Energy Prices

Andrew George Excerpts

Wednesday 19th October 2011 Commons Chamber

[Caroline Flint]

Absolutely. There is no point in the companies having a system that does not recognise the situation of ordinary families. The National Pensioners Convention talks about the fact that fewer than six in 10 pensioners have access to a computer to go online. It is not fair or right. The onus should be on the companies, not the public. However, all the Secretary of State could do this week was blame the public: “It’s your fault you’re not getting out there and getting a better deal. It’s your fault you’re not saving yourselves £200 a time.” He has got a lot to answer for, because he has just sat back and let people suffer.

[Andrew George (St Ives) (LD)]

The right hon. Lady bemoans the unfairness in the direct debit discounts and the way in which those suffering from fuel poverty are treated by the system—there is also an issue with rising block tariffs—but all those things happened in the 13 years of the Labour Government. She is absolutely right to raise those important issues, but what did her Government do in that time to address them?

[Caroline Flint]

For a start, we had the most ambitious programme to help people in fuel poverty deal with their bills—the Government are cutting those measures—but we also started discussions across Europe about having Europe-wide legislation to tackle some of those issues by not only giving greater powers to regulators but ensuring more openness and transparency. I will talk about this more later, but I am sad to say that we are seven months overdue in implementing that legislation and putting into statute powers that we can use to control parts of the market. Perhaps the Secretary of State will say something more about why the package that my right hon. Friend the Leader of the Opposition was negotiating when he was Climate Change Secretary has not been implemented.

Research published by the consumer group Which? showed that when people contacted the big six energy firms to ask how they could save money—that is, when they made the effort that the Secretary of State lectures us about—a third of them were given misleading advice. Either those customers were deliberately misled or the tariffs were so complicated that not even the staff selling them understood them. Can we imagine any other product or service where we would accept four out of five customers being overcharged—not just once, but time and time again—and nothing being done about it? When four out of five families are paying over the odds for their electricity and gas it shows how out of touch this Government are to lecture people about shopping around.

People do not want a Government who blame them for the fact that their energy bills have gone up. Families and businesses that do the right thing, work hard and play by the rules cannot understand why this Government are not only allowing electricity and gas companies to increase bills by so much, but seem to be apologising on their behalf. On Monday the Energy Secretary told the “Today” programme:

“Energy companies are not the Salvation Army”,

and said that he expected them to

“earn respectable returns for their shareholders”.

We know that the energy companies are not the Salvation Army, but it should not be Government policy to drive people into the arms of the Salvation Army either.

--- Later in debate ---

[Chris Huhne]

No, I disagree with that. I think that we have a very good track record at a number of our leading universities, with Edinburgh being first and foremost amongst them, of work on carbon capture and storage. One lesson that we have learned from the negotiations is that we can build a commercial-scale CCS plant with £1 billion. Indeed, we have had a very clear indication of interest back at Peterhead from Scottish and Southern that it would be prepared to do that with consortium partners. That is clearly going to be an offer that other contestants will have to beat, so for all the reasons that I have given and that I have explained at considerable length, we are determined that we should be successful with CCS technology. It is disappointing to me personally and to many others that we were not able to proceed at Longannet because of the specific problems there, but that certainly does not mean that we are shelving CCS.

[Andrew George]

I appreciate that my right hon. Friend is giving the House the benefit of time and his advice on the issue. Nevertheless, there will be concern about the impact that that outcome might have on the time scale for the delivery of an effective CCS programme. To be clear, is he saying that the difficulties at Longannet were primarily financial or technical? Does that raise a question about the viability of the technology, or can he reassure the House in that regard?

[Chris Huhne]

I can reassure the House that on the basis of the feed studies, that does not raise questions about the generic technology. What arose were questions related to the specific costs of employing the technology at Longannet, given how far away it is from the reservoirs and so forth. Those were the issues. We are confident that we can procure a CCS commercial scale plant within that £1 billion. That is what we intend to do.

--- Later in debate ---

[Guy Opperman]

I totally endorse that point, particularly in relation to pricing practices and the considerably enhanced prices charged by many heating oil suppliers. I have done quite a lot of research into this matter. In Hexham constituency the price of oil rose from 41p to 71p per litre between September and December last year. In that time, the wholesale price of oil went up only by about 10%.

