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Energy Bill [HL]

My Lords, I certainly support the thrust of the amendment, as I devoted almost my entire Second Reading speech to the subject. When I looked at my own electricity bill, I noticed that I was being charged nearly 30p for the first 900 units, after which the price dropped to about 13p; I obviously must have a word with the noble Lord, Lord Teverson, to see where he gets his from. I argued that that way of charging seemed cack-handed. As my noble friend said, it seems to defy the laws of supply and demand and their relation to price. The greater the demand, the greater should be the price. When I asked other customers and neighbours, they confirmed that they, too, were charged nearly double for the initial units that they consumed. I further argued that the first few thousand units should be relatively cheap—near the break-even point of the supplier—and that the more you consume, the more expensive the units should become. Therefore, the more you use, the more you pay per unit. I am afraid that I have no idea what the break-even point for energy suppliers is but, if they are able to charge some customers below 10p a unit for daytime use, it must be somewhere below that—around 6p or 7p per unit. I presume that Ofgem would know exactly what the break-even points are for each supplier and, if not, it could find out. It begs the question whether energy companies should be required to disclose the break-even points and the changes throughout the year, which could then be verified either by auditors or by Ofgem. I like the wording in the new clause proposed by my noble friend Lord Teverson. Subsection (2)(a) says that, "““the number of lower priced initial units shall represent the average amount of energy required for a household of that size to keep warm, clean and fed to a modest but acceptable standard””." I suggested at Second Reading that it would not be too difficult for energy companies to obtain the council tax banding of each property, so that they could differentiate between, say, band A and band D properties. Obviously, a single person living in a bedsit would not require the same amount of energy as a couple with 2.4 children living in a three-bedroom or four-bedroom house. As things stand at the moment, there is little or no difference in the tariffs for living in a bedsit or a six-bedroom house. That is wrong. The person in the bedsit is paying a much higher proportion of their energy bill at the higher initial rate that is currently charged. Perhaps the electoral roll could help in determining how many adults live in each property. If we are going to try to do something about fuel poverty, I believe that the way in which we charge customers must be changed, which is the whole thrust of my argument. In 2008, there were 4.5 million households in fuel poverty. I believe that, after the recent cold snap of November and December, this figure jumped dramatically, perhaps to 6.5 million households, 50 per cent of whom are pensioners. Those in badly heated homes are more prone to illness, which just pushes the problem and the cost on to the NHS. It was not surprising to read in the papers recently that energy companies have been cashing in on the cold snap and increasing their profit margins by 50 per cent. I am glad that Ofgem is investigating; it will report its findings on excessive profit margins in March. Consumers feel hard done by. Some whom I have asked feel that they are being ripped off. Can Ofgem make energy companies change their tariff structure? I realise that energy companies are profit-making public companies, some of which are foreign owned. Can, as the amendment provides, the Government introduce regulations to force companies to change their tariff system so that the initial units supplied are at a lower cost to the consumer than the remaining units? Subsection (2)(c) of the amendment provides that, "““overall, the new combined tariff should be revenue neutral to the energy supply companies””." I hope that the energy companies are willing to discuss this. The thrust of my argument is to get as many of the 6.5 million households currently in fuel poverty—that is 26 per cent of total households—out of fuel poverty. I believe that progressive charging may be one way of achieving this. It would act as a real incentive for all households to reduce their consumption and to take up the Green Deal. I received a useful letter this week from my noble friend Lord Marland, saying that the Committee on Climate Change looked into introducing rising block tariffs two years ago, before the recent hike in energy prices. It said that rising block tariffs would have an adverse impact on fuel-poor households, as they generally require more energy to heat their homes to an acceptable level. This is because the fuel poor tend to live in less energy efficient homes. Many of them, including pensioners, tend to spend more time in their homes. This suggests that a rising block tariff would make it more expensive for them to heat their homes to an adequate standard and make it more difficult to remove them from fuel poverty. The Committee on Climate Change concluded that rising block tariffs, "““should not be introduced until fuel poverty has been addressed through targeted energy efficiency improvement and other fuel poverty measures””." Quite so; I cannot argue with that. But is this not exactly where the Green Deal comes in? If the tariff system was changed and these households took up the Green Deal, they should be much better off. There is a curious statement in the Minister’s letter. It said that, "““at present suppliers can, with a degree of certainty, recover their fixed costs from the higher tier charges””." I bet that all companies wish that they could get away with that. In the real world, if a company charged double for the initial units sold in order to cover its fixed costs, it would not make any sales, as it would be undercut by competitors. Surprise, surprise, the energy companies are able to fix their pricing so that they can recover their fixed costs by charging a higher initial tariff. That does not seem right. What are my expectations for this amendment? I do not know about my noble friend Lord Teverson, but I am not expecting the Minister to accept it. It would be a first in this Committee. I am not even expecting the Minister to come back with a government amendment—although that would be nice—as it might be putting the cart before the horse. If the Committee recalls, the Committee on Climate Change concluded that rising block tariffs, "““should not be introduced until fuel poverty has been addressed through targeted energy efficiency improvement””." I agree. The Green Deal should be allowed to get under way before rising block tariffs are brought in. I would like an assurance from the Minister that this will be looked at again, although not by the Committee on Climate Change, because it is probably not the most appropriate body to do so—but good for it for looking at this. Its report was not even 250 words long, so it is difficult to assess how it approached the subject. It did consider, however, whether a subsidised price should be charged for consumption to cover basic needs. It occurred to me that the £2.7 billion spent annually on winter fuel payments should be better targeted to those most in need and perhaps paid directly to their energy supplier. The number of households in fuel poverty has already exploded and is likely to increase further as, if the papers are to be believed, electricity bills will have to rise by a further £500 per annum per household to pay for a new generation of environmentally friendly power stations. It seems quite extraordinary that, in our civilised society, over one-quarter of households live in fuel poverty, 50 per cent being pensioners, in many cases having to make the choice between fuel, food and perhaps their health. I think that changing the tariff structure is worth investigating, after consultation with energy suppliers and perhaps Ofgem, as it dovetails neatly with the ambitions of this Bill.