Energy Markets (Competition)

Debate between Albert Owen and Mark Lazarowicz

Wednesday 26th March 2014 Westminster Hall

[Mark Lazarowicz]

Indeed, and the figures have been rising, as the hon. Gentleman knows.

As I said at the start of my remarks, the Opposition see energy prices not just as the first step to reduce pressure on customers but as part of a much more fundamental reset of the energy market. In summary, we propose to get the energy companies to separate the generation and supply sides of their businesses, and we want to see all energy companies trading for energy in an open market by selling into a pool. We want a simplified tariff structure and a new, tough energy watchdog with new powers to police the market, including the power and remit to force energy companies to cut their prices when there is evidence of overcharging. All those proposals would make the market more transparent, and no doubt my hon. Friend the Member for Sunderland Central (Julie Elliott), our Front-Bench spokesperson, will refer to those proposals in more detail.

The proposals in the Labour party’s consultative document are welcome, and I note with interest the response to the consultation published today by SSE, although I have had only a brief opportunity to look at it this morning. I suspect that the Minister will say that, yes, there are weaknesses but they are being addressed. He will no doubt point to increased competition and to the new entrants into the market. Indeed, there has been an increase in the role and market share of new entrants, but they still represent a fairly small proportion of the market as a whole.

There is a long way to go, and we all know that many customers are reluctant to switch for all sorts of reasons. They might be uncertain about how to go about switching, for example. Some of my constituents switched and found that, after an apparently attractive offer, within a few months they were paying even more than they did under their previous supplier. The tariff simplification introduced by the Government, which on paper seemed a good idea, has in practice led to a number of difficult consequences. Many of us know of cases in which people have ended up paying substantially more following the tariff changes because those changes are in some cases biased against people who use little energy, either by choice or by lack of income or resources.

A much more fundamental change is needed, which is recognised across the industry. I also recognise that the weakness in the market is not the only reason for higher prices. World supply and demand is a major factor, and taxes and support for energy efficiency and renewables have an impact. There is certainly a need for changes there as well. Like many Members, I am concerned that the changes the Government have introduced so far will mainly result in the watering down of energy efficiency measures, which are the single biggest way of enabling consumers to cut energy waste and cost.

[Albert Owen (Ynys Môn) (Lab)]

Another factor in the increase in prices and the high prices is distribution cost. In the distribution areas, there is no competition at all. That monopoly contributes somewhere between 19% and 24% of a bill. Does my hon. Friend agree that we should look for greater competition in that area?

[Mark Lazarowicz]

Absolutely. That is one of the areas where a fundamental investigation is needed, with fundamental questions asked and fundamental changes made. I recognise that businesses have to make a profit for their shareholders and future investments. They are big businesses, so the profits will have big numbers in them. Nevertheless, there are fundamental questions. Today, SSE has made an announcement that promises an energy price freeze until at least 2016 and it is preparing to separate legally the retail and wholesale sides of its business. Those changes are in line with the policies announced by the Labour party last year.