under the pre-existing three schemes.
That would be a problem in itself, but it will be a greater problem if the way in which the ECO is being delivered is inefficient. Several sources appear to suggest that there is a serious problem with measures being brought forward under the ECO. On the climate change committee’s figures, the number of cavity wall insulation interventions declined by 60% in the first few months of the ECO regime. That is a serious teething problem. It may be a teething problem but it needs to be addressed seriously. The new structure under the various regulations introducing the ECO seems to create a problem for the cost of each individual measure as well.
I am probably not the only noble Lord who has received a letter from Scottish and Southern on this point. The supply companies have to buy from the market the interventions that they require to make up their ECO contribution. They have said, and this is quite startling, that the cost of some of those interventions under the ECO provisions is more than twice than under the old schemes. That reflects the volume but it also reflects the new system.
Scottish and Southern claims that the average cost at which it is buying cavity wall insulation, solid wall insulation and loft insulation has more than doubled under the new regime. That is also reflected in the views expressed by the insulation industry and the installers. They say that because the volume of work has gone down substantially, they can no longer send their workforce to an area where they can do four or five jobs in two or three days. They now have to go to an area where they can do only one job and then move on to the other side of the country, or the region, and carry out the other jobs. Therefore, the average cost to them is increasing. That is reflected in the prices they are offering through the brokerage system, which is therefore affecting the charge that Scottish and Southern and other electricity suppliers pay in the ECO context.
That is not a good situation. It is also having a knock-on effect in that those firms are also laying off workers. My own union, the GMB, which is the main organiser of insulation and installation workers, has seen significant layoffs already and sees more in the pipeline as the old schemes end. I have asked the Minister to give me some details about how the department sees the situation, but that is how it is seen from the point of view of the energy suppliers, the industry and the workers within the industry. If this goes on, the effectiveness of the ECO intervention is going to be substantially less than the equivalent level of resources that were provided under the pre-existing schemes.
Part of the problem, according to both the suppliers and the installation industry, is that the period over which the ECO is supposed to be operating is relatively short. Under present provisions, it runs to only 2015. That can be extended but at the moment there is certainty only over it existing until 2015. My amendments are an attempt to address this issue by, first, extending the period of the ECO in principle to 2019, giving time for this to be smoothed over; and secondly, providing for a review of how the ECO is operating. I am suggesting that we should put that in statute. If the Government are not prepared to put it in statute, they should make a commitment, in view of these assertions, that they need to look within the next six to 12 months at how the ECO is really working out.
The last stages of the old scheme are now going through their finishing stages. Everything that is starts from now on will, therefore, be under the ECO provision. Unless ECO rapidly builds to the same volume—and I hope at the same or better price—it will not deliver as great an impact on energy efficiency of homes, and thus on fuel poverty, as the previous system, even pound for pound and intervention by intervention. I want a review, which should be in the context of the ECO system lasting for a longer period because, theoretically, it is simpler than the multiple systems we had before. We need to know, however, what is really going on and whether the system and the market that has been established are operating properly. If they are, in the sense that real costs are being charged, what is wrong? Are the volume, incentives, or relations down the supply chain not right, or is there a basic flaw in the system itself? The sooner we have the answer, the sooner we can put the ECO system on a better basis, and one in which the industry, suppliers and consumers can have confidence. I beg to move.
My Lords, I am grateful to the noble Lord, Lord Whitty, for his amendments dealing with the future of the energy company obligations and the approach to replacement boilers adopted within the scheme. By way of background, ECO is worth £1.3 billion per year and is split into three obligations: affordable warmth; carbon savings communities; and carbon saving. ECO has been specifically designed to help us fight the battle against fuel poverty and to reduce carbon emissions by requiring obligated energy suppliers to invest in heating and energy-efficiency measures. Importantly, ECO is expected to be more cost effective than the Warm Front Scheme, with the delivery cost of 120,000 major measures estimated at around £350 million each year under the affordable warmth obligation. Under Warm Front, this amount of funding might have supported only 80,000 major measures, on which basis ECO is likely to be 50% more cost effective than the previous government-funded scheme. I recognise how important it is for vulnerable consumers to know how to access the support. That is why, in recognition of some of the reported difficulties, as the noble Lord, Lord Whitty, stated in his opening remarks, in identifying vulnerable customers who are eligible for help, we have provided a data-matching and referral service for ECO affordable warmth, operated by the government-funded energy saving advice service. Working in partnership with the Department for Work and Pensions, this service confirms whether a consumer meets the qualifying benefit criteria. Already, nearly 12,000 customers have been referred to an obligated energy supplier through this route. As we work on a new fuel poverty strategy to support the proposed new fuel poverty target, we will also be considering the scope for making more extensive use of data matching in future.
I turn to the amendments in more detail. Amendments 51ZB and 51ZC propose that ECO be extended to 2019, subject to a review. At the time that ECO was introduced, we indicated the intention that ECO would run until at least 2022 and the Government will, in due course, bring forward proposals for consultation on what the next phase of ECO, from 2015, should look like. In designing these proposals, it is important that we have flexibility to take account of experience under the current phase of ECO and new issues that may arise. It would therefore be wrong to restrict the future design of ECO to its current provisions. As part of our consultations on its future, we would, in any event, also consult all the organisations specified in the noble Lord’s amendment. Given the Government’s plans for the future of ECO, we believe that setting this requirement in law would be damagingly restrictive.
Amendment 51ZD would change the arrangements for the replacement of boilers under ECO. I would argue that this amendment is also not necessary. As was shown in the first Green Deal and ECO statistical release on 27 June, ECO is already delivering, with over 80,000 measures installed at the end of April and £155 million-worth of measures traded on the ECO brokerage platform to date for delivery over the coming months. We expect tens of thousands of boilers to be replaced each year under current arrangements. We will continue to report on progress, with both monthly and more comprehensive quarterly statistical releases.
There are other difficulties with the noble Lord’s amendments. For example, the text proposed would effectively mean that there would be no limit to the number of free boilers that might be offered to eligible customers. This would have a serious impact on the costs of the policy. Such costs fall on all bill payers, including those least able to pay, which risks undermining confidence in the overall policy. It would also dramatically skew the balance of the measures installed. At present, obligated suppliers have the freedom to meet their targets in the most cost-effective way, including by installing basic insulation measures, which are very cost effective and help to minimise costs. Among the affordable warmth eligible group, we estimated in the final Green Deal and ECO impact assessment that around 1 million households could benefit from further insulation. It is therefore important that affordable warmth delivery is not simply focused on boiler measures.
I am grateful to the noble Lord for the opportunity to discuss ECO, which is a key instrument to help us tackle fuel poverty, the subject of an earlier debate. Both the noble Lord and I share a concern for ensuring that the needs of vulnerable households continue to be addressed in the long term through ECO. However, I do not believe it is helpful for detailed eligibility criteria to be specified in primary legislation. As we have seen in relation to the legislative framework for fuel poverty, we need the flexibility to be able to respond when our understanding of a problem changes. That is why we have proposed, while maintaining a duty on the Secretary of State to address fuel poverty in primary legislation, that the same holds true here and why we consider that detailed eligibility criteria should be set out in secondary legislation, allowing us to keep those criteria under review while maintaining parliamentary oversight of any changes. In addition, this enables us to amend criteria over time to reflect developments in the Government’s benefits system.
The noble Lord asked what ECO had delivered so far. I think I have already alluded to that. More than 80,000 measures have been installed under ECO, benefiting more than 70,000 properties. More than 55,000 of these measures were installed under the affordable warmth or carbon saving community elements of the obligation, thereby benefiting the most vulnerable customers. The noble Lord also suggested that ECO was not going to deliver or have a large impact. ECO is a new obligation and has required some changes across the energy efficiency sector. However, the obligated suppliers have been set challenging targets, to be met by March 2015, and 80,000 measures have already been installed. This is a new measure and one planned to work over many decades. I think that the noble Lord must recognise we are taking a long-term view here and not instituting short-term fixes. On that note, I hope that the noble Lord will withdraw his amendment.
