Energy Prices, Profits and Poverty

Albert Owen Excerpts

Thursday 7th November 2013 Westminster Hall

[Albert Owen (Ynys Môn) (Lab)]

It is a pleasure to follow colleagues who work together very diligently on the Energy and Climate Change Committee. I begin by paying tribute to the Clerks and staff of the Committee for their work in putting such good reports together, so concisely. This debate is very important, and as other Members have said, a number of issues that are now in the mainstream of politics were initially raised by the Committee and put into the report.

I want to take one issue up with the hon. Member for North Warwickshire (Dan Byles), with regards to what he said about incoherent policies; I shall get my own back and then move on in a more consensual way. I think there is incoherence in the policy at the moment—not in the Labour party’s policy, but in the Government’s policy—of bringing in additional tariffs in January this year, then bringing in additional carbon prices in April this year, and then saying in November, “We are going to have a review”. The Government need to stop and think whether to hold back on bringing in such levies or whether to think the issue through in the long term. They cannot have it both ways.

I want to concentrate on two areas that were in the report briefly, but have been missing from the debate. We have discussed extensively wholesale prices and levies—and quite rightly, because they make up large components of the bill when put together. However, another section of the bill is transmission, which, again, the hon. Gentleman touched on.

If we look at the table in the report, when we break down the bill, the cost of transmission and distribution of energies to our homes contributes between 19% and 25% for the companies. There is a variant of some 6% and some regions are paying that extra cost. Given that we have a national grid, I do not see why that should be the case. One such area is mine, which generates a lot of energy through nuclear and renewables. We need to look at that point.

I am not sure which Government Front-Bench Member will wind up, but I hope that we will get some answers on whether the energy review will look at transmission costs, because they make up a huge amount. We did not get them yesterday, because the Secretary of State was not around for long, but we need those answers rather than having the question knocked about.

I have a suggestion, and if the right hon. Member for Hitchin and Harpenden (Mr Lilley) catches your eye, Ms Dorries, I know that he will endorse what I am saying from a different perspective: we need to look at the grid infrastructure and see whether we need another model of delivery for transmission and distribution in our country.

In Wales, the water industry has a not-for-profit organisation running pipes to homes and it invests all its profit back in infrastructure. That reduces costs to the customer at times, but the company is honest and open when it needs to do big maintenance and additional work on the infrastructure. Exactly what that company is doing is clear and transparent, because it produces its reports, and it has members on the relevant committee who are not from the industry.

Before anybody suggests that such an approach would in some way inhibit competition, within that model, companies go out to tender to get the work, so there is competition within that non-profit organisation. We could consider such a way forward for our national grid; at the moment, I do not believe that National Grid is acting in the national interest—I think it is acting in the interests of shareholders, first and foremost, because of the nature of the company. That is wrong for such an important issue as utilities and transmitting electricity, heat and fuel to our homes. We need a different model.

I understand the time constraints, so I shall conclude on the very important topic, which was in our report, of fuel poverty—rural fuel poverty, in particular. I make no apology for having this debate now. My right hon. Friend the Member for Doncaster North (Edward Miliband) said that this is not only about a price freeze; it is deeper than that. It is about regulation and looking at the whole market.

The issue has been clouded by the energy price freeze, but that would allow a pause, and the Government are very good at pauses. They paused on the Health and Social Care Bill, and they are now pausing on the gagging Bill—the Transparency of Lobbying, Non-party Campaigning and Trade Union Administration Bill. We need a pause with regards to price rises in the energy sector, so that we can have a proper review of the regulator.

I have argued for some time in the House that we need to be fair to the off-grid—those many residents in the UK who are not on the gas mains and who are paying more for their fuel than those who have dual fuel and are able to get discounts from the energy companies. Many of my constituents are in that position and pay a lot more—some 30%, 40%, and 50% more—for their heating than those who are on the gas mains.

I know that the Minister, who is not in his place now, is moving in the right direction and looking at the issue, but so was his predecessor but one, and so was Malcolm Wicks when the previous Labour Government were in power. I totally disagree with the energy companies when they ask for the Competition Commission and the Office of Fair Trading to look at the issue. That will take a long time, and when they have looked at the self-regulated off-grid market—they have reviewed it many times—they say, “Competition is there.”

