Energy Markets (Competition)

Debate between Lord McCrea of Magherafelt and Cookstown and David Mowat

Wednesday 26th March 2014 Westminster Hall

[David Mowat]

It’s in the pub. It was the “Energy Retail Markets Comparability Study” report completed for the Department of Energy and Climate Change, which stated that we have the least concentrated energy market in the EU, with the possible exemption of Austria. Opposition Members may want to reflect on that as well.

The next thing is profitability. Are companies making massive profits? The report states that there are two ways of looking at profits. They can be earnings before interest and tax, known as EBIT, or the return on capital employed or ROCE. On both measures, profitability in the UK market is similar to that in the rest of Europe. It is of course perfectly possible that I have missed the point—that every country in Europe has a cartel, of which the UK market is just one part, and that we are luckily going to fix that in the UK. That may well be the case, but all I am saying is that, by many measures, we seem to be no worse off, and often much better off, than some of our competitors.

[Dr William McCrea (South Antrim) (DUP)]

Listening to the hon. Gentleman, it is as if our constituents were getting a real bargain for gas and electricity, but I assure him that that is not what my constituents are telling me. They are facing a choice between heating and eating and do not believe that they are getting a bargain.

[David Mowat]

I thank the hon. Gentleman for that intervention. I have not said that people are getting a real bargain. I am trying to compare prices here with those in the rest of Europe, including the Republic of Ireland, and to examine whether there is evidence of exploitative behaviour. That is my point.

I wish we had less fuel poverty—I will come on to how we need to vote on measures to reduce it—and would like to see lower prices, which more competition can achieve. The Government’s work on making switching easier and price comparability is important, but switching is still too difficult and leads to stickiness in the market. If it was easier to switch, the market would work better and prices would be lower, so we need more work on that.

I agree that it would be better if there were more new entrants in the market. Having more game-changing new guys coming into the retail market would be beneficial. All I am saying, however, is that there is nothing in the structure of our market that implies that it is worse than elsewhere in the EU. Indeed, it would appear to be slightly better.

We need to be careful about what we wish for on energy policy, because security will be a significant issue over the next three or four years. In my earlier intervention, I mentioned SSE’s decision, announced this morning, to pull out of offshore wind, which I very much regret. I hope that there will be no trend of similar announcements from other players in response to the slow-motion car crash that is Opposition energy policy. We need energy stations to be built to replace ageing nuclear and coal power stations, and they need to be built pretty quickly or we will have a problem.

Finally, I have voted four times against the Opposition on matters of energy prices. Three years ago, there was a Government motion to reduce the solar subsidy from six times grid parity to four times grid parity, but the Opposition voted against the Government on what was a moderate reform to the market. They also voted against the Government on a Lords amendment regarding the accelerated replacement of coal. How we vote on green issues matters. Many of our constituents are in fuel poverty, and we need to be thoughtful as to how we vote.