My Lords, I thank the noble Lord, Lord Whitty, for this amendment. Amendment 104B would require the Secretary of State to consult on and then bring forward regulations to allow collective redress for energy consumers. I agree with the noble Lord that consumers need to get the redress that they are due by the most straightforward means available. I fear, however, that the introduction of collective redress in the energy sector would not achieve these aims. My concerns centre mainly on the time and cost of bringing such cases.
The noble Lord has said previously that collective redress offered a quicker and cheaper solution for cases than if cases were pursued by individuals either through the ombudsman, Ofgem or the courts. This presupposes that action through the courts is the only option available where an issue affects more than one consumer. That is not the case. One of the reasons we have introduced the consumer redress order powers in this Bill is to provide consumers with the means of redress without the need to initiate individual complaints.
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Consumer redress order powers offer an alternative to lengthy and expensive litigation in that investigations are initiated by Ofgem to benefit all affected consumers, with no legal fees to pay. These powers benefit consumers without the need for consideration of the relative merits of an opt-in or opt-out, as orders can be made on behalf of all affected consumers, whether they come forward or not, including many who may not have been aware that they have suffered a loss. The powers are proportionate, and build on the redress available to consumers through the ombudsman and the power to impose penalties on energy companies when things go wrong.
Collective redress, on the other hand, cuts across the role of the ombudsman as the most cost-effective and simplest form of agreeing redress when things go wrong. Collective redress opens the prospect of court action becoming the first route to redress. I ask: what is wrong with that as an approach? It is true that some would be happy if this were the case, as collective redress inevitably requires third parties or intermediaries to take action on the consumers’ behalf. In the event that a case is successful, these parties will seek to recover their costs from either the pay-outs due to individuals or from the energy companies. The problem with this approach is therefore that it introduces an entirely new cost that these companies will pass on to
consumers. Permitting private collective redress would not just encourage advocates intent on righting things when consumers are harmed; it could also encourage litigation on the finer points of law. The cost of litigation is not cheap and this would again be passed on to consumers as a whole.
As has been referred to in previous debates, the draft Consumer Rights Bill puts forward proposals to amend the existing collective redress regime for cases where competition law has been broken. These proposals, together with the consumer redress order powers in this Bill, represent a far more streamlined and cost-effective means by which consumers can be compensated. I hope that the noble Lord is reassured by my explanation and, on that basis, will withdraw his amendment.