Barry Gardiner
Main Page: Barry Gardiner (Labour - Brent West)(12 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint
There are a number of measures that we should be taking to tackle liquidity. Pooling is just one of them. No doubt there will be more detail on this matter and amendments when we have the Energy Bill before us. The issue is that there has so far been nothing in the draft Bill that has opened up that debate. After the Prime Minister’s intervention last week, it seems that we will now have a debate that he did not realise would be forthcoming.
I will make some progress, because we only have a half day on this issue and colleagues from across the House want to speak. We had a shambles last week. We can only imagine that civil servants in the Department of Energy and Climate Change are now busily rewriting the Energy Bill. If they are, we would like to put forward three clear proposals that could help people now and reform the energy market for the long term.
First, there is a proposal on which we think there could be action for this winter if there were unity, but on which we might need to legislate somewhere down the road. It is about targeting help where it is needed most this winter, not next year once the Energy Bill is passed, and not when Ofgem finishes the consultation on its retail market review in 2013. We all know that something like 75% to 80% of people are not on the cheapest tariff. Ministers say that it is possible for households to save up to £200 on an annual dual fuel bill by shopping around for the lowest online rate, but elderly customers, who are most vulnerable to the cold weather and most at risk of fuel poverty, are among the least likely to be able to access the cheapest online deals or switch supplier.
In January, we proposed putting all over-75s on the cheapest gas and electricity tariff, which would save as many as 4 million pensioners, including 8,000 in the Secretary of State’s constituency, as much as £200 a year. The Government rejected our proposals, but given what the Prime Minister said last week, their position now appears to have changed somewhat. If it genuinely has, can we come together today and send this clear message to the energy companies: “If you don’t put the over-75s on the cheapest tariff, we will legislate to make you”? That is our first proposal—getting help to those who need it most.
We also want everyone to benefit from a more competitive and responsible energy market, which means wholesale reform to how energy is bought and sold, so here is our second proposal. At the moment, no one really knows what the true cost of energy is. The way the market is structured means that the big energy companies are allowed to generate power, buy it from themselves and sell it on to the public. We believe that has to end. The time has come to open up the energy giants’ books, stop the backroom deals and end the secret contracts. If the energy companies were forced to sell the power that they generate into an open and transparent pool, anyone could bid to retail energy. That would encourage new entrants, increase competition and ease the upward pressure on prices.
Barry Gardiner (Brent North) (Lab)
Does my right hon. Friend recall that when the Select Committee on Energy and Climate Change discussed vertical integration, one energy company chief executive was asked why a company such as EDF, which generates most of its electricity from nuclear power, should benefit from the high price of gas, which sets the market rate for the sale of the wholesale supply into the retail market. The answer, of course, was that Ofgem would not allow cross-subsidising from one side of that barrier to the other. Is that not why the tough new regulatory powers that we have called for are exactly what the Secretary of State should introduce?
Caroline Flint
I absolutely agree, and I commend the Select Committee for its fantastic work over the past year. Since I have been in my post, it has been most useful to my discussions and thoughts about how policy should develop.
Thirdly—this takes me on to Ofgem’s role—I am afraid that too often in the past, Ofgem has ducked the opportunity to get tough with the energy giants. I believe that we therefore need to create a tough new regulator that people can trust. I can tell the House that we seriously considered whether it would be better to reform Ofgem or start again from scratch. In the end, I do not believe that just giving Ofgem new powers is the answer, because it is not using the powers that it already has. It has failed to enforce its own rules, and time after time it has let the energy companies get away with ripping off hard-pressed families and pensioners.
As I said earlier, when Ofgem removed price controls a decade ago, it did so in the belief that competition had developed sufficiently, and that privatisation had delivered a functioning competitive market. It is now clear that that was a mistake. Almost every indicator, such as consumer engagement and market share pricing, gives us cause for concern. The answer is not to go back to nationalisation but to reform the energy market to make it more open, transparent and competitive. Until that happens, we must ensure that the regulator has the power and authority that it needs to protect consumers.
That was why, at the Labour party conference, I announced that the next Labour Government would abolish Ofgem and create a tough new regulator with a statutory duty to monitor the relationship between the prices that energy companies pay for their energy and the bills that the public pay. It would have the power to force companies to pass on price cuts when wholesale costs fall. It would be a new watchdog with new powers, new responsibilities—including for small businesses and off-grid customers—a new focus and new leadership.
