Energy Price Freeze

Bob Stewart Excerpts

Wednesday 6th November 2013 Commons Chamber

[David Morris]

I disagree with the hon. Gentleman’s analogy. We are talking a lot about gas, but the two nuclear power stations are huge employers in my constituency. What is the Opposition saying to my constituents with the suggestion of a price freeze? Will there be a freeze on their wages? That is what would happen. How can those two new stations produce energy efficiently and make some profit out of doing so without passing the effect of the price freeze down to the people who work in the area? The local economy would be hard hit. It is one thing to announce price freeze policies on the hoof, but that is the reality.

We are trying to be more responsible. I agree that we must take down green levies, which are a blight on struggling families. The average British family pays £112 a year because of green levies and I am delighted that the Prime Minister is taking action on that. We all support low-carbon energy production, but there is no point in confusing saving the planet with taxing people to death. We also need to invest in local energy production which is less susceptible to foreign crises and currency fluctuations. My hon. Friend the Member for Warrington South (David Mowat), who is no longer in his place, articulated accurately how the European markets are dealing with this problem. We can debate what sort of locally produced energy we should have, and I am very aware of people’s different views on that, but having local production is vital in my area for a variety of reasons, including the local economy and the cost to the consumer.

[Bob Stewart (Beckenham) (Con)]

It is clear from what my hon. Friend says that we need more nuclear power stations. They will produce energy at the lowest price, so let us get on with it.

[David Morris]

My hon. Friend takes a Churchillian stance on this issue. We do need more nuclear power in this country and I have never made any bones about saying so. Under this Government, Britain has done well at improving homes to make them more energy efficient, and that cuts costs even at a time when costs are rising. I want us to go further and consider the possibility of tax breaks for companies that build homes with solar panels.

We must push to bring more companies into the market. In 1997, there were 20 major energy companies; now, there are just six. The monopoly must be broken up, and that will never happen unless people are willing to switch providers. The Leader of the Opposition switched supplier. I do not want to ridicule him for that; I want to praise him, because he did the right thing. I just wish he would encourage others to join him, because this is one way of creating competition that will push costs down.

There are more ideas than the ones the Department of Energy and Climate Change is working on, but whatever happens the public must be aware that while the Labour price freeze sounds attractive, it is fundamentally weak and will not lead to lower energy bills—it might even increase them. The truth is that there is no obvious solution to the problem, but by putting a number of measures in place we can take control of it. I support the work of the coalition on energy markets. For the sake of my constituents, I beg hon. Members on both sides of the House not to put that work at risk.

--- Later in debate ---

[Dr Whitehead]

My hon. Friend is right. The market tends eventually to land its risk, its transfer arrangements and its outcomes squarely on customers’ bills. The point about a price freeze is that it must be seen in the context of the other measures that it is being suggested should accompany it as a way of securing a pause while the market is reset.

[Bob Stewart]

For the sake of my education, will the hon. Gentleman clarify one point? It seems to me that if we had a nationalised energy company and the prices went up, there would be only two ways of paying for that: through the customer, and through the Government. Does the hon. Gentleman agree that, whether a company is nationalised or commercial, the customer pays in the end?

[Dr Whitehead]

The hon. Gentleman asks a rather complicated question. Currently, gas is the market-maker and companies that produce energy that is not gas-based sell their energy into the retail market at the electricity-equivalent of the price of energy produced by gas. It is to be hoped that one of the effects of energy market reform will be that a change in the balance of production, in particular as a result of increasing amounts of renewables, will mean that gas is no longer the market-maker. That is another canard that will need to be shot in the long term.

[Bob Stewart]

Gas is the most expensive?

[Dr Whitehead]

Obviously, the world gas price varies considerably. The UK market is currently based around the gas price. If gas is no longer the market-maker over the medium and long term, a number of interesting consequences will arise, particularly in terms of how we would relate volatile markets to retail prices.

That is one of the issues that would be dealt with by the Opposition’s proposals to introduce a pool. If there is a pool into which everybody transparently sells their products and the pool then sells to energy retailers, that would deal with a number of problems that have arisen as a result of the imperfections in the market, and which would remain despite the Energy Bill trying hard to address them. If there was a pool, they would be dealt with even if gas was still the market-maker, but the market would be much more efficient in the long term if that was not the case.

We should consider in this context the fact that independent generators do not believe they have a clear market for their products. That issue remains unsolved by the Energy Bill provisions. If there were a pool, it would be substantially solved in as much as they would know they had a buyer into the pool and a seller out from the pool. If the current dysfunctional market were reset in the way the Opposition propose—with a price freeze while the market is reset, a pool, and a regulator that can properly relate what is happening in world prices to how they are being passed on through the pool and out the other side—a lot of the issues we have been talking about today would become far more simple and transparent, and the future solutions would be customer-oriented.

I do not say that that would solve the problem of increased energy prices in the future, because it is certainly true that world energy prices continue to increase and that there would be price increases for the consumer. It is not true, incidentally, that under those circumstances energy companies would simply take back the money lost during a price freeze, because there would be regulation reflecting world prices. Although prices have gone up, the world gas price has not gone up over the past year and a half. A fair relationship between world energy prices and retail prices could be achieved through a combination of new forms of regulation, an energy pool and a reset of the market.

We must look at these proposals as part of a wider package that, at its heart, is on the side of the consumer. At present we have a dysfunctional market that will never end up on the side of the consumer unless it is fundamentally reset so that it points in the right direction. My sorrow is that, although the Energy Bill has many good provisions that deserve to be supported, it does not do that, and that is what the Opposition proposals are trying to do, and that is why they should be looked at seriously—