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Energy Bill

moved Amendment No. 25: 25: After Clause 81, insert the following new Clause— ““Display of information relating to tariffs (1) In exercising the powers contained in— (a) section 81(1) (power to amend licence conditions), and (b) section 81(3)(g) (power to require the holder of a licence to make arrangements in relation to the protection of consumers), the Secretary of State shall have regard to the desirability of establishing technical specifications for meters (under the provisions of section 81(3)(a)) which include specifications for the display on those meters of information to the consumer about tariffs for electricity and gas, and shall consult representatives of the gas and electricity supply industries prior to the establishment of such specifications. (2) Such specifications shall have regard to the desirability of displaying information about variable tariffs, in particular ““rising block tariffs”” as defined in subsection (3). (3) A ““rising block tariff”” is one in which there is a basic threshold price for electricity or gas and an additional percentage price premium applicable to each block of units about that threshold. (4) In exercising the powers contained in section 81(3)(g), the Secretary of State shall report to Parliament within 12 months of the coming into force of this section on the desirability of a national standard for such tariffs, covering the matters specified in subsection (5), in order to facilitate the development of a common technical specification for meters. (5) A national standard for rising block tariffs shall cover the following matters— (a) the number of units of gas or electricity to be provided by the supplier at the basic threshold price annually, (b) the number of units comprised in each subsequent block of units, (c) the additional price premium payable per unit, applicable to each block, (d) the calculation for the purposes of setting the minimum number of units to be supplied at the basic threshold price quarterly, (e) arrangements for the setting of standing charges. (6) Nothing in this Act permits the Secretary of State to determine the basic threshold price of electricity where a rising block tariff is in force.”” The noble Lord said: My Lords, this is a transparency-driven amendment. It has been trailed in the national press and has support in the European Parliament, where a committee is recommending that a similar arrangement be adopted throughout the European Union. It has a lot of support in the House of Commons. Indeed, an Early Day Motion was tabled there today by David Anderson, which refers specifically to the amendment. The principle behind the amendment was referred to by Ed Miliband MP in an article in the Guardian last week. It states: "““He said he was also looking at the structure of tariffs so that people might no longer have to pay the highest price for the first tranche of gas and electricity they use””." This amendment was tabled in July, before the current energy crisis, and followed by work I carried out in the recess to devise a workable tariff system. The public simply do not understand the current system of energy pricing on their bills. The conversion factor on gas bills to kilowatt hours is gobbledygook. The discounting of bills for high users seems perverse. The injustice of prepayment meters and the levying of high standing charges make it impossible for mere mortals to compare energy prices due to a policy of inconsistency in unit volume charges across providers. The system needs surgery and the public need the protection of greater regulation. My amendment has been the subject of extensive consultation during the recess. Due to difficulties over the Long Title of the Bill, I have had to graft the rising block tariff, which I shall refer to as the RBT, on to the back of a smart meter amendment, so it would be silly to vote on it. It is a probing amendment. The rising block tariff applies to domestic suppliers of gas and electricity. If we examine our gas or electricity bills, we will note that the initial units of electricity and gas are charged at a higher rate than subsequent units. Low-use consumers are penalised by the pricing structure, not only because of the early-units penalty, but the levying of standing charges. The present system is regressive in its financial impact by penalising poorer sections of society. The system also lacks any incentive to conserve energy. If we are serious about energy conservation, we should use the pricing structure for units of energy to influence investment in conservation measures. The problem is that, while a relatively free market in domestic energy prices can influence conservation investment as prices increase, the effect is limited due to a lack of real incentives. We need a penalty built into cost to the domestic consumer, whereby the higher the consumption of units, the higher their price—in other words, a reversal of the present arrangement. Furthermore, introducing such incentives would provide an opportunity to affect the position of people on low incomes without necessarily drawing them into means testing. It is worth mentioning that many Labour Members remain as opposed to means testing as we were in the 1980s, when it was repeatedly condemned from the opposition Dispatch Box in the House of Commons. Why cannot domestic energy prices be set at a discount for the first block of units, with subsequent blocks priced at increasing rates? It would be perfectly possible for the first block, what we might call block A, to be set at a discount from block B, a standard tariff, which itself could be less than block C, the premium tariff: discounted tariff over standard tariff over premium tariff. The block A tariff would be universally available to all consumers and set at a level that maximised the benefit to low-income households. In blocks A and B fixed allocations of units would be available to all domestic hereditaments. The Government would set the number of units in each of those blocks and the percentage difference in cost per unit between blocks A, B and C. However, it is critical that the block A price, the discounted tariff, would be set in the free market by the energy suppliers. The Government would play no part in setting the block A unit prices. That would leave suppliers free to set