Energy Company Charges

Lord Barker of Battle Excerpts

Tuesday 4th February 2014 Commons Chamber

[The Minister of State, Department of Energy and Climate Change (Gregory Barker)]

This has been an excellent debate and there have been thoughtful speeches from Members across the House. I pay tribute to my hon. Friend the Member for Harlow (Robert Halfon) for bringing this matter before the House and for framing this very real question in his powerful introduction to the debate. I also pay tribute to my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) who will speak after me. She has joined my hon. Friend the Member for Harlow to bring into close focus an issue that rightly warrants the scrutiny of Members across the House.

Let me be clear: the coalition Government are doing more than any Government before them to help hard-pressed consumers with the cost of energy bills, and we are fairly, squarely and rightly on the side of British consumers. My hon. Friend has raised legitimate questions about the way that consumers pay for energy by different methods, and the Government want to address that. We share the concern that my hon. Friend has put into sharp relief, but it is not a new issue. I am glad to use this debate to tell the House that Ofgem will be looking into the issue as part of the new competition test announced by the Prime Minister, to ensure that energy companies are living up to their obligations and licence requirements, and that the interests of the British consumer are at the heart of the modern energy market.

[Dr McCrea]

During the Minister’s remarks, can we get away from having those on the Front Benches make a political broadcast, and deal with the cross-party motion before the House? Will the Minister tell the House—I certainly did not hear this from the Opposition Front Bench—what is happening to the concerns that we as elected representatives have on behalf of our constituents, and which are summarised in the motion?

[Gregory Barker]

I certainly intend to do that, but I think the hon. Gentleman is being a little unfair. I have already mentioned the most important point of the speech, which is that we have asked Ofgem to consider the matter raised by my hon. Friends the Members for Harlow and for Chatham and Aylesford, and Members across the House, as part of the new competition test that was brought forward by the Prime Minister towards the end of last year. That will have real teeth and will report within a matter of months, if not weeks. We expect that in the near future, and Ofgem will be tasked to do it.

[Mr Robin Walker (Worcester) (Con)]

I am grateful to my hon. Friend the Member for Harlow (Robert Halfon) for securing this debate. I agree with the Minister that it is welcome that Ofgem will look into this matter and at competition, but Government policy is clearly to encourage switching. Will he address the point raised by the hon. Member for Liverpool, West Derby (Stephen Twigg) about energy companies charging people who want to move from a prepayment meter to a more ordinary tariff, and the outrageous variation in costs that can involve? One of my constituents was quoted between zero and £200 to have a prepayment meter removed. Does that not show that the system is not functioning properly as a competitive market, which is something Ofgem ought to investigate?

[Gregory Barker]

My hon. Friend is right and it is to his credit that he raises an issue that invariably afflicts the poorest and most vulnerable customers. In most cases, however, those on a prepayment meter can switch to a supplier that will not charge them for coming off it. Even if they are on a prepayment meter, they can still switch supplier.

It is important that we do not become carried away with the idea that the only response to getting a better deal for consumers is for Government to intervene with a one-size-fits-all solution. We saw what the result of over-regulation was under 13 years of Labour. Ham-fisted over-regulation does not actually benefit the consumer—it created the big six. We saw real choice for the consumer collapse under the previous Government through ham-fisted inappropriate regulation. The real interests of consumers will be served by a renaissance in competition. Relighting the fires of competition under this market will create real competition between energy companies.

I am glad to tell the House that since the coalition came to power we have seen movement back the other way, correcting the downward slide towards an oligopoly that we saw under the previous Labour Government. We are seeing new entrants to the market and unprecedented switching. In the last two months of 2013, an unprecedented number of customers switched their suppliers, hitting the companies that penalise customers where it hurts. People voted with their wallets and moved to get a better deal. This Government stand for empowered consumers—not just a lucky few, but everyone. We do not want a return to a nationalised industry; we want fair regulation for a fair energy sector.

[Caroline Flint (Don Valley) (Lab)]

There were plenty of examples in the debate that made it clear that regulations are not being followed on prepayment meters, and that Ofgem is not even using the powers it has. Rather than kicking everything off to the competition review, the Minister should ask Ofgem why on earth it is not enforcing the powers it has. It should stop letting this happen.

[Gregory Barker]

The right hon. Lady suggests that the competition test, which is new, will be a distant solution and that action is needed in the meantime. The competition test is alive now and we expect the first results shortly. This is not something we are kicking into the long grass; this is live. She raises a legitimate point on prepayment meters, as other Members have from across the House. Do not misconstrue me: this is a serious point and she is right to raise it. The Government take it very seriously.