In my constituency there are roughly 16 to 18 heating oil providers. However, 11 or 12 of those are controlled by one company. DCC Energy, an Irish-based company, has bought up many of the individual suppliers throughout the country. It operates heavily in west Wales and has been prosecuted there in relation to a trading standards case. It also operates to a considerable extent in Scotland. In Northumberland and throughout the north-east it has a substantial presence. I accept that there is competition in the sense that there are about five genuinely independent companies providing heating oil. However, the other dozen or so are providing heating oil from one global source. There is nothing wrong with that, but when one adds up the figures, it means that one company has 69% of the providers and the multitude of other companies represent 31% of the providers. That should be investigated by the OFT, and it should result in a competition inquiry. If that case does not give the suspicion of price fixing, I do not know what does.

[Andrew George]

The hon. Gentleman is absolutely right on that point. Across the country as a whole, a little under 30% of those who depend on oil for central heating are in fuel poverty, and they are primarily in rural areas.

With regard to the OFT’s report published yesterday, does the hon. Gentleman recognise that it found that the terms of contracts may not be entirely consistent with existing consumer protection? The OFT states that it will examine the

“clarity and fairness of termination rights”

and engage with suppliers to discuss how to proceed. Does he think that regulation is required, or should the OFT continue to pursue some sort of voluntary agreement ?

[Guy Opperman]

With respect, I would say that the answer is somewhere in between. There cannot be regulation without submissions being made and investigations taking place. It is incumbent upon us not just to get upset about how our constituents are being affected by heating oil prices but to make representations to organisations such as the OFT. We must also invite the Energy and Climate Change Committee to investigate off-grid energy, which I very much hope it will do.

--- Later in debate ---

[John Healey]

My hon. Friend is absolutely right when he says that, for many, high energy prices mean a choice between eating and heating, and, in some cases, a choice between life and death, particularly in a harsh winter.

The second way in which the Government are failing is that they are scrapping some of the important Labour schemes to make homes warmer and bills lower, particularly the Warm Front scheme. You will know as well as I do from your experience in the Treasury, Madam Deputy Speaker, that over a decade, the Warm Front scheme helped more than 2 million households with their bills and insulation—it helped to make their homes greener, warmer and cheaper to run. This year and next year, that scheme will have a third of the budget that it had under the previous Labour Government. From 2013, it will be scrapped altogether.

In my constituency of Wentworth and Dearne, more than 3,000 households have benefited from that scheme in recent years, including pensioners, disabled people and young working families. One of my most recent visits was to Nicola Savage and her partner, Dan, who have two young kids. They had problems heating their home in Swinton, but the Warm Front scheme helped to replace an old back boiler with a new condensing unit. As Nicola told me at the time, “This makes a huge difference to us. When you switch it on, the house gets warm quickly and it stays warm.”

[Andrew George]

I believe that the previous Government were well intentioned with regard to the Warm Front scheme, but when I visited my constituents who benefited from it—there is no question that they benefited—I found that most of them paid twice as much as they should have done. I do not know who pocketed the benefit of that system, but my constituents could have paid half the price to a local supplier. The scheme was certainly not fit for purpose.

[John Healey]

I do not know whether there is anything peculiar about the contractors and suppliers in St Ives, but that is not the general experience or track record of the scheme throughout the country, and it is not the experience of most hon. Members on both sides of the House.

--- Later in debate ---

[Andrew George (St Ives) (LD)]

It is a pleasure to follow the hon. Member for North West Durham (Pat Glass) in the light of how this debate has developed and evolved. She has made a constructive and considered contribution to a debate that is going to conclude with a clear consensus, whereby this Parliament can move forward and encourage the Government to do a great deal more.

[Ian Lavery]

rose—

[Andrew George]

I do not think I have said anything yet, but I am happy to give way.

[Ian Lavery]

I thank the hon. Gentleman for giving way. Is he as surprised as I am that Government Members are supporting the Opposition motion when it is highly critical of many aspects of energy prices and Government policies?

