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Energy Bill

My Lords, the noble Lord, Lord Teverson, has poured a little more cold water on the idea than I will do from the Dispatch Box. That makes me feel a little happier about my response, although I do not even have to say that I hope my noble friend will withdraw his amendment because he has already said that it is a probing amendment. What a successful probing amendment it is. Any noble Lord wanting information on what my noble friend Lord Campbell-Savours intended has only to read the press—particularly the specialised press on energy matters—to be fully aware of the campaign in which he has played such a significant part. I pay due tribute to him and I hope that he will not therefore think that I am doing what the noble Lord, Lord Teverson, did. I will express a few doubts as I agree with the noble Lord that nothing is easy in this area, but we see considerable merits in the proposals, which need examination. Any step that could help reduce this country’s consumption of energy and, as a result, help to provide lower fuel bills for consumers is to be welcomed and must be considered seriously. The Government set energy efficiency at the heart of our strategy in the 2007 energy White Paper. Many of the emissions savings in the measures in that White Paper derive from the concept of energy efficiency policies. The first part of my noble friend’s amendment relates to smart meters and, in particular, to the benefits of setting technical specifications for those meters in the Bill. We had a short but intensive debate on smart meters, and I know that my noble friend will have noted my response on behalf of the Government. He wants smart meters to display information regarding tariffs—in particular, rising block tariffs—which are the concept behind this amendment. I am not sure that rising block tariffs are sufficiently in public parlance to be referred to as RBTs, but I have no doubt that the assiduous way in which my noble friend goes about his business will make the concept of RBTs part of the energy debate in the not-too-distant future. Rising block tariffs, the main purpose behind my noble friend’s amendment, are an interesting and challenging concept. Decisions on the technical functionality of any smart meter will be made in the context of the wider design of any future roll out, as I explained in response to the amendment moved earlier by another of my noble friends. I am beginning to fall back on the old statement: I may be able to cope with the Opposition, but the Good Lord protect me from my noble friends. My noble friend Lord Dubs put me on the spot regarding smart meters, and now I have my noble friend Lord Campbell-Savours raising rising block tariffs. He will have noted from my response to my noble friend Lord Dubs that we are some way off decisions on the functions of the smart meter. We know that when we have the chance to be smart, there are a lot of smart people about telling us in which direction we need to be smart, and the issues can become inordinately complex. We can see that there is enormous progress to be made, which is why the Government are indicating that we need the Bill to enable examination of the roll out of smart meters, but we are bound to have reservations about having one function, however important, in the Bill. The rising block tariff is the real thrust of my noble friend’s amendment. His case is significant. He explained that as a consumer passes its threshold, the unit price of energy would increase by a percentage designated by the Government. That would differ from current billing arrangements, in which the first units of electricity are charged at the higher rate and subsequent units at a lower rate. As my noble friend demonstrated, there are significant reasons why we need to recast the way we have charged for electricity for many years. I recognise that at face value there are potential benefits from the rising block tariff model. Such a pricing structure would help to reduce fuel bills for users who consume small amounts of energy and increase bills for those consuming large amounts, which would provide further financial incentives for consumers to reduce their energy use and would make us all increasingly energy conscious. However, we have some concerns—as my noble friend said, what would be the point of a probing amendment if it did not reveal where the Government's concerns lay? I need to enumerate them. One concern is obvious. There is a risk that some fuel-poor customers, such as the elderly and the disabled, who spend more time at home than is average for people in our community, or consumers in less energy-efficient dwellings, could see higher fuel bills as a result. We know that the elderly can be high consumers of electricity by dint of the fact that the rest of us—no one in this House qualifies as elderly—have other warm places to which we can go, not least this Chamber; whereas a lot of people for all sorts of reasons spend a great deal of time in their homes. Their homes may not be energy-efficient and, in any case, they need to consume a great deal of energy during the course of the day. Such a tariff may reduce the incentive for energy companies to help consumers to become more energy efficient. The problem with the rising block tariff is that a greater percentage of energy company income would come from high energy users and a lower percentage from low energy users. That might have a perverse effect on how companies operate. There is a practical problem as well. Implementing a rising block tariff would also constitute a significant intervention in our competitive energy market, which brings us benefits, and would bring with it uncertainty for investors and additional technical requirements for new entrants. So potential costs are involved in the concept. My noble friend, who is always fair when presenting the case, was good enough to identify some of the difficulties. He suggested that identifying the right thresholds and the right percentage increase between each would be a complex process likely to require regular adjustment. My noble friend does not need lessons from me on this, but regular adjustment of the concept on which a fuel bill is constructed might lead to the consumer—able through the smart meter to know exactly what was going on—being extremely irritated by frequent changes to the model. People need to take account of their energy costs; it is an important part of household income. My noble friend recognised that the complexity of the changes would not be an unalloyed joy for the householder, even if the meter reads things out accurately and clearly and reflects that complexity. The Government seek a better understanding of the pros and cons of a rising block tariff; we intend to do that. Therefore, I do not believe that, as the amendment proposes, it is necessary to put that into law. My noble friend did not rate his chances at this stage highly; he was concerned to get the concept in the public mind and on the record; and to get the Government response on the record, which he will deploy effectively in future. However, I have to tell him that, if he were pushing the amendment, I would be pretty robust in saying that the complexities of the concept are such that we could not accept any such amendment at this stage. We do not believe that it should be in the Bill. However, we are persuaded that it is necessary to investigate the potential of the rising block tariff concept as a possible route to greater energy efficiency—a major objective that we share with my noble friend. I am pleased to inform the House that Ofgem has already started work on this, and that it will among other things provide a more detailed understanding of this potential tariff model. My noble friend may have identified an area that will prove fruitful in the future, and I am grateful that he has already announced that he does not intend to press me any further today.