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Utilities Bill

8.53 p.m.

House again in Committee.

Baroness Sharp of Guildford moved Amendment No. 230A:


("Determination of performance standards
DETERMINATION OF PERFORMANCE STANDARDS BY AUTHORITY

. After section 43 of the 1989 Act there is inserted--
"Determination of performance standards by Authority.
43A.--(1) The Authority may from time to time--
(a) determine such standards of performance in connection with the selling of electricity by suppliers to consumers as, in its opinion, ought to be achieved by them and is consistent with their licence conditions;
(b) arrange for the publication, in such form and in such manner as it considers appropriate, of the standards so determined; and
(c) arrange for the publication, in such form and in such manner as it considers appropriate, of an assessment of which suppliers, in its opinion, are failing to meet those standards.
(2) Where a supplier has failed to reach the standards set out in this section, the Authority may order that supplier to pay compensation to the consumers affected.
(3) It shall be the duty of every electricity supplier to conduct his business in such a way as can reasonably be expected to lead to his achieving the standards set under this section."").

The noble Baroness said: In moving Amendment No. 230A, I shall speak also to Amendments Nos. 231A, 266A, 266B and 267A.

This group of amendments relates to the misselling of gas and electricity. They derive from the concern of the citizens advice bureaux throughout the country at the large number of misselling cases with which they have had to deal. Two different sets of problems are dealt with by the amendments. The first set arises from the choice consumers now face from the multiplicity of and from knowingly or unknowingly being switched from one supplier to another and then having difficulty cancelling contracts. In particular, the CABs are concerned about vulnerable people being pressured and misled into switching suppliers. The second set of problems arise from landlords selling gas and electricity supplies at inflated prices.

Let me deal first with the problems that arise from the sheer multiplicity of suppliers. A range of different problems arise. First, there is a problem of suppliers being switched without consent. A number of

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examples can be given. For example, a citizens advice bureau in London recently reported the case of a client on jobseeker's allowance who came into the bureau because he had suddenly started to receive electricity bills from a different company. He was emphatic that he had not signed up with the new supplier because he had been out of the country for approximately nine months visiting his family in Bangladesh.

Another citizens advice bureau in the north of England reported the case of a client who found that his supplier had been switched after he signed a form which he was told was to confirm that his meter had been read. This is a difficult issue where people are switched from one supplier to another without realising that they have given their consent or, in some cases, without giving consent at all.

Other cases arise where vulnerable people are treated inappropriately. A citizens advice bureau in the North West reported that a client who was profoundly deaf and with limited speech was visited by a doorstep salesman who wanted her to change supplier. She did not understand what she was being asked to do and felt that she was misled into changing supplier. It then took almost three months to restore her original supplier and sort out the billing problems that arose from the transfer.

Another example arose in London, where a client of one of the bureaux with severe mental illness was misled into signing a paper confirming the visit of a sales agent but which was in fact a contract. The client was paying for fuel direct--an arrangement that would have been jeopardised had the bureau not intervened.

Further problems arise with the cancelling of contracts. The citizens advice bureaux have seen a significant number of clients who are finding it difficult to cancel contracts in line with their right to do so. One bureau in the South East reported a client who had come into the bureau after finding it impossible to cancel the contract to switch supplier within the cooling-off period. The company continued to send him bills and made it extremely difficult for him to cancel the contract.

Finally, there is the issue of poor administration. Again, there are examples of people having difficulties. A man over 85 years of age and partially blind and deaf had chosen an alternative electricity supplier. His existing supplier confirmed the cancellation of his contract in the spring of 1999. He then came into the citizens advice bureau seven months later, since he had not received any bills from anybody and was becoming extremely worried about the accumulation of his bills. His new supplier had no record of the fact that it was supplying him.

In another example, a bureau in the north of England reported the case of a client who, having changed suppliers, continued to receive bills from both the old and new suppliers for nearly a year. He eventually visited the CAB in frustration, having received debt recovery actions from one of the

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suppliers. All these examples illustrate the difficulties being faced by people these days in relation to these matters.

In theory, the providers' licence conditions are intended to prevent companies from using such improper sales techniques. The licences are intended to provide a simple way of cancelling a contract when a customer changes his mind after further consideration. But, in practice, the regulator has taken action to enforce compliance under the licence conditions on only two occasions.

The CAB advised over 140,000 people on utilities issues in the year 1998 to 1999. Many of those clients are low income earners and may be among groups who experience discrimination and consequent disadvantage through, for example, age and disability. It is particularly important for these clients that the sales techniques of gas and electricity providers should not exploit the complexity of and unfamiliarity with the products they are offering.

If the licence conditions were being effectively enforced by Ofgem, these problems of misselling would not have to be raised so often with the citizens advice bureaux. Ofgem has recently said that it will come down very hard on companies who break the licence conditions. However, it is not clear what trigger will be used to initiate such action. It needs to be made clear to all concerned parties that the regulator will ensure that sanctions are put in place in relation to misselling. The CAB evidence indicates the necessity for such sanctions.

The purpose of the first two of these amendments is to put this matter right. Their aim is to beef up the regulator's powers; to ensure that GEMA, in its new form, sets minimum performance standards; to ensure that they are published; and to ensure that a naming and shaming procedure is in place for those undertakings which do not meet minimum performance standards. In addition, they provide for compensation to be paid to those who have suffered. Those are the issues which arise from the problems of choice and the misselling of electricity.

