Energy Prices and Profits

Alan Whitehead Excerpts

Wednesday 4th September 2013 Commons Chamber

[Mr Davey]

Actually, when we talk about profit levels, we need to talk about competition. One of the core points of our policy is to increase competition, which the previous Government failed to do. Yes, regulation has a role, and I will discuss that, but competition has a much greater role.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

What proportion of the total investment that the departmental estimates claim will be needed for plants, transmission, grids and connections will come from the big six energy companies? Will it be most, some or a small proportion of it? Does the Secretary of State think that the big six may not be the only game in town as far as investment in our future energy supplies is concerned?

[Mr Davey]

The hon. Gentleman makes a fair point in his usual informed way. The big six will be a big part of that investment profile, but as he will know, their balance sheets are weaker than they were in the past as a result of the recession, and there will be other investors. That means we will have to work harder to get that investment, but some of it will come from the big six.

--- Later in debate ---

[Mr Davey]

The hon. Gentleman asked that question when I appeared before the Energy and Climate Change Committee, and I told him then that I would examine the matter. I am afraid that we have not come to any conclusions—he only asked me a month or two ago—but I am happy to look at that. The Minister of State, my right hon. Friend the Member for Sevenoaks (Michael Fallon), is extremely concerned about the high prices paid by consumers who are off the gas grid, as I am. When we examine the research on fuel poverty, we see that some of the worst is among those customers, so this Government will do something about it where the last Government did not.

[Dr Whitehead]

Is the Secretary of State aware that at least one of the big six energy companies forward-trades for only one week in this country? Trading beyond one week ahead is taken out of this country. Will he explain the impact that his proposals will have on that trading arrangement, so that it is made wholly transparent?

[Mr Davey]

Let me be clear that we have an independent regulator, which the Labour party tends to forget. I should say to my colleagues that under the EU third package on energy, we have to have an independent regulator. The proposals that have been made are Ofgem’s, but I am on the record as supporting them strongly. As I have explained, Ofgem has proposed a market maker system, whereby the six vertically integrated companies will be mandated to sell power in the forward markets in the UK.

What about the third element of Labour’s package? It is a bit vague, talking about tackling the big six. The House should know from what I have said that we are already doing that through competition. What did Labour do in office? In 1998, there were 14 firms in the electricity supply market retailing electricity to customers. By 2010 there were just six, as my hon. Friend the Member for Peterborough (Mr Jackson) said. Rather than promote competition to help consumers, Labour did the reverse, and it now promises to undo what it did. What a shambles the Opposition policy is, and what a shambles the last Labour Government were.

If Labour’s energy policy would really help consumers, will the right hon. Member for Don Valley tell the House by how much the average energy bill would fall under her party? She tells us that she is proposing radical changes, so what would the impact be for consumers? We published detailed analysis of the impact on people’s bills of our energy and climate change policies, and it showed our policies helping people by keeping their bills lower than they would have been. We need to know what the impact of her policies would be.

As I have made clear, we have policies to help hard-pressed consumers and to help improve competition in the retail electricity market, including policies with Ofgem to help consumers. On the supply side, we have deregulated to make it easier for smaller suppliers to enter the market. We now have our “offtake of last resort” mechanism through an amendment that I introduced into the Energy Bill in the other place, and we are supporting Ofgem’s reforms to the retail market to deliver tariff simplification and get a better deal for more consumers. Labour failed to do that even when pushed to do so in the House. The confusing array of tariffs—there were a huge number—got to such a point that it was hindering competition and hurting consumers, not helping them and driving competition. We are right to back Ofgem with more reserve powers so that we can ensure that vulnerable people are not left being fleeced on so-called dead tariffs, and so that people find it easier to choose and switch.