My Lords, I am grateful to my noble friend for tabling this amendment and for his pursuit of this issue in other fora. It is correct that the way that electricity is priced at the moment is illogical: the more we consume as a whole, the higher the cost of producing the electricity. Once our demand rises, we have to bring on marginal plant, which is less efficient and more costly, pushing up the wholesale price for everyone. The people who consume the most therefore cause us to carry a cost that we should not have to bear.
It should therefore be logical that we disincentivise the bringing on of marginal plant by tariff pricing and tariff structures. However, although the idea has been raised on many occasions, the moment has never been found to make it a reality. I hope—and I think that this will be the case—that once smart metering comes into play, this will become an absolute no-brainer. At that point, when we have detailed information about each individual household’s demand across a given period of time, this will become enabled. At present, though, it is a very difficult thing to bring into practice.
Noble Lords have touched on some of the issues. One of them is the question of the variance in demand between households. It can be perfectly true that you have two identical semi-detached houses with very different energy bills, because of different socioeconomic circumstances. Someone who is at home all day will have the heating on and that will increase their bills. If you have a high occupancy rate—if you have children, for example—your energy bills will go up. It is quite difficult to identify the right point at which to say, “This is a fair use of electricity and after this we are going to increase the price”.
That said, though, it is not impossible. It should not be the case that electricity companies incentivise greater usage and reduce the rate of tariffs after a certain point of consumption. If we are not yet able to get to a fully comprehensive rising block tariff system, then at least the Government could perhaps make it clear that tariffs should not have such a regressive effect that the highest price would be for the first units of consumption and then there would be a reduction in the unit price—that should be ruled out. The Prime Minister has indicated that he has a desire to make tariffs simpler. The simplest thing would be to have one unit price for everyone and for everything. Let us start there, and if we can establish that principle and stop the incentivisation of greater consumption, that will be a step in the right direction.
I still think that there is something in this idea. We need to look at it, although it is possibly true that now is not the time. I am sure that that will disappoint my noble friend; one can always say, “Now is not the time”.
However, with the advent of better technology such as smart meters and a greater understanding of demand with better data, we will be able to get there. The way that the system is currently structured is illogical, and I am sure that something like this will be introduced within the next decade. I congratulate my noble friend on being so prescient and ahead of the curve.