their prices, which would need to be at a rate to ensure that their block B and block C prices were viable, competitive and affordable for consumers. What are the advantages? The system would induce investment in conservation and there would be more careful management of energy use by householders as consumers sought to avoid moving into higher blocks, particularly into block C. There would be an element of redistribution. It would reduce the growing shift towards means testing. It would reduce CO2 emissions and suppliers would retain control of the price by being responsible, crucially, for setting the block A price. What are the problems? It will be difficult to set the volume of units to be applied to each block, particularly block A. It will be necessary to calculate and agree to a reasonable number of units for allocating to block A for the basic usage of electricity and gas. Some useful work has been done by the Centre for Sustainable Energy in its report for WWF UK, Waste Not, Want Not. The statistical tables that it used on modelling are not altogether applicable to the proposals in my amendment, but they indicate the modelling process required in the establishment of a rising block-tariff structure. Some households are single fuel and would lose out when compared with dual-fuel households, which would have the benefit of a universally supplied gas and electricity block-discounted tariff. The answer is to provide every domestic hereditament with two entitlements, one for gas and the other for electricity. Single-fuel households would be entitled to two electricity entitlements. The need to provide two entitlements for single-fuel households stems from problems with heating requirements. Dual-fuel households would have had the benefit of discounted gas entitlements denied to single-fuel households. Provision for those with disabilities and pensioners needs particular consideration. In some households, heating requirements are much greater, due to disability. The RBT available to all should be set at a level that provides for basic energy needs. It could be calculated on the basis of an agreed square-footage-space energy requirement. Pensioner household space requirements would need to be fully considered, but the likelihood is that most pensioners would move into block B areas of consumption, certainly in heating fuel requirements. The RBT system does not do away with state support for low-income pensioner households, but it would reduce dependency on the state for heating support and transfer responsibility for that support to heavy users in a process of redistribution. The situation is more problematic in relation to the disabled. One option would be to allow RBT to apply to that group as it does to everyone else and let the benefit system take up the additional costs. Alternatively, it would be possible to have a separate RBT system for disabled groups with greater heating requirements, which for the purposes of this discussion I will describe as the special rising block tariff system. Block volumes under this system could be assessed on a different basis. The SRBT could be applied to groups that met some form of disability criterion. It might be possible to have either fewer blocks with greater spreads in terms of volume of units or a greater number of blocks with narrower spreads. A mechanism would need to be in place for registering SRBT entitlements and monitoring against abuse. It would also be necessary to protect against suppliers refusing to supply disability groups with greater heating requirements. Problems could arise over seasonal peak period uses of energy. Householders invariably consume more energy in the winter months, when there are greater heating requirements. It would be necessary to ensure the transfer-on of units between quarters at the end of each quarter, as is currently the position with some mobile phone free-minute allocations. Differentials in regional temperature are not fully considered under present domestic energy pricing arrangements. It has been argued that a national pooling arrangement should be in place to compensate consumers in colder regions for their higher energy costs. It has also been argued that the pooling arrangement should be the responsibility of suppliers. Privatisation of the industry and competition in the marketplace have made this difficult to introduce. Under the RBT, any such pooling arrangements, if required, would need to be based on block A volumes of units allocated and not on price. More work also needs to be done on the whole question of Economy 5 off-peak electricity suppliers. There are obvious problems for the Government in deciding on the RBT allocation of units, which identifies the number of units that comprise each block. There are also problems in setting the percentage increase between each block. For industry, there is the obvious problem of setting the price of block B units—that is, the standard tariff, to which I have already referred. A number of problems arise over the timing of the introduction of RBT. It could be constrained by limited public understanding of the value of investing in conservation measures. There are also problems over the availability of conservation materials and skills—a problem which I suspect the Government will have in relation to the detail of the implementation of the announcement made in August on conservation measures. There are problems over the impact of block C tariffs on heavy consumers, and there are also problems over smart meter technology, when finally rolled out to deal with the introduction of RBT. The answer is to introduce RBT over an extended period—perhaps as long as 10 years. Such a period would enable power suppliers, consumers and the energy conservation industry to adjust. In particular, it would enable suppliers of energy to refocus their efforts on further developing and refining their conservation packages, which would be of special interest to domestic energy users. This amendment provides an early canter round the course. I understand that it is one of the first references that has been made in the Palace to this way of pricing energy, and I hope that the Government give it very serious consideration. That is certainly the expectation in the House of Commons and I should like to think that it is equally the position in the House of Lords. I beg to move.