Energy Costs and Charges

Debate between Carla Lockhart and Amanda Solloway

Tuesday 21st November 2023 Westminster Hall

[Amanda Solloway]

I thank the hon. Gentleman for his intervention. Of course, the fact is that we had a cost of living crisis mainly, as I have pointed out, because of Putin’s illegal invasion of Ukraine. That was the situation we found ourselves in.

For households in fuel poverty, we have targeted support such as £150 directly off energy bills through the warm home discount, which last year we increased in value and extended to around 3 million households. We are also tackling the root problem through our energy efficiency schemes. We are looking at ways to make the warm home discount more flexible, and also to help respond to future increased pressures on consumers’ bills, and we continue to monitor energy bills and keep options under review.

[Carla Lockhart (Upper Bann) (DUP)]

Figures released by the utility regulator in Northern Ireland show that small and medium-sized enterprises in Northern Ireland are paying almost 10p per kW more than a typical EU price or that in the rest of the UK. Does the Minister agree that this places Northern Ireland businesses at a competitive disadvantage, particularly given the land border with the Republic of Ireland? Does she agree that further support measures need to be put in place, particularly for small to medium-sized businesses?

[Amanda Solloway]

I point out to the hon. Lady that I had a meeting yesterday with the Secretary of State for Northern Ireland, and we were discussing these very particular issues. She has my assurance that those discussions are always mindful and at the top of my thoughts.

I also encourage hon. Members to make their constituents aware of the Government’s “It All Adds Up” campaign, which shows simple measures to save people money on their energy bills this winter. I know that the hon. Member for East Lothian has a particular interest in standing charges, as he discussed them with me yesterday. Standing charges are a matter for Ofgem.

I am pleased to share that last week Ofgem published a call for input on standing charges to look at how they are applied to energy bills and what alternatives could be considered. The standing charge is used to recover the costs required to provide vital energy company services, including providing and maintaining the wires, pipes and cables that deliver power to a customer’s door. If the standing charge were scrapped, as the hon. Member for East Lothian suggests, suppliers would still have to recover reasonable costs in other ways, which would mean charging a higher price for every unit of power used. That could have significant consequences for some categories of vulnerable customers: for example, those with high energy use due to medical equipment. That is one of the reasons we are working through the matter very carefully.

The standing charge can also vary from region to region, as has been pointed out, because of the differing costs associated with the transmission and distribution of supplying energy to a particular area. Geographical factors mean it costs more to run the local electricity distribution network in the north of Scotland than elsewhere. To help protect consumers in the north of Scotland from those costs, a Government cross-subsidy scheme provides an annual cross-subsidy of some £112 million to that area. The scheme is funded by electricity suppliers from across Great Britain and reduces the electricity distribution charge for a typical household in the north of Scotland by more than £60 a year. The cost-reflective approach means that Scottish consumers actually pay lower charges for the high-voltage transmission network than most consumers in England and Wales.

I am also aware that the hon. Member for East Lothian is interested in the benefits available for communities located near transmission network infrastructure, especially those in Scotland near offshore wind facilities. Offshore wind farm developers already provide a range of community benefit packages developed in consultation with local communities. For projects based in Scotland, developers follow the Scottish Government’s offshore energy good practice principles when creating a community benefit package. However, we want to ensure communities hosting transmission network infrastructure can benefit from supporting the delivery of cheaper, secure and low carbon energy for all of Great Britain. We have therefore consulted on proposals for community benefits. The consultation proposed to introduce voluntary guidance on the appropriate levels and forms of benefits to give communities the knowledge, power and flexibility to decide what benefits they want in consultation with the project developer. The consultation has now closed and we intend to publish a response as soon as we can.

I now want to come on to prepayment meters. Historically, customers on prepayment meters have paid higher standing charges than direct debit customers, reflecting the higher cost of serving those customers. The Government subsidises prepayment meter customers through the energy price guarantee to ensure they pay no more for their energy than direct debit customers. That seems to be the fair thing to do. The support is due to end at the end of March 2024 when the energy price guarantee ends, but Ofgem is due to announce shortly how it will create an enduring replacement for that scheme so that prepayment meter customers will have that unfair premium they were paying removed from their bills once and for all. Furthermore, the Government have worked with Ofgem and the industry to see that the rules extending protections with regard to prepayment meter installations for the most vulnerable consumers have come into effect.

I wish to close by reminding all hon. Members that they should encourage their constituents to contact their energy suppliers if they are concerned about their energy bills or their ability to pay. Energy suppliers have an obligation to their customers and Ofgem has also introduced further rules on customer services for this winter. Once again, I sincerely thank the hon. Member for East Lothian for securing this incredibly important debate.

Question put and agreed to.