My Lords, it is precisely for the reason that this needs to be about the long term that I suggested that we extended the statutory period. I appreciate that we have talked to industry and said that we intend to run it to 2022, but all the industry sees is that it is going to run to 2015. I would certainly ask the Government at least to look at that. If the system is going to run to 2022, subject maybe to some tweaking, it would be useful for both the energy suppliers and the installation and insulation industry to know that that is indeed going to be the case. I can pass the noble Baroness the exact costs that Scottish and Southern claims it now has to pay, as against the figures in the DECC initial assessment of the cost of the ECO. Those costs are quite startling. For loft insulation, it goes from about £280 per installation to the brokerage outcome of £1,080. There is a similar escalation for cavity wall insulations. These are not consumer figures or even the insulation industry’s figures. They are ones that the insulation industry has charged to a supplier. Scottish and Southern draw the conclusion that we should put a cap on ECO. I do not go along with suggesting we should do that. Nor do I suggest that we should cut back on the ECO and change course. I suggest that the Government look at these figures and see how they have arisen. If it is a teething problem I accept that we need to give it a little time to settle down but I would like to be convinced that it will, otherwise the scheme will not be cost effective.
I did not speak very much about Amendment 51ZD, on boilers, in my opening remarks because I thought it was self-evident that probably the biggest contribution to household energy efficiency achieved in the last 10 years was when we required all replacement boilers to be A- or B-rated. That was a dramatic change and it has brought dividends to thousands of households. The amendment suggests that we try to extend that into the area of identified fuel poverty. Where the suppliers know that there is an old, inefficient boiler still operating, and that is matched with data identifying a household as within the definition of fuel poverty, there should be a possibility of using the ECO allowance to replace it. The amendment is not saying that it is mandatory to do so or that you use up the whole of your ECO figures in so doing. It simply says that that ought to be one measure recognised under the ECO portfolio. It matches one set of figures to another and tackles fuel poverty and energy efficiency at its very heart. If we could replace the F-, G- and worse-rated boilers that are still in a lot of poor homes, particularly in the private rented sector, with A- and B-rated boilers, it would make a huge difference to people’s bills and the energy efficiency of those buildings.
I am disappointed that the Minister is not prepared to take this up. She has to recognise that there is a perceived problem with the ECO at the moment that the Government and the department need to put right. I am not saying we should abandon the policy or even drastically change it but we need to get it right. If we do not get it right within a few months it will begin to fall into disrepute. At the moment there is that danger. I hope that in not accepting the amendments the Minister will at least accept that there is a bit of a problem. People need to be talked to as a matter or urgency and, if necessary, a formal review by the department needs to take place. With that, I beg leave to withdraw the amendment.
Amendment 51ZB withdrawn.
Amendments 51ZC and 51ZD not moved.
51ZDA*: After Clause 132, insert the following new Clause—
“Data from smart meters
(1) All data on energy use generated by a smart meter shall remain the property of that consumer.
(2) The energy supplier that receives data from a smart meter shall make that data readily available in an appropriate generic format, to be determined from time to time by the Secretary of State, to the consumer on demand.”
My Lords, one important but largely forgotten area of energy policy is the smart meter rollout which has been recently, rightly, postponed to make sure we get it right. To put it into context, nearly 50 million meters altogether will be rolled out to some 30 million homes and businesses at a cost, over about a decade, of £11 billion. That is a major national investment. Sometimes I feel that we do not give this enough attention—I am sure Government do but maybe Parliament does not—to make sure that that investment delivers what should be a real change to the way that the electricity market, distribution and usage, work in this country as the future foundation of a truly smart grid.
One important area is data. I apologise to the Minister for tabling this amendment very late; it is a probing amendment and she might tell me that I have nothing to worry about. If that is so, I will welcome it. I have felt a concern both on the consumer side and from within the industry that this area is not fully clear. If you look up smart meters on the DECC website, it says that both these areas are satisfactory. Clearly, there is no great detail there. The amendment would ensure that the considerable data that come out from smart meters and are transmitted to energy suppliers will remain the property of the consumer who used the meter, and that they will be able to use the information in whatever way they want, primarily to help use their energy more efficiently but also to get quotations from other energy companies. This will ensure that the data are used properly and to the benefit of consumers as well as to the electricity supply industry, which will have reduced collection charges.
Those two areas are fundamentally important. I would be very pleased to hear from the Minister that I have nothing to worry about and that this is already enshrined in a reasonable degree of law. If it is not, it is important that we make sure that it is enshrined in some legislative form. I beg to move.
I should perhaps start by declaring an interest. I am chairman of SmartGrid GB. In some respects we will have an information overload as a consequence of the rollout of smart meters. On the other hand, it would be desirable for the rights of the consumer to be taken properly into account. It is quite likely that there will be a lot of information, and it would be a reassurance to the consumer if they had access to what was out there. Some of the enthusiasts for the new technologies, which have yet to be fully realised, find their eyes glowing at the prospect of smart metering. We have to be a wee bit cautious. There could be civil liberties concerns, although not about the time when you put on a kettle or whether you run the washing machine in the middle of the night. These issues are trivial.
It is a bit like another problem that we have at the moment. If we use our passes on the Underground, we could be tracked over the course of a day or a week. While that might be of use to some authorities, and might be used for beneficial purposes, it could be a problem. It will be the same when we get these new meters in households. I see the noble Lord, Lord Deben, looking at me, but I am sure that, in his experience of constituency surgeries, he had, as I had from time to time, individuals who were convinced that in a television set there was a camera as well as the receiver, and that somebody, somewhere, was finding out what was going on in their living room.
The noble Lord is absolutely right, but we should not allow people to think of this just as a joke. Some newspapers will certainly try to suggest that this sensible proposal is a means of doing untold damage. Therefore, we must get it right from the beginning or we will destroy the whole system.
I remember being a lorry driver’s mate in the 1960s when I was a student. As a consequence of a Labour Government’s legislation, the haulage companies were trying to introduce the “spy in the cab”. That is now regarded as a very important health and safety measure. At the time it was not very well presented. If we can get an understanding and an appreciation by government of the dangers of the overload of information that could emerge, the public could be educated on the beneficial uses of it and made aware of the dangers—of which the civil liberties lobby could take account—the anxiety that parts of the press might have about the rollout of smart meters would in large measure be mitigated.
Therefore, while I appreciate the probing character of this amendment, it would benefit the process if the Government gave us positive indications today that if this is defective, or if it is otherwise necessary, amendments could be presented at a later stage in the appropriate format. We would do well to keep this in mind even if we do not get completely uptight about it.
I would like to speak to Amendment 51AA, which I tabled with the noble Viscount, Lord Hanworth.
I was not at Second Reading but I have been listening to some of the Committee’s sittings. I went to a meeting last week at University College Energy Institute which discussed the difficulties people will have—up and down the country—with the new Energy Bill, which has many laudable objectives. I recalled at this meeting the case of one noble Earl finding that his electricity statement was five pages long. My son-in-law, who works in a green energy company, comments on the great difficulties people have when installing new green systems: heating, insulation, flood-prevention, and so on.
So how are people going to understand it? There seems to be a feeling we are not yet, and perhaps never will be, a society that gets it all on the internet or from a phone call. Perhaps we need to go back to what used to be quite a familiar sight on the high street: the energy showroom. Not only could you see a range of electrical apparatus, you could show your bill to someone. These showrooms were the front office for the energy company.
Our suggestion in this amendment is that the Secretary of State makes adequate provision for the universal availability of information, in order to enable domestic energy consumers to make effective decisions about their energy usage, including information relating to installation, running costs and monitoring equipment— that last point refers to smart meters. People studying smart meters realise they are going to be a source of great difficulty to many people.