Mr Davey
I am grateful for the hon. Lady’s question, not least because I was born in her constituency. The Government want to help everybody. I am surprised that she is focusing simply on over-75s. We are acting on over-75s and on all poorer pensioners, because the warm home discount will get £130 off their bills this year. We are taking action.
Mr Davey
No, I will not.
I have spent some time on competition in the retail energy markets, but the right hon. Lady spoke a lot about competition in the generating markets, to which I should like to turn. She made a great deal of wanting to reintroduce a pool to the UK and said it was in the Labour party’s manifesto. She did not really explain why, having abolished the pool in the UK in 2001, Labour wanted to re-introduce it. The Labour Energy and Competitiveness in Europe Minister at the time of pool abolition—she is now the noble Baroness Liddell—told the House:
“There is no question but that the electricity pool has distorted the market”.—[Official Report, 15 June 2000; Vol. 351, c. 1102.]
When the NAO reported on the old pool in 2003, it said that the
“the centralised arrangements of the pool carried with them a risk that some generators could manipulate the market and Ofgem consider that this risk materialised through much of the period of the Pool’s operation to the detriment of consumer interests.”
Indeed, many at the time believed that the pool was leading to higher and not lower energy bills. That is why the Government are not convinced by the Opposition’s policy.
Mr Davey
No, there is more than one company, as I think the right hon. Lady will find when she checks.
Ofgem and my Department agree that Ofgem’s voluntary measures do not go far enough, so the latter has been working on a mandatory auction, and it might well be that some sort of trading obligation is the way forward. I can confirm that I have been considering this matter intensively for some time, and that I will bring forward measures in the Bill to address it. At the very least, these will be back-stop powers in case the efforts of industry and the regulator prove insufficient. If we are to drive competition in the generating side of the electricity market to help people and firms struggling with bills, we must address the liquidity problem. The right hon. Lady’s policy does not do that, but ours does.
Barry Gardiner
I agree that it is important to free up liquidity in the forward market—I do not think there is any dispute about that—and, in so far as that goes, it is welcome. However, it will not address the problem of a generator such as Centrica making a £1.5 billion profit while the retail prices of British Gas rise, because it will not be possible to see that integration—it can show its profits where it likes. The Secretary of State talked about integration of the retail and wholesale market. He has to address that, otherwise we will not resolve this problem.
Mr Davey
The only way to ensure greater transparency is to have more liquid markets. That is the whole point of liquid markets. Without them, people cannot compete or buy and sell their electricity forward, and we cannot ensure price transparency. That ought to be welcomed by the Labour party. I would be worried if it set its face against greater liquidity in the forward market. It would be a very odd position to take.
I have spent some time explaining how our various policies will promote fiercer competition and help cut bills, and I have set out why I think the Opposition’s proposals are fundamentally flawed.
Mr Marcus Jones (Nuneaton) (Con)
I welcome today’s debate, because energy is one of the most important issues for my constituents. The pressure on the cost of living over the past four or five years has been relentless, with petrol and diesel prices going up almost weekly, food prices going up in the same fashion and energy bills soaring. Over that time, people’s incomes have not increased anywhere near in line with those increased costs and salaries in both the public and private sectors have been pretty much static.
Despite the rhetoric we have started to hear from the Opposition, the Government have made moves to try to help with the cost of living. We all know that had the Opposition been in power, petrol and diesel would have been 10p a litre dearer at the pumps. We all know that the Government have frozen council tax for the third year in succession, in stark contrast to Labour, which doubled council tax during its 13 years in government. My constituents who commute using Nuneaton station will also be heartened that regulated rail fares are to be capped this year.
Much of the problem with energy prices stems from energy generation issues and the energy market. We all know that the wholesale cost of oil and gas accounts for half the cost of energy. Given Labour’s inertia, inactivity and lack of enthusiasm about energy generation during its 13 years in government, it seems opportunistic for Labour Members to put forward this motion.
I welcome the fact that the Government are working hard to incentivise low-carbon energy, and I hope that the Minister will provide some reassurance about the energy mix and confirm that clean coal will be a firm part of that mix. Many of my constituents work at Daw Mill colliery—one of the largest deep producing coal mines in the country. I am sure that my constituents will be very interested to hear the Minister’s comments.
Barry Gardiner
The hon. Gentleman quite rightly said that wholesale electricity prices are based on the wholesale price of gas, but will he explain why a company such as EDF, which supplies electricity to its customers yet generates from nuclear, should benefit in exactly the same way from the higher price of gas, which of course it does not pay?
