Peter Aldous backs Domestic Gas and Electricity (Tariff Cap) Bill but raises concerns about future investment

6th March 2018

Peter Aldous backs the Bill to cap energy costs but highlights some areas that still need to be addressed and, in particular, he raises concerns of unintended consequences such as a downturn in investment in the energy sector.

Going through the briefings that I have received from various organisations representing both consumers and suppliers, it is quite clear that there is universal recognition of the problem that the Bill seeks to address: market failure. There is almost universal support for the Bill on those grounds, and for that reason I am also extremely supportive of it. However, as we have heard, it is important to say that this Bill is not a panacea for all our ills and that the hard work does not stop here.

Citizens Advice is supportive of the Bill and sees it as a vital first step towards ensuring that consumers on default tariffs are no longer ripped off. Scope highlights the fact that disabled customers face higher energy costs for reasons related to their impairments and conditions, and it is of the opinion that the Government should also put in place a long-term plan to address the barriers that disabled customers face. First Utility, a challenger supplier, is also supportive, but it highlights the need for serious consideration of the level at which the price cap is set, for a level playing field for all suppliers and for consumers to become more active players in the market instead of them sitting back and becoming more passive. uSwitch has concerns in principle and believes that any price regulation should be light touch and in place only for the minimum time necessary.

I sense that we are moving in the right direction, but I do have one concern nagging me at the back of my mind about the possible unintended consequences. I hope that the Minister will be able to address my worry about a negative knock-on impact on investment in the energy supply sector. While I recognise that there is a strong element of “They would say that, wouldn’t they?” I take note of the worry raised by both the CBI and Centrica that the CMA should consider appeals against Ofgem’s decisions, rather than them being pursued through the courts by way of a judicial review, as the Bill currently proposes.

A revolution is taking place in the energy supply sector as it is decarbonised and decentralised and as more renewables come on stream. That welcome process requires an enormous amount of investment, and the Treasury has identified over £250 billion of energy investments that will be made in the early 2020s. We need to ensure that that investment keeps taking place in the UK. Such investment is beginning to bring significant benefits to East Anglia and my Waveney constituency, with numerous projects planned in the southern North sea, including the opening up of marginal gas fields and decommissioning. In offshore wind, 11 wind farms are either operational, under construction or planned off the East Anglian coast, with a total capacity of 8.7 GW. As I chair the all-party parliamentary group on energy storage, I should also highlight the exciting opportunities emerging in that sector that will help to decarbonise not only the energy sector, but the transport sector, that will empower British households to become generators of their own electricity and that will help to make our industrial base more competitive as cheap renewables are more easily deployed.

We are on the cusp of an exciting future that could bring significant benefits to the UK and create thousands of jobs, often in parts of the country where regeneration is badly needed. That requires enormous investment and, up to now, Britain has been an attractive destination for such investment due to its straightforward regulatory framework and limited state intervention. Everyone knows where they stand, and it is vital that we do not lose that hard-earned reputation.

The appeals process needs to be carefully designed and implemented to allow for continued investment and consumer engagement. Proper appeals are important to ensure that regulatory decisions are well founded. The appeals processes in sector-specific regulated industries show that regulators make errors. Ofgem is a regulator with wide-ranging powers that can make decisions that have significant consequences both for consumers and for companies operating in energy markets. Robust checks and balances are needed to ensure that the regulatory decision-making process is both rigorous and careful.

In making decisions, investors are mindful of the overall integrity of the regulatory process, which includes a proper right of appeal. There is a worry—as we heard from my hon. Friend the Member for Fylde (Mark Menzies), who is currently not in his place—that the Bill, as drafted, is damaging from that perspective. That said, I recognise and take on board the significant amount of work that the Select Committee carried out in its pre-legislative scrutiny. The research and evidence it received suggests that this is not a problem.

I have a slight nagging doubt about unintended consequences. I am mindful of an article in the Financial Times yesterday that painted a scenario of increasing investor uncertainty that, in turn, could lead to higher costs of capital and, ultimately, higher costs to British energy bill payers.

I would welcome from the Minister, either in her summing up or later in correspondence, an assurance that there has been due diligence and an impact assessment confirming that the Bill will not lead to a downturn in the investment that is currently being unleashed in the energy supply system and that is beginning to bring significant benefits to many parts of the UK.

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Peter holds regular surgeries at various locations in the constituency. Please call 01502 586568 to make an appointment.

Next Surgeries - 2018: 
Beccles, Saturday 14th April
Lowestoft, Wednesday 30th May


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