My suggestion, therefore, is that we should have energy showrooms up and down the UK’s high streets, where empty shops give organisations such as councils, the Government and energy companies the opportunity to provide places offering this sort of information. As I have explained, it is important that in these places there are people who can provide information.
Like all good ideas this idea builds on the wide variety of existing initiatives run by councils and voluntary bodies. However, the Government should take it as a general responsibility to encourage, where possible, and to provide funding, where necessary, to ensure that these energy showrooms, or information centres, become available. The idea is that in such a place you could not only see technology but make a decision about spending more money on insulation or on heating.
It is true that, under the Green Deal, there are approved operatives who can come and visit you, but that is a second stage. You would really like to see a rather broad overview of all the possibilities as well as having somewhere where you could find out about the bills coming through to you. We have been talking about fuel poverty, which is a complex issue and will be dealt with in many different ways. Again, you need a real person to do it. I know people who work in the CAB, and I fear that the CAB will be overloaded with people trying to ask questions about their energy bills. The effect will be such a big ramp, it will be necessary to have additional or separate places for energy.
One of the other points is who would do this. Well, there are lots of people out there seeking jobs. This would be a rather interesting, useful and perhaps economical, way for people who have technical skills, abilities and inclinations to provide this kind of information. Anybody working in such an energy showroom would of course develop skills that they could quite quickly apply elsewhere, so it might be a practical way of upgrading the skills of many people with a direct objective.
Of course, the information services are available on the internet and via helplines but, speaking for myself, I always much prefer to go and buy something from a shop and talk to a person. Although I am a computer person and use a Japanese supercomputer, when it comes to my bill I like to go and talk to somebody down the street. I am not sure if the noble Viscount, Lord Ridley, is in his place, but people like him who go down to their electricity showroom might also like to get some government information about climate change from approved sources. When you go to a doctor’s surgery you learn about your health and how to change your lifestyle, and you learn about science and medicine. Maybe we should be hearing a variety of views, but it seems to me that these would be climate change centres as well as energy showrooms.
I was just wondering how the noble Lord would make provision for the views of certain people who find that most of the information given at these centres will be somehow or other not to be trusted? Will he have a special little place on the side with a notice up that says “Contrarians”? If so, will he take some care to ensure that what they have said had at least some connection with the truth?
I was going to suggest that, in an objective way, you present the official view but you might say that there are some areas where there are questions, as there are in science. However, I am sure that if these centres were formed, the Committee on Climate Change would be able to give excellent advice on how these centres might be used. The other point, as we learnt this afternoon, is the question of safety, including the safety of carbon monoxide and so on. Again, you could have that information at these places.
Secondly, as I have commented before in the House of Lords, I visit the Netherlands quite often—I am a visiting professor there. They have an excellent European energy centre where you can see a tremendous array of all the different kinds of technologies and energy developments available. Of course, in the UK we have the Centre for Alternative Technology at Machynlleth in Wales. There was one in Swindon. Surely we should have many more of these centres where people can make these really quite complex choices between windmills—if you are a Prime Minister, you have one on your roof—solar collectors, heat pumps, biomass generation and new kinds of insulation. Two critical issues are insulation and flood damage. We really need centres up and down this country where people can go and see them, funded and managed by energy companies, non-profit bodies and councils.
These two suggestions are building on what exists already. They are in line with the Government’s big society—going to meet your fellow citizens dealing with energy is surely part of that scene. I believe that all political parties would support this kind of initiative in order to get the whole energy and climate change movement going faster and with less concern to people, and that people would make use of it. DECC should take action quite soon.
My Lords, I support my noble friend on this issue. As he was speaking, I was thinking that we have a model for what he is talking about. If you go along Oxford Street or the main street of pretty well any town there is at least one telecoms shop, where you can sign up to get a new phone. The last shops to close seem to be the mobile phone shops. Yet this is a far more pressing requirement than just a mobile phone.
One of the consequences of privatisation has been the demise of the old electricity and gas showrooms, in which various pieces of equipment, from washing machines to cookers to refrigerators, were on sale. Unfortunately, of course, they have now been superseded by the likes of Currys and tend to be in shopping areas outside the high street. With regard to the level of public concern about electricity and gas prices, and the confusion over the effectiveness of one piece of equipment against another, it is fair to say that if you go to some of the high street shops you will get very good, helpful assistance but that tends to be in the minority. Due to the churn of staff in the retail trade, people are there for relatively short periods and do not have the experience that was built up in the old showrooms.
The telephone companies and the makers of telecoms equipment seem to be able to provide a service for the public which the big six energy companies seem incapable of doing. They have retreated from the high street. The cost of property on the high street is not very high these days and one would imagine that it would not cost an awful lot to get people in there, but of course they would say that that was too much and that if people were better informed they would probably be looking for better tariffs than the ones that they get and we would be back talking about mis-selling and the like.
This is something that the Government ought to put their mind to and I wait with interest to hear what the Minister has to say. As my noble friend said, it is part of the big society, part of a well informed consumer society, and one would have thought that it might be an attractive proposition for some of the big companies to look at in terms of looking after their customers.
My Lords, the amendment in the names of the noble Lord, Lord Hunt, and the noble Viscount, Lord Hanworth, raises a really interesting issue, and I commend them for tabling it. It brings this Bill into contact with people, consumers and citizens.
When I read about the amendment, I thought back to my childhood, where in a medium-sized town in south Wales, there was the South Wales Electricity Board showroom, right in the centre among all the shops. You could get advice about your bills and you could speak to people, but it also had a showroom for the sale of electrical goods. Of course, in those days—and I am sure this started a long time before—the energy companies had a great interest in making sure that every family had a washing machine, a fridge-freezer and an electric cooker because it would boost the sale of their product. They were ensuring that we were all making the most of all the labour-saving devices that were coming forward in order to boost the sale of the units of electricity that they generated. It probably made very good business sense. However, times have changed and over the years energy companies have receded into the background. Now they are engaged mainly in a massive database management exercise, in which they try to keep interaction with the consumer to a bare minimum. I have been told that, from a supply company’s point of view, every time someone rings up it is money off the bottom line and it does not like it. Companies invest in call centres, which have become a modern job-creation exercise here and overseas. We can talk to people only on the phone. There is very little interaction on the high street.
I am grateful to my noble friend Lord O’Neill for his comparison with the mobile phone industry. It is an interesting parallel. You could just interact with your mobile phone company through the internet, a database or a call centre. However, we choose not to. We go into a shop and ask for advice on different tariffs. Carphone Warehouse and many others have an aggregation service. We want to pick up the phones, try them out and see which ones suit us. Telecommunications is a much simpler proposition. Energy is much more fundamental—telecommunications is a subset of energy—but it does not have that interface, which is curious. Whether it is government’s role to make this happen is a harder question. It is an interesting, probing idea.
I am grateful to the noble Baroness, Lady Lane-Fox. We had a conversation about the digital world and what the high street of the future will look like. I said that it might seem very empty because things are moving to the internet. She said that, on the contrary, when we move more and more to digital services we will also need the high street. The services provided may be different, but people will still want to go to and use a town centre for all the convenience and ease that it provides. The noble Baroness said that when you order something on the internet and it turns up at your door, it is often quite inconvenient. It will come at the wrong time and you will get a horrible slip saying, “We called but you were out”—or you have to sit around for 12 hours waiting for your thing to arrive. She said that in future there would be sites in the high street where there would be deposit and collection services, and that the high street would be much more dynamic.
We do not need our energy companies to sell us fridges any more, but we might need them to take delivery of our fridge and then install it, or provide us with advice. There is something here about the nature of the industry and the degree to which it has hollowed itself out into a no doubt very efficient service. Is it very human? Does it provide the advice that people need?