We also take seriously the crux of today’s debate: are customers who elect to pay by cash or cheque, by standard payment through the post or at the post office, being unfairly penalised for doing so? That is not the same as saying that everybody should pay the same. I am afraid that there may be a genuine difference of opinion on that point. It is not our view that all customers should pay the same. There should be healthy competition, but—and it is a very important but—the differential between paying by direct debit and paying by cash or cheque should be cost-reflective and cost-reflective only. That is a key element of the licence condition under which energy suppliers operate. It is vital that Ofgem looks at that forensically and in detail, and answers to Ministers who have asked whether that is really happening.

[Albert Owen]

Will the Minister give way?

[Gregory Barker]

In just a moment. I want to make some progress and I have to give my hon. Friend the Member for Chatham and Aylesford time to wrap up.

My hon. Friend the Member for Harlow drilled to the centre of the issue when he raised the fact that Spark Energy is charging a premium of £300-plus. That is staggering. Scottish Power, one of the big six created by the Labour party, is offering a premium—or a discount, depending on which way we look at it—of £99. The right hon. Member for Don Valley (Caroline Flint) asked why we were not doing anything. We are doing something: there is already a specific ongoing investigation into Scottish Power. This is not just about Scottish Power, however: for npower, that figure is £95. As part of the competition test, we have asked Ofgem to look at all the energy suppliers to ensure genuine cost reflection. We want to know why these costs are so much more than those charged by other utilities providers, such as water and telephone companies.

[Robert Halfon]

My right hon. Friend is right about the costs, but do we not need to look at the criteria by which they are measured?

[Gregory Barker]

Absolutely, and of course we look at the criteria. I have listened carefully today and in our discussions with my hon. Friend about the criteria, and we are asking Ofgem not to make a cursory comparison, but to establish forensically whether these charges are genuinely cost-reflective.

[Julie Elliott]

Ofgem’s investigation into Scottish Power has been going on since March 2011. Why does the Minister have faith that Ofgem is looking into this properly and will come up with a real answer?

[Gregory Barker]

Ofgem will be reporting in the near future as part of the competition test. It has the necessary powers, and we have made it clear that we expect a forensic analysis of the cost differentials and criteria.

This is not a new phenomenon, however. The Labour party had 13 years to crack it, but it took no action. Moreover, the Leader of the Opposition spent two years as Secretary of State for Energy and Climate Change, so the question is not “Why has it taken since 2011?”, but “Why did Labour do nothing, between 1997 and 2010, when it had the time, the power, the majority and the authority?” What did Labour do? Zero, zip, nothing. So before they ask, in high dudgeon, why we are not acting faster, would they please explain why they did nothing to help consumers for 13 years? When we get a credible answer, we will give their criticisms more credit.

I do not want to go off on a completely partisan rant, however, because some good questions have been raised, and I do not want to diminish their seriousness. We take the issue of prepayment meters and standard payments seriously, but we are also looking at direct debits. Some 55% of people pay by direct debit and 45% pay by standard payment.

[Albert Owen]

Did I understand the Minister correctly? On cost reflection, he said that Ofgem still had the power to intervene over the licence. I understood that in 2012 it gave up that power and introduced the retail market review. Is he now saying that Ofgem can still exercise that power? If so, why does he not tell it to do so? Then this debate would be null and void.

[Gregory Barker]

We have done it already. The hon. Gentleman was not listening. We have spoken to Ofgem, and it has confirmed publicly what we have discussed privately—that this will form a key part of the competition assessment. That is a new development, and a sign that the Government take this seriously and are on the side of consumers. We will not wait 13 years to do something about it.

We are not just acting for people on prepayment meters or trying to get a better deal for people who pay by a standard payment method; we are taking action to get a better deal for people on direct debits as well, because they do not always get a fantastic deal. We know that many people do not realise they are inadvertently building up stores of credit with the energy companies, as has been highlighted by Members on both sides of the House, including the hon. Member for Sunderland Central (Julie Elliott), I believe. We will soon be announcing proposals that will give consumers a much better deal. That is just one of the measures we are taking to get a better deal for British consumers, particularly the most vulnerable, and comes on top of the £135 warm home discount, guaranteed winter fuel payments for pensioners and energy efficiency support for the most vulnerable through the ECO.

This has been a good debate. I am pleased that we were able to benefit from expertise from across the House and that the concerns shared across the House on this issue were properly aired. I pay tribute to my hon. Friends the Members for Harlow and for Chatham and Aylesford for bringing it to the Floor of the House and allowing us to demonstrate that this coalition is taking action for British consumers.