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Electricity and Gas (Carbon Emissions and Community Energy Saving) (Amendment) Order 2011

My Lords, these are minor and technical amendments that I hope will not delay the Committee for too long, but which have the potential for a profound impact for all small energy suppliers, being pro-growth and pro-competition. The amendments are deregulatory in nature, cutting red tape for smaller companies to enable them to compete on a more equal footing with the large, established suppliers. The order gives effect to the outcome of a public consultation process earlier this year, and makes changes to the carbon emissions reduction target, CERT, and the community energy saving programme, CESP. Its primary effect is to increase the threshold at which suppliers are obliged to participate in both schemes from 50,000 customers to 250,000 customers. It further ensures that obligated parties under CERT, as is already allowed under CESP, can trade completed qualifying activity to the end of the programme. This will provide suppliers with flexibility for longer in terms of the options they have to meet their binding obligations. I emphasise that increasing the threshold for CERT and CESP does not mean that customers of small suppliers will lose out. Customers of small suppliers can still benefit from CESP and CERT because suppliers are free to promote these schemes to any householder, not only those customers they supply. I am sure we can all agree on the importance of increasing competition in the domestic retail market. Competition is key to keeping prices as low as possible for consumers. However, with six large, established suppliers currently supplying 99 per cent of all households, it is clear that we need to take action to reduce barriers to market entry and growth so that smaller companies can begin to challenge the dominance of these big players. This measure is one step to enabling just that. Energy suppliers with fewer than 50,000 domestic energy customers are already exempt from participation in CERT and CESP. This was to help avoid creating a barrier to new entrant suppliers whereby they would need to commit significant investment to set up CERT and CESP environmental programmes while still at an early stage. We recognise that compliance with some of the Government’s environmental and social programmes places a disproportionate burden on small suppliers as it involves significant fixed costs for which suppliers are not compensated. The current threshold disincentivises suppliers from growing beyond 50,000 customers. Increasing it to 250,000 will ensure that no small suppliers will be required to participate in the final year of CERT and CESP. This will help boost competition without imposing new costs on the larger suppliers, burdening those suppliers’ customers or reducing the effectiveness of the programmes. Boosting competition is essential to drive innovation, improve the service customers receive from their supplier, and to keep prices as low as possible. I commend this order to the Committee.