I will say a word on technologies. As noble Lords on both sides of the Committee said, we are in a period of great change. The days when you simply plug in your kettle and do not think about it are slowly starting to change. Not everyone needs to think about it, but increasingly people are thinking about it. We have seen a quite rapid uptake of solar panels. Obviously, it speaks to some people in some way. The idea that you can make your own energy is attractive and appealing. The fact that you can even make money from it speaks to something human in us. Therefore, there is a need for proper information about these different technologies. They will continue to grow in number. Solar panels are perhaps the most visible example at the moment, but there are other technologies such as smart meters, which we discussed when we debated the previous amendment. There is also voltage optimisation. People who know me know that I have a particular interest in this. It is an interesting bit of kit that can take 10% off your electricity bill and that elongates the life of your electrical appliances. It is a win-win, but hardly anybody knows how voltage optimisers work, perhaps including many energy experts.
I have probably said enough. There is an issue here. I am not sure about the Government’s role, but perhaps they could provide the impetus for a public/private partnership, although I am not sure about the formulation. Having said that government should not provide it, I will just ask a question about the Energy Saving Trust, which was part of the Government’s architecture and did, I believe, provide local outlets or offices. Does the Energy Saving Trust still have these local centres? If so, how many of them are there, what kind of visitors do they get and are they successful? If they do still exist, perhaps they could be built on. The fact that I do not know whether they exist is perhaps a bit of a sad indictment—I am not sure whether of me or of the trust. Perhaps I should know.
It is tempting to say that the private sector will do everything super-efficiently, but it will do it efficiently from its perspective. None the less, with a bit of encouragement, and perhaps some work with the likes of Citizens Advice, the Energy Saving Trust and more innovative entrants into the market, something could be looked at here to kick-start some fresh thinking.
My Lords, I do not know whether noble Lords are aware but some local councils have energy roadshows, which they take round to the town halls in small towns. They did it in Northumberland. Some of them have a trailer that they take round. I think that the energy centre in Milton Keynes used to have a roadshow, so there are some things that could be built on. However, I cannot see how a Government could afford to put something all across the country and I think we ought to build on what we have.
My Lords, I thank my noble friend Lord Teverson and the noble Lord, Lord Hunt, for their amendments concerning consumer access to information. I start by saying to my noble friend and to the noble Lord, Lord O’Neill, that I take the issues around data protection and data security very seriously. I hope that in responding to both noble Lords I will be able to reassure them of the measures we have in place. However, I will address that at the end.
Amendment 51ZDA relates to the ownership of, and access to, the energy consumption data that will be stored by smart meters. I am grateful to my noble friend for the opportunity to explain the important regulatory changes on smart metering data access and privacy that have came into effect since last month. The smart meter data access framework is based on the principle that consumers should have a choice about how their data are used and by whom. The first step is that energy consumption data will be stored by smart meters themselves, in people’s homes. The meters will be capable of storing at least 24 months-worth of historic data. The second step is that consumers will have control and choice over who can access the data held on those smart meters.
Consumers will be able to access their data directly from the meter in their home. Energy suppliers are required to ensure that consumers are able to do this. As part of their smart meter installation, all domestic consumers will be offered an in-home display. This will connect them directly to their smart meter and show them how much energy they are using, in real time and historically, and what it is costing them. We expect other innovative products to be developed that will connect directly to the smart meter, which consumers will be able to purchase on the high street.
Consumers can also choose to give their energy supplier, or anyone else offering them an attractive product or service, remote access to their data. This enables companies to offer services to consumers such as regular home energy reports. The only exception, where consumers do not have a choice, is that the meters will provide energy suppliers with the data required for billing or other regulated duties. One of the key benefits of smart metering for consumers is the end of estimated billing. This data access framework, embedding the principles of consumer choice and control, has been implemented through changes to energy suppliers’ licences and will be enforced by Ofgem.
Before I turn to the amendment of the noble Lord, Lord Hunt, I will respond to two points. Both noble Lords asked about data control and engagement. While I have given noble Lords a broad overview, we also have in place a central consumer delivery body that would be able to reach out and reassure consumers with an independent voice on how their data are being kept. We have come to create the mechanism through which the data are stored with advice from the National Technical Authority for Information Assurance, which is linked to the Government’s GCHQ; I hate acronyms. We therefore know that we have worked with a huge amount of expertise on national data security. The noble Lord, Lord O’Neill, will welcome the appointment of his colleague the noble Baroness, Lady McDonagh, as the chairman of the central delivery body.
The other mechanism, which I have just mentioned, is the data and communications company. This will effectively be the mechanism through which all information will go. It has security on the front and back ends. The information that will be utilised from consumers’ homes cannot be accessed unless it has been accredited to the suppliers who have signed up through their licence conditions to the utilisation of smart meters. There is a huge amount of information out there that I urge noble Lords to access. If noble Lords would like me to, I am more than happy to ensure that they receive the updated frameworks and codes of practice that we are putting out there to ensure that there is absolute privacy for and security on data for consumers. We have worked hard to ensure that we satisfy the sort of concerns and fears that noble Lords are raising.
I now turn to Amendment 51AA of the noble Lord, Lord Hunt. I, like the noble Baroness, Lady Worthington, support the sentiment behind the amendment concerning the provision of energy information to consumers. The first step to saving energy is to receive reliable, quality advice about energy efficiency. Generic advice from a high street shop will only get you to a certain stage of information availability. The best approach is to get personalised advice that is tailored to your own home. This is the only way to ensure that recommendations and savings estimates are truly meaningful for the consumer. The Green Deal assessment does exactly that.
The Green Deal assessment provides detailed advice about the range of options which might be suitable for a particular property, including insulation and other efficiency measures, renewable heating systems and options for generating low-carbon electricity, like solar panels. Householders also receive advice on how they use energy through an occupancy assessment. It is still early days, but awareness of the scheme has grown rapidly. I am pleased to say that nearly 40,000 Green Deal assessments had been completed by mid-June, with thousands happening every month. Physical demonstrations are always a highly effective way to raise consumer awareness of the measures available. That is why we are supporting the development of a national “open homes” network to make it easy for people to see how homes can be improved by energy-saving retrofits.
We have seen the statistics on the Green Deal. If I am right, you have to pay for those assessments. That seems very different to somebody being able to walk in off the high street to receive advice. Would the noble Baroness care to comment on that?
If, in a year’s time, the numbers of actual, completed, signed-up Green Deal participants are still very low—and they have been quite low, in terms of completing the whole process—would the Government consider that perhaps a new approach is needed where a lower level of advice is available without any cost?
My Lords, first, we have to recognise that the Green Deal is still in its early stages. Given that, the numbers of assessments received and accepted are quite high. The noble Baroness does not get the point that the Green Deal assesses the individual’s needs and tailors advice to that individual’s home, whereas getting generic advice would be exactly that: generic. Everybody’s homes and requirements are different. The way the assessments are carried out is tailored to those individual needs and engages on a one-to-one basis—if the noble Baroness would allow me to finish—the needs of those consumers and their households. You cannot get that from going to a one-stop shop for that advice. This is tailored advice and it is too early to say whether the Green Deal measures are reaching out and people are engaging with them. Given the number of assessments that we have delivered, people are engaging with them. We must not be pessimistic about the numbers. I welcome the fact that there has been quite a surge in people wanting to access them.
Unfortunately, the noble Baroness missed my point. Obviously, everybody’s body and lifestyle are different but we go to a doctor’s surgery without cost to receive advice from an expert. Does she not accept that if you place the barrier of an up-front payment fewer people will receive advice? Is there not a role for very low-level but expert advice that can be tailored? Of course, people can communicate their circumstances. They are not incapable of speech. That is exactly what you do when you visit a doctor.
It is up to suppliers whether they charge: they may or may not. Government cannot dictate that to suppliers. It is in the interest of suppliers to offer the best possible deal out there, knowing that they compete for that work. We need to leave it to the people offering the Green Deals as to whether they charge, do not charge or give the costs back if they have a Green Deal accepted.