[Andrew George]

No, I am not at all surprised that the Government have decided that, on balance, looking at the motion—it could, of course, be tinkered with—it says a lot of the right things. We need to start coalescing around the issue to move it forward effectively in the interests of the nation. My concern is that we started this debate in the customary and traditional manner of a yah-boo pantomime. There is a sense that we are obliged to endure the opening of Opposition day debates in that way, so I am pleased that we seem to have moved on from the traditional type of exchanges—when we hear the trading of “It’s your fault” followed by “No, it’s yours”, which takes us nowhere and certainly does not impress the country as a whole—and identified areas on which we can agree. That is what the country wants us to do. Rather than wasting our energy—if Members will excuse the pun—on the yah-boo pantomime, we should build on the constructive speeches made by Members in all parts of the House today. Given that there is a great deal of agreement among us, we must ask what it is that we all agree we can do.

I accept that my right hon. Friend the Secretary of State is a self-declared ambassador for the sharp-elbowed middle classes who will be scrutinising their bills, understanding what they mean, and chopping and changing on a regular basis, but the fact is that 60% of the population do not do that. Although it was rightly said at the energy summit that there should be a more transparent and effective way in which consumers could become informed and make informed choices, the fact is that many people lead busy lives, cannot penetrate the opacity of the bills with which they are presented, and do not understand how choices can be made.

I may not be a member of the sharp-elbowed middle classes, but I am so busy doing my job that I know more about my constituents’ finances and bills than about my own. I never get around to dealing with these issues, and I would not recommend anyone to follow any of the financial decisions that I make about my own life. I am sure that many other Members have the same problem.

The right hon. Member for Wentworth and Dearne (John Healey) referred to a five-point plan. Usually three is about as much as we can count up to in the Chamber, but five is very helpful. He spoke of the need for greater transparency, and the possibility of regulating standing charges. I think that that idea should be thrown into the melting pot, and I hope that the Government will consider it.

Others, including the hon. Member for Ynys Môn (Albert Owen), suggested that, given the profiteering of the big six, a windfall tax should be introduced. We know that we cannot opt, as a country, for a Soviet-style state-owned energy system—and there is no appetite for that in any part of the House—but the fact is that, although the system will of course continue to be in private hands, we need to do something about the profiteering. The idea of introducing a windfall tax, or threatening to introduce one if the energy companies do not start demonstrating that they are prepared to provide a genuine and a better service rather than simply putting money into the pockets of their shareholders, might also be thrown into the melting pot. We need to do more to incentivise fuel efficiency, which is not something that energy companies favour at present. They want to sell their energy and do not necessarily want people to conserve it, and we need regulations that will encourage that to happen.

Earlier, I mentioned rising block tariffs, which exist peripatetically more or less throughout the industry. I hope that the Government will think about those, because they plainly disincentivise fuel efficiency in the domestic market. Many other Members have mentioned key meters and pre-payment arrangements, and we should also consider special groups such as park home owners. The hon. Members for Ynys Môn and for Hexham (Guy Opperman), among others, made telling references to off-grid energy and, in particular, to the LPG market.

We should not ignore a minority group, namely the rural poor, and in particular the fuel-poor in rural areas. We should bear in mind that 29% of households with oil-fired central heating are in fuel poverty. It is clear from the position in my constituency—it includes the Isles of Scilly, which means adding a further 20% to the LPG costs—that many people are struggling to pay their fuel bills in rural as well as urban areas. The Office of Fair Trading report is of course welcome. It suggests that most customers now sign two-year exclusive contracts with their supplier. That is the maximum time allowed following the Competition Commission investigation. Under those contracts, the supplier usually retains ownership of the tank, which makes it hard to switch supplier if prices rise. The Government must keep an eye on that.

In debates such as this we always hear from the climate change deniers—the environmental equivalent of deficit deniers. The balance of opinion in peer-reviewed science is clear, however: if we do not address this issue, there will be significant economic costs and impacts for future generations. We must deal with it; we cannot simply close our eyes.

I understand that the Government will make an announcement on the renewables obligation certificates review shortly. I hope we get a significant degree of parity between Scotland and the countries south of Hadrian’s wall in respect of ROCs. In my constituency, we have the first commercial-scale wave hub in the country, and I give the previous Government great credit for having invested in it. Although it is based just outside my constituency, the wave hub itself lies within it. It is important that we have measures that encourage such initiatives, so I hope that we have a favourable outcome to the ROCs review.

This has been a constructive debate, and I hope we can take the key issues forward constructively with all parties engaged.