In theory, competition is indeed there, and in practice it is there on some occasions, but it is still pushing prices up, and many families and households in this country cannot afford to heat their homes. It is very important that we look at those issues rationally and that we stand up for our constituents.

Finally, the hon. Member for North Warwickshire asked why we are having the debate now and said that fuel prices have been going up since 2007. In the past three to four years, people have had pay freezes and their household incomes have flatlined. Inflation is only 2.7%, but food inflation and energy inflation is far more than the basic rate of inflation, so people are suffering. Their incomes are going down in real terms and they are struggling to pay their bills.

That is why I am proud of this report. We have highlighted some very good issues that are now in the mainstream of political debate. We should move forward to a conclusion, where we are helping to ease the burden on our constituents and get the right investment for the future, without the excessive profits. We all need utilities. We all need heating and electricity in our homes. We want to get a coherent policy for the future, and this report will help shape that.

--- Later in debate ---

[Albert Owen]

I think that was the first time that business was mentioned; I omitted to do so, too. Would the Minister consider in the energy review looking at switching for businesses, so that they can break their contracts more easily, or have a comparison website where they can look for bargains in the marketplace?

[Michael Fallon]

That is an important point, and I would like to reassure the hon. Gentleman that work is going on to make it easier for small businesses to escape some of the higher tariffs under the contracts they are placed on, and to encourage more collective purchasing among small businesses. There is an organisation called Lumina that covers small businesses in my county of Kent, and I think there are others. That is a very important point.

Consumers will get the best deals only when suppliers face tough competition, and that is what the Government and Ofgem are working to achieve. We are committed to tackling the problem of fuel poverty; I note what the Committee has said about that. I was pleased to see what it had to say about the new definition of fuel poverty that we are bringing in through the Energy Bill. We are committed to helping people, especially low-income vulnerable households, to heat their homes more affordably.

We have already introduced some immediate help: 2 million vulnerable households will get £135 off their energy bills this winter, thanks to the warm home discount. Around 12.5 million pensioners will get the winter fuel payment: £200 for the under-80s and £300 for those over 80. There are cold-weather payments that are available if needed, and last year, they delivered £146 million to help cut bills for the most vulnerable. This year, we have added to those policies with more direct action. The Big Energy Saving Network is training 500 volunteers to go out into communities to help people get better deals from their energy suppliers and reduce their energy bills.

Energy efficiency remains a central part of our strategy, to help the fuel-poor and to deliver permanent energy savings. I am well aware of the serious concern among colleagues in the House for those consumers who are off-grid. I have chaired two meetings of our round table on that, in conjunction with the all-party group on this issue, and we have now established a code of conduct for the suppliers to ensure that—again, as the Committee would wish—prices are properly transparent at the point at which they are delivered, in a way that matches the transparency at the point at which they were ordered. More than 230,000 low-income households will be warmer this winter, thanks to energy efficiency measures that have been installed through the energy companies obligation.

Let me turn briefly to retail market reform. Competition is the key tool in exerting downward pressure on prices. Companies that do not compete effectively will lose customers. We are using the Energy Bill to ensure that Labour’s big six companies now place consumers on the cheapest tariff that meets their preferences, and give those consumers clear information to help them shop around.

I was also asked about the review of levies that is going on. We are looking hard at how we can get people’s energy bills as low as possible, to help hard-pressed families, just as we have done with the fuel duty and the council tax. I was asked specifically when we would see the result of that work. I hope that will be around the time of the autumn statement in a few weeks. That work includes some of the network costs. Ofgem has yet to establish the distribution costs for the next period. There is plenty of work to be done there to ensure that we bear down on those costs that form a considerable amount of the bill.

I would like to give the Chairman of the Select Committee a few seconds to reply. In closing, I thank the Committee for its work and the inquiry it has led. We are acting to help those most in need to keep warm this winter. We are also acting to ensure that everybody will get a better deal from the energy companies.