The energy-saving advice service will ensure that both consumers and businesses have access to impartial advice on the range of measures and services available to them. The Government are also currently operating a cashback scheme to consumers as further encouragement to install energy efficiency measures. The steps we are taking in the area of energy efficiency form part of a whole coherent strategy. As noble Lords mentioned, alongside the Green Deal we are also rolling out smart meters. The introduction of smart meters will provide consumers with real-time information on their energy consumption to help them control their energy use. As part of the smart meter installation visit, suppliers must also provide energy efficiency advice.
I will also say a few words on energy labelling and product standards. Already, measures like the ECO design and the energy labelling directive have played a key role in enhancing energy efficiency, securing above-average savings from electrical appliances. The UK continues to work with partners in Europe and is currently pushing the European Commission to increase the level of ambition on this issue. We are not just doing it nationally here but trying to encourage our partners in Europe to do the same. I hope my noble friend Lord Teverson and the noble Lord, Lord Hunt, see that the Government are taking every step possible to reassure and inform consumers. On that basis, I hope my noble friend will withdraw his amendment.
My Lords, I thank the Minister for that. I am greatly reassured, particularly that, as the data are held for at least two years on the smart meter on the premises and are also being checked by GCHQ, if I lose the data I can be sure that the National Security Agency over in Washington has got it and I contact them to get them back. What could be better than that? I have every pleasure in withdrawing my amendment.
Amendment 51ZDA withdrawn.
Schedule 14 : Consumer redress orders
Amendment 51ZE not moved.
51ZEA*: Schedule 14, page 204, leave out lines 35 to 37
My Lords, Amendment 51ZE deals again with the redress powers. The issue here is that the Government have rightly given Ofgem the ability to require compensation as well as to fine for breach of licence conditions or consumer law, but it is not clear whether this could apply to the cases that are currently under investigation by Ofgem, to which my noble friend Lady Liddell, who is no longer in her place, referred earlier.
Those outstanding investigations include one that started in September 2010, looking at doorstep selling for Scottish and Southern, ScottishPower and npower; a separate one into doorstep selling for E.ON; one into customer complaint systems at EDF; and one into misleading tariffs from ScottishPower. In total, there are eight or nine ongoing investigations, some of which have been going on for three years.
Ofgem has therefore already started a number of such investigations and, as I understand it, will start some more in the months between now and Royal Assent. At present it does not appear that the powers to award compensation would be allowable under that welcome provision in this Bill. However, if Ofgem finds against the companies it seems likely that a significant number of consumers will have suffered detriment and that the consideration of potential damage to the companies has outweighed the Government’s determination to ensure justice for those consumers.
When a similar point was put in the Commons by my honourable friend Tom Greatrex, the Minister replied that this would be retrospective legislation. It is not retrospective legislation. Ofgem would have to find that there had been breach of consumer law or a licence that already existed. Previously, consumers would have to go to court to get compensation but the provisions in this Bill would allow Ofgem to award that compensation. This is not inventing a law in retrospect; it is ensuring that the compensation comes through an easier channel.
It is important that those consumers whose complaints are currently being investigated by Ofgem benefit in the same way as future consumers will from what is a sensible improvement to the situation by the Government. I hope that the Minister will not resort to the retrospective legislation argument, because it is not retrospective legislation; it is simply improving delivery of the penalty and the rightful compensation that is due to these consumers. I beg to move.
My Lords, I thank the noble Lord for his amendments. Amendments 51ZEA and 51ZFA are designed to amend Schedule 14 and permit retrospective application of these powers. I am aware that these amendments were debated both in Committee and on Report in the other place. The aim of these amendments is to allow Ofgem to require redress for events that happened prior to the enactment of this Bill.
In seeking to take powers through the Energy Bill, our objective has been to put consumers first and we will consider any amendments from that perspective. It may appear that it is in consumers’ best interests to seek to put right consumer harm irrespective of when it took place, but the effect of retrospectively applying powers in the energy market will have negative impacts on all consumers.
Noble Lords will be aware of the presumption that powers should not generally be applied retrospectively. This is an important principle, but we are also concerned by the effect this will have on consumers. It is likely that the introduction of the regulatory uncertainty that these amendments will create will lead to increases in the cost of capital for energy companies, pushing up bills for everyone. We want to avoid creating investor uncertainty, particularly when we are trying to encourage the private sector investment that is required to move to a low-carbon economy. Increasing costs will hit most heavily the small energy companies that we want to come into the sector. We want new entrants to the market and do not want to accept amendments that could hinder them.
In addition, smaller energy companies would be most likely to shoulder the burden of the increased costs of insurance premiums that could arise from these amendments, as companies seek to cover their liability for events prior to the enactment of the Bill. My noble friend Lord Deben touched on some of these concerns more generally when we debated an earlier group of amendments. The combination of these factors may push up costs for energy consumers, impacting the very people we seek to protect. The potential unintended consequences of these measures mean that, while I am entirely sympathetic to the intentions behind the amendments, it could be counterproductive to accept them. For those reasons, I hope that at this stage the noble Lord will feel able to withdraw his amendment.
My Lords, I am afraid that I do not accept those arguments at all. New entrants will not be affected. If they are not operating in the market at the moment, they will be operating under the very process that is prescribed in the Bill. There is therefore no uncertainty for them. Furthermore, the only retrospection will be in how compensation is delivered. Any breach will have been under a contract or licence that already existed at the time that the breach occurred. Any breach of consumer law would have been a breach of the law at the time, and therefore susceptible to a court case brought by one or more consumers at that point. This is not retrospective legislation. It is simply tying up the delivery of existing legislation and existing licensing conditions.
If the Government continue to resist this, they will need better arguments. There is no retrospection in the sense that the noble Lord, Lord Deben, talked about earlier. He perhaps had a point. This simply concerns consumers who are currently under investigation. We also have to bear in mind, when talking about the detriment to consumers, that some of them might have started a court case had it not been for the fact that they knew that Ofgem was beginning to investigate the situation and that they might be precluded from bringing such a case.
The idea that resisting the amendment is in the interests of consumers, or that it should be resisted because it implies a breach of the principle—which I fully support—of not legislating retrospectively, is wrong. I hope that the Government will look at this again before Report. At this point, I beg leave to withdraw the amendment.
Amendment 51ZEA withdrawn.
51ZEB: Schedule 14, page 204, line 44, at end insert “unless one or more consumers have suffered loss or damage greater than this value”
My Lords, this is a straightforward question. The size of any compensation is limited to 10% of the company’s turnover, which is a fair amount. For some of these companies, it would be about £1 billion, which is a fair whack of compensation. Therefore, the possibility of awarding that compensation to an individual consumer would arise very rarely. However, it is of course possible that a serious breach of an industrial contract could lead to a loss to an operator of that order. My principal point here is that, in most sector regulations, a 10% limit applies to the fine that the regulator can impose. It is a reasonable limit on the enforcement and sanctioning powers of a public body. If Ofwat, Ofcom and Ofgem have the ability to impose fines of this order, the 10% limit is not unreasonable, but it is irrelevant to any potential compensation. The Minister may say this will never arise, and he may well be right, but in principle, if you have suffered detriment, should there be a limit on the degree to which you can seek redress for that detriment? That is the principle I am trying to establish. I beg to move.
My Lords, Amendments 51ZEB and 51ZEC, 51ZFB and 51ZFC are designed to amend Schedule 14 and permit unlimited liability for energy companies by seeking to ensure that the amount of compensation that can be required through a consumer redress order is not limited. I am aware that these amendments were debated both in Committee and on Report in the other place.
Our aim in drafting the powers in the Bill has been to ensure that the overall interests of the consumer are put first. With this in mind, we have sought to achieve a balance between the need for consumers to get speedy access to the redress they are due and an appeal process which is proportionate to the potential liability faced by energy companies and which does not present a barrier to entry for the small suppliers that we need to ensure a healthy competitive market.
