I am very grateful to my noble friend for those comments. Indeed, I hope that through his intervention and through the remarks that I made, and indeed through the remarks that the noble Lord, Lord Whitty, made in Committee, my noble friend will determine to join these eminent ranks in support of creating an effective, competitive market for retail services with the intent of providing low-cost improved services to non-householders, because today we are focusing on businesses.
My amendment does not seek to persuade the Minister to introduce competition at this stage to householders, although there are those in your Lordships’ House who hope that, once successfully tested in the business sector, such a transition to competition in the householder market will be fully reviewed. I am proposing that the Secretary of State begins work on preparing regulations not in haste but ready for market opening in 2017. I hope that in so doing—this emphasis is really important—the Minister will provide customer protection and take into account the need for further work to ensure that the Consumer Council for Water is able to maintain its position whereby customer confidence in the water industry is significantly higher than in any other utility sector.
I met the council’s chair, Dame Yve Buckland, and its CEO, Tony Smith, yesterday and I listened carefully to their request to work with customers directly on retail exit—an area which, they freely recognise, requires far more work to be undertaken by them. They wish to review the experience in Scotland. They want to make sure that their customers—particularly the small businesses —are consulted and protected. They are right to do so. In accepting either of our amendments, the Secretary of State will have the time and opportunity to listen to their concerns, for he will need to ensure that all consumers are protected from unnecessary increases in price and from service reduction.
Perhaps I may help my noble friend with examples of the measures available to him to protect the business customers under consideration. He can insist on the full army of tools which already exist. Default tariffs can be set through price controls, ensuring price and service protection. New codes can be drafted to contain all necessary customer protections and to keep the system as simple as possible. Powers of the Enterprise Act can be used for consumer protection should issues go awry—for example, through a failed merger.
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Powers in extremis could be used through the licence process. The appointed licence of retail entities already has special merger provisions. It is both likely and, in my view, necessary that the Secretary of State would consult the economic regulator, the Consumer Council for Water and Citizens Advice. I know that my noble friend could sign off each and every request made by an incumbent water or sewerage company to transfer its retail business to a third party. It is really important to emphasise that this approach does not require or compel incumbents to transfer any or all of their non-household customers. The amendment to permit retail exit, which I am proposing, simply provides the incumbent companies with the opportunity to apply to the Secretary of State to request that they do. It is an option—nothing more.
Exit has become a much debated issue—the most important issue that remains to be debated, although the others that we will hear this afternoon may contest that thesis. Nevertheless, exit is absolutely critical. In that context I place on record my thanks to my noble friend the Minister and his officials for having held a series of meetings with me and colleagues to discuss the implications of what I believe is a much needed and important amendment to improve the Bill.
Finally, my noble friend has expressed a wholly understandable concern, as has the Consumer Council for Water, about the effect of a transfer of non-household customers to a third party to its remaining household customers. The empirical evidence is to be found in Scotland. To assist the Minister I will quote from the head of the Water Industry Commission for Scotland, who states:
“Ministers have expressed a concern that ‘exit’ could strand household customers with a company that would have less interest in its customers. This is contrary to experience in Scotland where Scottish Water’s focus on its household customers has sharpened markedly since the non-household customers were transferred into its Business Stream subsidiary. Operational performance has also improved at least in part due to the pressure being applied to the wholesale operation to ‘up its game’ by retailers. Such improvements in operational performance (whether in terms of costs or levels of service) benefit households as well as non-households”.
That is compelling evidence.
Business customers have been promised competition for 15 years. With appropriate customer protection they should wait no longer. I hope that the Minister will agree to provide for exit and thereby create an efficient market mechanism. In so doing I hope that my noble friend will commit to ensuring that all business customers receive improved services and that the country will be provided with an efficient, demand-led mechanism which will help reduce wastage, protect consumers, increase smart metering, save water through demand management measures and provide confidence to the market to continue to invest in this vital industry. I beg to move.