Mr Jones
The hon. Gentleman’s comments are interesting. I am a firm supporter of nuclear energy—he might not be, but it is absolutely necessary. This Government are trying to incentivise companies to make sure that nuclear is a firm part of the energy mix and that we are not switching off the lights.
Gordon Birtwistle
That is true, but my point is that fuel is bought and sold on the open market. We need to ensure that the supply of both gas and nuclear fuel in this country is secure for the long term. We do not want to rely on foreign suppliers, because that could bring about a situation similar to that in Chechnya when the Russians turned the gas off.
Barry Gardiner
The hon. Gentleman is right to focus on security of supply, which is an essential part of the future of the market. He said that the price of gas would go up and down in accordance with the cost of procuring it on the open market. Can he explain why the wholesalers who generate the electricity by means of that gas do not drop their retail prices when wholesale prices have dropped in the international markets?
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. May I remind those who continue to intervene that they will be placed at the bottom of the list rather than the top, because they have already spoken? I am sure that they will want to save something for their speeches.
Barry Gardiner (Brent North) (Lab)
If one is going to reform the energy market, it seems to make sense to configure that market according to one’s objectives. When the Secretary of State spoke earlier, it was extraordinary that he did not set out the clear objectives of the reconfigured energy market. I will set out mine.
The first objective is on carbon targets. We have our 2020 targets and our 2030 targets, and the Committee on Climate Change has been clear that we should look to set a target of 40 grams to 60 grams of carbon dioxide per kWh and move towards achieving our renewables targets. If we are to reconfigure the market, let us do it to achieve that objective.
The second objective is on fuel poverty. The price per unit of energy will rise, but fuel poverty must come down. That means that energy efficiency has to be an integral part of the reconfiguration of the market.
Security of supply is the third objective that I wish to put forward. We require a mix of energy from both within and outside the UK. We need both base load sources such as coal and nuclear and intermittent sources such as wind and hydro, as well as dual-purpose sources such as gas.
How do we go about configuring the market in that way? First, I want to hear the Government talking about standards—building standards and product standards. Why is the percentage of excess winter deaths lower in Finland than in the UK? That seems like madness when we compare the climates, unless we understand the importance of the role of building standards. That has to be part of a sensible reconfiguration of energy policy in this country, which cannot be achieved through encouragement and incentivisation alone. We need compulsion to ensure that those standards are driven throughout the market, which the Government have refused to address.
We need honesty. Unit prices for energy will rise, because world demand is rising with increased wealth in Asia, which is a good thing, and with increased global population, which is not such a good thing. That means that we have to structure the market to ensure that it is maximally efficient. Vertical integration allows a company such as Centrica to show obscene profits for its wholesale side, while making what the regulator considers to be “normal” profits in its retail arm of British Gas. Yes, increased liquidity in the forward supply market will help promote competition on the retail side, but it will not solve the abuse that vertical integration is allowing. By tackling that issue, retail unit prices will not rise by as much as they otherwise will—although if we are honest, we should say that they will still rise on a per unit basis.
Security of supply includes the investment of £200 billion over the next decade in our energy network and of £110 billion in our electricity infrastructure. That is to replace the 30% of generation that will go off stream by 2024. We need base load, yet today’s rumour is that the EU new entrants reserve carbon capture and storage project in the constituency of my right hon. Friend the Member for Don Valley (Caroline Flint) will not now proceed because of the Government’s failure either to match fund or to submit the appropriate information to secure the bid. CCS is vital because coal is vital—vital to India and to China—and whatever we do with renewables in this country, unless we come up with a CCS solution for coal-fired generation around the world, any paltry reduction in emissions achieved by the UK will not stop climate change. That is why we need a global perspective on our own energy policy. The CCS technology that we can put in place could drive the entire green economy to which both sides of the House claim to have signed up, but of which we see very little evidence.
Nuclear base load is an essential part of the mix, but the Government are set to negotiate a strike price for the nuclear feed-in tariff in the region of £100 per megawatt-hour. The cost of the two EDF reactors at Hinkley Point has risen by £14 billion and is tied in with the strike price. That is madness for a 40-year lifecycle project when onshore wind is already performing at as low as £94 per megawatt-hour, and figures from the Department of Energy and Climate Change suggest that offshore wind will achieve £100 per megawatt-hour by 2020.