In response to previous amendments, I mentioned that consumers can obtain redress through the courts under existing arrangements. However, the legal process is lengthy and does not offer a typically quick remedy for consumers who have lost out. This is largely because the legal process is necessarily equal to the potential sums at stake, where compensation is unlimited. Schedule 14 sets out powers which contain appeal mechanisms that are proportionate to the potential penalty. These are also limited to 10% of an energy company’s annual turnover and offer a relatively straightforward resolution of cases.
Accepting amendments to remove the cap could deny consumers timely compensation, as they would require us to make changes to the appeal mechanism, which could result in a more lengthy resolution of cases. Given how unlikely it is that consumers would lose out on a scale that went beyond the level of the 10% cap, we do not consider such a change is justifiable. As the noble Lord, Lord Whitty, has mentioned, for the very largest domestic energy suppliers to exceed a cap of 10% of annual turnover would mean penalties and compensation of over £1 billion. This contrasts with the largest penalty imposed by Ofgem to date of £15 million. We therefore believe that the proposed cap on redress is unlikely to hamper Ofgem’s ability to impose appropriate redress orders.
As I have mentioned in relation to previous amendments, removing the cap on liability could also have adverse impacts on smaller energy companies and, in turn, on consumer bills, due to the increased cost of capital and insurance premiums for energy companies. I assure your Lordships that the approach set out in the Bill does not let companies off the hook. The combined 10% cap on penalties and redress will apply to each separate regulatory breach, so that any company breaking the rules on a number of occasions will face correspondingly larger payouts. For the reasons I have set out, I hope the noble Lord feels able to withdraw his amendment.
My Lords, I thank the Minister particularly for that last point, because it indicates that it would not apply to a single breach—a single act of mis-selling or whatever—that applied to a large number of people. I am grateful for his explanation but I still think there is a difference between a limit on the ability of the regulator to impose a fine and a limit on compensation. However, although I am not in favour of a limit on compensation, he is right to say it is pretty unlikely to be applied and therefore it is not an issue to which I intend to return. I beg to withdraw.
Amendment 51ZEB withdrawn.
Amendments 51ZEC to 51ZFC not moved.
Schedule 14 agreed.
Amendment 51ZG not moved.
51A: Before Clause 133, insert the following new Clause—
“Feed-in tariffs: increase in maximum capacity of plant
In section 41 of the Energy Act 2008 (power to amend licence conditions etc: feed-in tariffs), in subsection (4), in the definition of “specified maximum capacity” for “5” substitute “10”.”
My Lords, in moving Amendment 51A I will also speak to Amendment 57; I hope that noble Lords will welcome them. The issue of increasing the scale of the feed-in tariff scheme was debated in Committee and on Report in the other place. It has also been raised by a number of noble Lords, both at Second Reading and outside the Chamber, including my noble friends Lady Maddock, Lord Teverson and Lord Stephen, as well as the noble Baroness, Lady Worthington, the noble Lords, Lord Whitty and Lord Cameron, and the right reverend Prelate the Bishop of London.
Having carefully considered the options, the Government agree that there would be a benefit to a limited extension of the feed-in tariff scheme. We intend to limit this support to community energy projects only. For developers of commercial projects larger than 5 megawatts, we continue to believe that larger projects are best supported through market-based incentives such as the renewables obligation and, shortly, contracts for difference as part of the electricity market reform process. This approach also offers the best value for money to the taxpayer.
Since the start of the FITs scheme three years ago, many communities have installed solar panels, wind turbines or hydro schemes. However, until now, they have been limited to a maximum capacity of 5 megawatts. We have listened to the compelling arguments of Co-operatives UK and others, and are convinced that the certainty of the feed-in tariffs scheme is a more appropriate way of helping community groups to deliver locally generated energy at scale and at the heart of their communities. We want to see communities up and down the country raising their ambition, and consider community-owned wind and solar schemes the most likely to benefit from this change. We hope that these amendments pave the way to support this greater ambition for community energy.
Amendment 57 is a procedural requirement which explains when this enabling power to amend the feed-in tariff scheme should come into effect. We will consult on how we intend to enable this change in secondary legalisation following Royal Assent. The current FITs scheme includes a definition of “community” which will form the basis of our consultation. We know that many will want to apply for this new support. However, we want to ensure that only genuine community energy schemes are permitted to benefit, so it is important that we create robust legislation which provides confidence to the public that subsidies are being delivered only to the intended recipients.
Taken together, these two amendments will drive a step change in the deployment of community energy. I hope your Lordships will support these amendments. I beg to move.
My Lords, can I be the first to welcome the amendment? Those of us who have read the debates that took place in the other place in Committee and on Report are certainly very pleased that the move to assist communities to produce 10 rather than 5 megawatts has been agreed to. It will, however, be rather important that we watch carefully the secondary legislation which will define what is a “community activity”. Quite clearly, if it were to move into the commercial area, the increase to 10 megawatts would be resented by those who generate a little more than 10 megawatts. As it has been defined by the Minister today, however, it is an important step forward and will help a lot of micro-microgeneration in communities.
My Lords, this is an important government amendment and we welcome the group, which replicates amendments tabled by Labour in Committee in the other place to increase the feed-in tariffs to at least 10 megawatts. This comes as a welcome acknowledgment of the gap that exists in the Bill on community energy. I also pay tribute to the personal enthusiasm of the Minister of State in the other place, Mr Greg Barker, both for these schemes and for the work that he has done since the debate in order to secure the amendment. We welcome the progress the Government have made in this respect.
On Report in the other place, we pushed the Government to introduce a minimum threshold for the fixed feed-in tariff of 10 megawatts. The Community Energy Coalition of NGOs, including the Centre for Sustainable Energy, the Forum for the Future, the National Trust, the Low Carbon Communities Network, Co-operatives UK and many more have called for the threshold to be raised even higher to 20 megawatts to allow community energy schemes a guaranteed income and enable them to participate effectively in the energy market in the future.
Already in the UK a number of community energy schemes exceed 5 megawatts, such as Westmill Wind Farm Co-operative in Oxfordshire of 6.5 megawatts, the Lochcarnan Community Wind Farm on South Uist of 7 megawatts and the Neilston Community Wind Farm near Glasgow of 10 megawatts. Community schemes are not necessarily small. The mid-size market can attract the participation of the wider population in renewable energy and the attainment of our 2020 targets. These schemes should also be given the signal that there is support to develop further.
The Energy and Climate Change Committee has argued that medium-sized projects of up to 50 megawatts are disadvantaged because they cannot access the feed-in tariff, yet often lack the financial capability to deal with the complexities of the renewables obligation and, in the future, contracts for difference. In the interim, until contracts for difference come into play, the gap remains. They may also struggle to obtain the reference price under the CFD regime, meaning that they would lose out financially. Why is the threshold fixed at 10 megawatts? What will the Government do to support mid-sized community energy schemes which are not eligible for the FITs but have difficulty accessing the contracts for difference? Community and co-operative energy schemes can be hugely beneficial in helping to meet our renewables targets that must be met by 2020.
Research reported by Co-operatives UK estimates that there is the potential for at least 3.5 gigawatts in UK community energy schemes by 2020—the equivalent of four conventional coal-fired power stations. Looking overseas, Germany, where 15% of renewables are community owned, is a good example of how community energy generation helps to diversify the market and increase its resilience. Locally owned and locally targeted strategies for energy generation and saving can be better tailored to local needs, such as helping to tackle fuel poverty, and can increase community awareness and engagement in a way that leads to lower bills and greater sustainability. We welcome the Government’s call for evidence on community energy launched last month. Indeed, the Secretary of State has said that he wants,
“nothing less than a community energy revolution”.
While it is disappointing that this proposed new clause is in many ways an afterthought to the Energy Bill, nevertheless it is welcome that it may become an integral part of the Government’s vision for the future electricity market.
