My Lords, first, I thank the noble Lord, Lord Whitty, for tabling these probing amendments, as he described them, and therefore providing this opportunity to continue the careful scrutiny of this part of the Bill. I have listened carefully to what noble Lords have said. I believe that we all want to secure the best for consumers but suspect that we may diverge on how that is best achieved.
Amendment 51ZA would require the Secretary of State to bring forward regulations to allow collective redress for energy consumers. We agree that consumers should be able to get the compensation that they are due when things go wrong. The consumer redress order powers we have put forward in the Bill will provide energy consumers with what we believe is the most appropriate and cost-effective way of obtaining this. In principle, collective redress can provide benefits in some sectors, but I am concerned about the potential impact such powers may have on the time and cost involved for energy consumers seeking redress through this route, and the impact of any additional costs on all consumers.
The most effective redress mechanism ensures that consumers receive timely and cost-effective compensation, and I was particularly interested in what the noble Lord, Lord O’Neill, said about balance in these matters. Under existing arrangements, energy consumers can already obtain redress through the courts, but the legal process does not typically offer a quick or cheap remedy for consumers who have suffered a detriment. In part, the concern that I have about the proposals from the noble Lord, Lord Whitty, on collective redress is that it would not speed up the process; indeed, it may, perversely, lengthen it, although I am sure that is not his intention. Consumers will also be required to identify themselves as potential claimants and join an action. Consumer redress order powers overcome these barriers by allowing Ofgem to take action on consumers’ behalf, without them needing to initiate action or incur costs.
Allowing collective redress via these amendments would benefit intermediaries involved in bringing such cases, who will seek awards that allow them to recover their costs—which would be borne by claimants or, where costs are awarded, by all consumers as energy companies seek to recover these sums. Collective redress could also encourage litigation on fine points of law, creating higher costs for energy companies, which would again risk increasing prices for consumers as a whole. In contrast, the consumer redress order powers contained in the Bill offer a speedier resolution to consumer detriment, which does not require consumers to come forward and take action, is proportionate to the sums at stake and minimises the potential costs for all energy consumers.
The noble Lord, Lord Whitty, asked whether the Bill’s provisions cover regular breaches of consumer law. The intention is that they will. If the breach is also a breach of licence conditions, such as mis-selling, that would be included.
The noble Lord’s Amendments 51ZE and 51ZF would increase the time limit for consumer redress order powers contained in Schedule 14 from, as the noble Lord has mentioned, five years to 15. I naturally have sympathy with amendments designed to ensure that consumers can obtain redress. The intention is certainly not for these time limits to be arbitrary. The time limit is consistent with the existing time limit for Ofgem imposing penalties on energy companies. In some cases, both penalty and redress may be appropriate, and so it is important that the enforcement regime that we establish allows Ofgem to balance both penalties and redress when looking to put things right.
This five-year time period for penalties was introduce as recently as the Energy Act 2010, following, as the noble Lord will know, two high-profile cases which showed the limitation of the then one-year limit for Ofgem to investigate and take action. There has been no case involving an energy company either before or since where it is alleged that this five-year time limit would not have provided ample opportunity for Ofgem to take action.