The second set of amendments arises from the on-selling of gas and electricity. The current provisions preventing landlords from selling on such services at inflated prices have failed, due to inadequate enforcement powers. If this overcharging is to be brought to an end, the provisions will have to be reformed and strengthened. Amendments Nos. 266A, 266B and 267A are aimed at probing this particular issue. The amendments are intended to allow the regulator or the trading standards official to pursue resale problems in cases where tenants are unable to pursue the problems themselves. I beg to move.

Lord McIntosh of Haringey: Like the noble Baroness, Lady Sharp, I shall first discuss Amendments Nos. 230A and 231A and then move on to the other three amendments.

I was glad to have the opportunity of hearing about the examples which the citizens advice bureaux have given of bad practice in the supply of utilities.

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However, I have to say that there is nothing in the noble Baroness's amendment which is necessary to increase the powers to impose standards of performance under existing sections of the Electricity Act or under the new clauses to be inserted into that Act and the Gas Act by this Bill. Section 39 of the Electricity Act (as amended by Schedule 6 to the Bill) will allow the authority to set standards of performance


    "in connection with the activities of electricity suppliers so far as affecting customers or potential customers of theirs".

This clearly encompasses any standards of performance which could be set under the clauses proposed in these amendments. In addition, the noble Baroness will recall that earlier today we dealt with the question of deemed contracts when there is a change of supplier.

The existing clauses in the Bill require the authority to consult before setting standards of performance, so that there will be an opportunity for organisations concerned about misselling to suggest standards of performance in this area. That, of course, includes citizens advice bureaux and the examples which the noble Baroness, Lady Sharp, has provided in this debate. I am sure that Ofgem will have heard what the noble Baroness has said.

In addition, there already are licence conditions on how companies sell electricity. The regulator is under a duty to take enforcement action when these conditions are breached. In future, contraventions of the conditions could also lead to the imposition of financial penalties on the licence holder concerned.

With regard to publication powers that are proposed as part of the new clauses, Clauses 20(4) and 20(5) place the Gas and Electricity Consumer Council under a duty to publish such statistics as it thinks appropriate relating to levels of performance in relation to standards of performance, including any standards of performance concerned with misselling. This duty is unqualified by any consideration of the harm that such publication may cause to the companies concerned.

I do not minimise the concerns behind these amendments. It is clear from the examples given by the noble Baroness, Lady Sharp, that much is to be desired in relation to the way in which some electricity companies supply electricity to their consumers. However, the Bill provides for no fewer powers than she would add to it by these two amendments.

I also recognise the motivation behind Amendments Nos. 266A, 266B and 267A, but I do not believe that in practice they would improve the lot of those whom they are designed to assist.

Let me outline what would happen under the Bill, as drafted, if a customer discovered that he or she was being overcharged by a landlord. It is very difficult, of course, to get people to complain in the first place. Landlords are in positions of authority over tenants and many tenants have difficulty getting past the first barrier of expressing a desire to complain. If a consumer is prepared to take action personally, the powers under Clauses 72 and 101 allow recovery of the

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sums which have been overpaid, plus interest. If a consumer feels that he needs assistance because he is afraid to raise it with his landlord, the correct body to approach would be the new Gas and Electricity Consumer Council, rather than the authority or trading standards officers. That does not mean that the citizens advice bureaux, local authority advice bureaux and others do not provide a very valuable service.

The council has a duty to investigate complaints and will be able to insist that the reseller, in this case the landlord, provides it with information relevant to the complaint. It will seek a satisfactory outcome by making representations to the reseller. But if this was unsuccessful and the consumer took his landlord to court, it would be open to him to utilise arguments, reports and so on prepared by the council as part of his legal case. I hope that that will occur only in extreme circumstances and that it will not occur often. However, those powers exist.

The Gas Consumers' Council has in the past played an active and successful role in advising tenants on their rights in maximum resale price matters. There is, for example, a booklet which is sent to tenants who are considering making a complaint which can be passed to landlords. The Gas Consumers' Council has corresponded with resellers on behalf of consumers. The new council will pick up this important work on behalf of consumers both of gas and electricity but with the valuable new ability to insist that the reseller provides information relevant to the complaint.

There is no need to revise Clauses 72 and 101 for the purpose of giving the council a role in maximum resale prices. It has this role already by virtue of the powers and functions set out in the Bill. We do not see any need to enable the council itself to receive overpayments on behalf of consumers. It is enough that the council has the duty to investigate complaints and to make representations and provide other assistance on behalf of the consumer. The remit of the council includes exempt as well as licensed suppliers, and so covers landlords, who are likely to be the suppliers in this sort of case.

Also, conditions can be placed on exemptions similar to licence conditions. Failure to comply with exemption conditions could lead to the withdrawal of the exemption. For example, a caravan site which overcharged caravan owners could lose its exemption and its power to intervene between the supplier and the ultimate consumer. A landlord who continued to supply without a licence or exemption would be committing a criminal offence. We have not concluded our consideration of what conditions should be applied to exemptions but they will almost certainly include an obligation to supply information on request to the consumer council in relation to any complaint it is investigating. I hope that if a consumer sought assistance from the authority or from trading standards officers or from the CAB, he would be redirected towards the consumer council.

I entirely accept the motivation behind the amendments. I am grateful--the consumer council and the authority will also be grateful--for the specific

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examples which the noble Baroness, Lady Sharp, adduced in support of the amendments. However, I hope that she will accept that the powers that she seeks are already available.


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