FITs are a user friendly, bankable mechanism to encourage easy investment and engagement from people and organisations for whom energy is not their core business and who do not want the complexity of the renewables obligation. So far the mid-size market has failed due to excessively low FIT tariffs and unfair capacity constraints. However, the constraints on many applications of non-domestic solar are unfair. First, the FIT tariffs were set too low for many of the non-domestic FIT bands. Secondly, the degression mechanisms under budgetary constraint measures that come into play at relatively early stages are having the effect of leading to an imbalance between technologies.
The solar industry especially feels that it is subject to unnecessarily harsh measures. The consequences of these low capacity triggers is that any significant national deployment of solar power in schemes over 50 kilowatts in size—about the size of a school roof—will result in major cuts to the tariff that will make developing further schemes uneconomical. The solar industry contends that between 50 kilowatts and 5 megawatts it is cheaper than other renewables supported under the renewables obligation. I ask the Minister: why does it feel that it is subject to constraints beyond those that utility-scale renewables are subject to under the renewables obligation? Can the Minister clarify whether this Energy Bill could be used to correct the situation or could this be achieved through secondary legislation? Would there be any repercussions to correcting her department’s imbalance in the energy mix between technologies? Would there be an increase in the total budget before degression or would it result in reducing payments to some other technologies?
As I debated with the Minister yesterday when we were discussing the RHI order, these degressions are set very stringently at quite low levels, which can choke off investment from coming forward to help the UK get near to the 2020 targets, which are still a long way from being attained. No doubt in future we will debate at greater length the barriers faced by smaller generators to participating in the market and taking advantage of the new CFDs in terms of the technical knowledge required. Access for smaller participants is vital to extend the energy market to be as widely inclusive as possible. I would welcome the Minister’s comments at this stage so that these amendments can be assessed in the round with others due to be debated in Committee.
My Lords, I am extremely grateful for my noble friend Lord Roper’s warm welcome for these amendments and I think I sensed a warm welcome from the noble Lord, Lord Grantchester, as well. He said it was an afterthought. It was actually because we considered really hard what people had been saying and took that advice on board so I hope that the noble Lord has welcomed it with open arms. I agree with my noble friend Lord Roper that we must ensure that we have in place robust legislation, which will provide confidence that these subsidies will be delivered only to the intended recipients.
As always, the noble Lord, Lord Grantchester, raised a number of searching questions. Although I tried very hard to keep up with him, I suspect that I will end up having to write to him in response to one or two. The noble Lord asked why we should stop at 10 megawatts. Supporting generation through the FIT scheme is more expensive than market-based mechanisms such as the renewables obligation. We value community energy and are willing to extend the FIT scheme to support the ambition of the sector. Community developments larger than 10 megawatts will still get support but at that scale they will need to apply for the renewables obligation.
The noble Lord also mentioned that we had a call for evidence around the benefits of and barriers to community energy access. The community energy strategy will be published in the autumn and will identify the potential of community energy projects in the UK to bring benefits to communities while, very importantly, still helping tackle climate change and maintain energy security. The strategy will go further than renewable electricity generation projects. It will also include community energy-efficiency schemes, community renewable heat projects, smart grids and collective energy-purchasing and switching schemes.
On degression, the non-domestic solar PV sector is supported by the renewables obligation and the FIT scheme, so some schemes are receiving both. But degression is a necessary tool. As we discussed yesterday, we do not want to put an unfair balance in favour of one technology over another while technologies are developing. The mechanism of degression assists us in ensuring that some technologies do not get an overexposure to subsidies while other technologies try to reach up and compete on an equal basis. On that note, I commend these amendments.
Amendment 51A agreed.
51AA: Before Clause 133, insert the following new Clause—
(1) The Secretary of State shall make adequate provision for the universal availability of information to enable domestic energy consumers to make effective decisions about their energy usage, including information relating to—
(a) installation;(b) running costs;(c) monitoring equipment.(2) Measures under subsection (1) should include physical demonstration and comparison in collaboration with industry providers.”
I was astonished by the Minister’s remarks. She does not sound as if she goes shopping before she buys something. The whole point of this is that you want to see things—you cannot get a custom service. I do not know what the Minister’s life is like but it is not like most people’s lives.
The noble Lord can move his amendment if he wishes and then he will get a response. However, he must move the amendment in order to get the response. The noble Lord is entitled to degroup if he wishes to.
Amendment 51AA not moved.
Clause 133 agreed.
Clause 134 : Fees for services provided for energy resilience purposes
Debate on whether Clause 134 should stand part of the Bill.
My Lords, I have proposed that this clause should not stand part, partly because this is a very odd part of the Bill. I read it and then read it again. Then I thought that I would go to the Explanatory Notes as they would help explain what it is all about. However, the Explanatory Notes simply repeated what was written in the clauses in the same language but with the numbers taken out. So that was absolutely hopeless. I then turned to the debate in the Commons when this clause was introduced. I was seeking some sense of why this was needed, how it was going to operate and what it was for. My colleagues in the other place pressed the Minister quite hard but, I am sad to say, I am still a little confused as to why this power is being taken.
It did not appear in the draft Bill, so it was not subject to any pre-legislative scrutiny. There is very little background information on it and there seems to have been no consultation. It introduces quite extraordinarily wide-ranging powers with almost no definitions at all. It allows the Treasury and the Government to raise money, but the amounts that are allowed to be raised do not even need to pass before Parliament; they can simply be determined by the direction of the Secretary of State. It is quite a profound, if small, piece of legislation. I was curious to know what it was for and I still am. Perhaps the noble Lord can provide us with his account. Is the noble Lord, Lord Jenkin, going to tell me that there is lots of background information that I have not read?
In the other place, the Minister did try to give some explanation as to what these fees for energy resilience might be. My colleagues in the other place did press him quite hard, because one reading could see it as a way to discourage strike action in those sectors that deliver fuel or are connected with the energy sector. We were pleased to receive quite emphatic reassurances that these fees would not be applied to unions that sought to take strike action.
What seemed to emerge was that the fees are going to be levied on business in response to extreme events that it was almost impossible to predict. That could be anything but some examples were given. The Government might need to step in and provide personnel to companies in the event of an outbreak of a flu pandemic and would want to recover the cost in fees. Then there was the potential for equipment or vehicles that the Government own to be deployed in the event of extreme weather or of a clean-up. Then there are the unspecified assets that might need to be provided in the short term to business. Really, this is the Treasury seeking a power to regain costs for that. What have we come to? Is the government budget so tight that we are introducing powers to claw back money for disaster situations? In reality, if a disaster strikes you want the Government to be able to respond. You do not want there to be any quibbling about costs being passed on or who will pay for what. Why do we—and companies—pay taxes? The Government are there to provide a service in the event of national security issues.
Maybe I am wrong and there are plenty of precedents for the Treasury introducing specific powers to recover money for specific unintended events. If there are, I stand corrected. However, my reading of this is that it is an extraordinarily broad power with almost no definition and very little accountability. For that reason, it does not have a place in this Bill. Obviously, as we go forward we know that there will be an increase in natural disasters that could potentially interrupt energy supply. In fact, we have quite a resilient system for dealing with that. The power companies and National Grid are on the front line. Their licence requirements mean that they have to reconnect customers as soon as they can. When the large storms hit the Isle of Arran, SSE men in vans were out there fixing that problem. The Government were not involved. I suspect that the Government do not have the skills to address these issues.
It strikes me that this must be about military personnel. It can only be about military deployment because the department certainly does not have skilled engineers who can go and fix transmission lines. That is all done in the private sector. If it is about concerns about the military and the budget, this is quite a strange precedent to set, that there will somehow be fees applied to businesses. Are those fees voluntary or mandatory? How will they work? Does a company have to pay? As I said, when will all this be negotiated? If there is a natural disaster I would hope that we got on with fixing the problem and that the Government would be sufficiently robust and well resourced to do that, not that we would be quibbling about collecting these fees.
As I said, we are going into a world where there are likely to be more natural disasters. We should not shy away from that, but the Treasury would better spend its time getting to grips with climate change rather than preventing us from tackling it and introducing apparently innocuous but quite powerful bits of legislation that enable it to collect costs. It should be thinking about how it can act to stop the excessive increase of natural disasters and it should start taking climate change seriously.
I apologise for appearing to interrupt the noble Baroness in mid-flow. I just have one question. I had the same problem as the noble Baroness did. I thought, “Why has this clause stand part question been put down and what does the clause say?”. I turned up the Ofgem consultation letter published on the same day as its recent capacity assessment report, which has of course shown that the margins will, by the middle of this decade, become very much smaller. It goes on making hopeful remarks that perhaps there will not be interruptions but an increasing number of people think that there might be. The letter consults on additional balancing measures for the grid. It proposes two of them. I will not go into this in great detail at this hour of the night—we are due to rise in two minutes—but does that have anything to do with this clause? There is nothing in the letter about fees so there may be no connection, but it proposes new methods to achieve resilience to avoid power cuts. It seemed that there might be a connection. The noble Baroness, Lady Worthington, seems not to think so. We will listen to my noble friend replying in due course.
My Lords, I want to raise a slightly narrower point, but one related to that raised by the noble Baroness, Lady Worthington. The report of the Delegated Powers Committee raised very clearly a point about subsection (3)(b), where money can be specified or determined by the Secretary of State without any reference to Parliament. Your Lordships’ Delegated Powers Committee is very clear, and concludes:
“We accordingly do not find persuasive the explanations in the memorandum that the power conferred by clause 134(3)(b) is appropriate; and we recommend that, unless the House can be satisfied to that effect by further explanations from the Minister, paragraph (b) should be removed from clause 134(3)”.
I would be most grateful if the Minister could give us such a reply.
Perhaps, as I am dealing with the Delegated Powers Committee, I could raise a slightly wider question. We have, of course, had a new report from the Delegated Powers Committee this morning, based on a further memorandum submitted by the department to that committee. It is impossible to find a copy of that memorandum on either the department’s or the committee’s website. I would be grateful if it could in due course be made available to Members who have attended this Committee.
My Lords, I am particularly grateful to the noble Baroness for this opportunity to consider this clause, which will enable the Secretary of State to charge fees for providing energy resilience services in the event of a disruption or threatened disruption to energy supplies. It will allow the Government to recoup some or all of the costs of the services provided to businesses, and to set appropriate fees for these services.
The clause does not set the rate of any fees or charges. It will enable the Secretary of State to set fees either through secondary legislation or through administrative means and, as such, to recoup some or all of the costs of providing the service. It cannot and will not be used as a revenue-raising measure; that is not the purpose of this provision. The services will be provided on a discretionary basis, because businesses can choose to take advantage of them or not, based on balancing the effect on revenues and meeting contractual obligations against cost of the service.
The services which the Government may provide, to help improve the resilience of the energy sector, are those such as making available personnel, supplies, equipment or other assets, to businesses. Examples of where the Government could provide a service for which it might be appropriate to charge businesses include: provision of personnel in event of widespread impacts on workers due to flu or industrial action; equipment or vehicles which have greater flexibility in extreme weather conditions, allowing companies to carry out repairs or clean up more effectively; and provision of assets to enable a critical component of the supply chain to remain viable in the short term and until alternative options are identified.
The need for this power became apparent last year when there was a threat of industrial action by drivers, which would have caused widespread disruption to fuel supplies across the UK. As a result of that, the Government have set up a military fuel school to train military personnel to drive commercial fuel tankers. Drivers could be deployed to haulage companies in the event of a future dispute of this nature, and this power would enable us to charge those companies for some or all of the costs incurred by Her Majesty’s Government—which is to say, the taxpayer.
My noble friend Lord Roper raised the Delegated Powers and Regulatory Reform Committee, and the recommendation for the removal of subsection (3)(b) which enables the Secretary of State to set the levels of the fees by means of a direction to be laid before Parliament, as well as by means of regulation. The Government are considering all the committee’s recommendations very carefully and will respond in due course. However, I take this opportunity to clarify why we feel that this provision is important.
The requirement for the services proposed is likely to arise in the event of a significant unexpected disruption. This may be necessary to plan and provide services in a situation of emergency and urgency. There may well be situations where it would be appropriate and feasible to set out the level of fees to be charged for a particular service in secondary legislation, and the Government would aim to do so in those circumstances. However, it is likely that there may also be circumstances where it is not feasible to work within the timetable required for secondary legislation, and the flexibility afforded by ministerial direction would be required for those sorts of situations. Lack of this flexibility may make the services difficult to deliver within the optimum timescale. At worst, it could render timely delivery completely unfeasible, with the consequential loss of benefit to businesses, the economy and consumers.
My noble friend Lord Roper mentioned other matters in relation to the publishing of the department’s reply. We will be happy to make it available. It will be published on the department’s website as promptly as is possible. That is in hand.
My noble friend Lord Jenkin made some points. I will say that these powers are not connected with, and would not apply to, provisions elsewhere in the Bill on the security of electricity supplies and capacity market provisions.
For the reasons I have set out, and given the importance of the provision for improving national resilience, the clause should stand part of the Bill.
Will the Minister clarify one point? If there is an official strike, for which due notice has been given, and military personnel are used as strike-breakers, companies will have to pay the Government for the use of the strike-breakers. In that event, what would the companies have to do to recoup the money that they had been forced to lay out to pay for the strike-breaking? Would they have recourse to the courts? Would they be able to sue the unions for the money involved in the strike-breaking activity?
My Lords, this provision is not designed to interfere with the normal relationships between employers and employees. Wherever possible, the Government’s preference is for the supply of fuel to be maintained by the normal, civilian supply chain. Military personnel would be deployed only where this is not possible. Ministers will take a decision to deploy military personnel only where there is a threat of significant disruption to fuel supplies. Industrial action in this sector can have a very serious impact on the UK economy, as well as endangering the health and safety of our citizens.
The Minister did not answer the question. If the Government impose a charge on companies in the event of an industrial dispute where military personnel have to be responsible for driving tankers, what redress will the companies have to recoup the money that they will have to pay to the Government to fund the strike-breaking exercise?
It seems to me that we have got to the bottom of this. It is a very narrow thing that is needed, yet the Government have created an incredibly enabling piece of legislation with no scrutiny. It is poor legislative drafting to have taken such a wide-ranging power. The Minister says that it will not apply to electricity, or will be used only in certain circumstances—which boils down to the Army learning how to drive fuel tankers. That is very narrow, but this is not a narrow provision. It almost sounds as if one could interpret this as the Government going into the energy supply business. It is that broad. I am glad and encouraged that we are not. I am also reassured to hear that this is discretionary, although how that would play out I am not sure. Either you deploy or you do not deploy.
Is the Minister saying that we would not deploy unless the company agreed to pay? That would be a reduction in the security of the country. The company might say, “No, we’re not paying for that”. Who in their right mind would say yes? If you are an oil company, you will not have factored into your bottom line unexpected payments to the Government for people to drive your tankers. The money has to be recouped from somewhere, and a company would be perfectly within its rights to refuse to pay. In that case, the Government will have to deploy their personnel anyway, or risk an interruption in our fuel supply. This needs to be narrowed in its application. It needs more definition in law.
I absolutely agree with the noble Lord, Lord Roper, who pointed to the delegated powers recommendation that subsection (3)(b) does not deserve to be here. It is far too wide-ranging. The whole thing is ill conceived. As I pointed out, in a disaster situation the last thing you want to be doing is negotiating around who is paying who. We have a Government. We pay taxes for a reason. That is what we expect of government. This is penny-pinching from the Treasury and it does not deserve to be in the Bill.
Clause 134 agreed.
Clauses 135 and 136 agreed.
Committee adjourned at 6.10 pm.