Energy Price Freeze

Debate between Caroline Flint and Duncan Hames

Wednesday 6th November 2013 Commons Chamber

[Caroline Flint]

I will make a little more progress.

At the outset I want to deal with a few of the myths that the Government have resorted to peddling in the absence of any credible policies of their own and because they are confused about how to respond to our proposals. The first myth is that the price freeze cannot or will not happen or that the idea is a con. Let me tell the House that there is only one situation in which this price freeze will not happen: if the Conservatives or Liberal Democrats win the next election. If we are elected, this price freeze will happen. The idea that a price freeze will not work if wholesale prices increase is complete and utter rubbish.

As the energy companies themselves admit, they are not buying today all the energy they need to supply their customers tomorrow. They buy their gas and electricity two, three or even four years before it is supplied, precisely in order to manage the risk of fluctuation in wholesale prices. The Secretary of State must know this, so the Government’s argument does not stand up.

The second myth is that companies will undermine the freeze either by hiking up their prices beforehand or by increasing them afterwards, but as I asked the Secretary of State at the last Energy and Climate Change questions, if companies collude to increase their prices beyond anything that can be justified before the next election, will he stop them? If he will not, let me be clear: we will take action. As for what happens after the price freeze ends, the reason it lasts for 20 months is that that is how long we think it will take to enact our reforms to overhaul this market. By that point, we will have a new regulator in place, with the power to force companies to cut their prices when wholesale costs fall, which will prevent the kind of mark-up and overcharging that we all know is happening. This price freeze will happen and it will work.

[Duncan Hames (Chippenham) (LD)]

Does the right hon. Lady agree that it would be in the interests of bill payers for all Governments to have an objective of keeping the cost of capital in the industry as low as possible so that bill payers may get their energy as cheaply as it can be produced?

[Caroline Flint]

I do agree. It is sad that in recent times so many people who want to invest in energy have said that the capital costs are going up because of the dithering and indecisiveness of this Government towards investment in energy.

The third myth is that our proposals will deter investment. Nothing could be further from the truth. As EDF’s decision on Hinkley Point C shows, what matters for investors is long-term certainty on returns, not short-term gains based on overcharging. That is why we have supported the Energy Bill and given our backing to the framework of contracts for difference and the capacity market. And we will put right this Government’s failure to set a decarbonisation target, in order to give low-carbon investors the certainty they need to invest throughout this decade and the next.

--- Later in debate ---

[Caroline Flint]

I will make some progress, because I want to get on to one of our other policies that could have an effect this winter.

A competitive, transparent energy market is our aim, but markets must have rules. The question is what those rules allow and what they encourage. Do they mend broken markets or do they allow some firms to take advantage at the expense of everybody else? The motion proposes two important changes to the rules.

First, we all think that there should be simpler and fewer tariffs, but we must also ensure that the market protects those who are less able to switch. The over-75s are the most likely to live in homes with poor energy efficiency and the most vulnerable to cold weather, but they are the least likely to switch supplier and the least able to access the cheapest deals, which are often online. As a result, they often pay more than they need to. The motion proposes that we make the energy companies put all over-75s on the cheapest tariff. The energy companies have told me that they can do that.

Secondly, the constant attacks on clean energy are short-sighted because investing in clean, home-grown energy and energy efficiency will improve our energy security, make us less reliant on imports and leave us less vulnerable to price shocks in world markets.

[Duncan Hames]

Will the right hon. Lady give way?

[Caroline Flint]

No, I will not give way.

We currently have the problem that when wholesale costs increase, bills go up like a rocket, but when wholesale costs fall, bills fall like a feather, if at all. In a properly competitive market, cost reductions would be passed on as quickly and as fully as cost increases. I urge the House to support the proposal in the motion to establish a new regulator with the power to force companies to cut prices when wholesale costs fall. I know that the president of the Liberal Democrats supports that proposal, because he said so to the audience and viewers of “Question Time” when I sat next to him on the panel a few weeks ago. I hope that the Secretary of State will confirm his party’s support for the proposal in his speech.

That is what real action looks like. That is what a Government who put the interests of ordinary people ahead of the energy companies would look like. What a contrast it is with this Government: a Government who pretend to put everyone on the cheapest tariff, even though 90% of people will see no benefit, but who refuse to put all over-75s on the lowest deal; a Government whose only answer is to tell people to shop around, even though switching levels have fallen to an all-time low, as people have lost faith with the market; and a Government who want to roll back the very measures that will insure us against rising prices in the future because they are too weak to stand up to the energy companies today.

Let us remember that 60% of the levies that the Government are rushing to blame were introduced by them. It was the Chancellor of the Exchequer who introduced the carbon floor price, which leaves British consumers and industry paying over and above what is paid by our European neighbours for energy. They talk about value for money, but it is they who designed the energy company obligation—a scheme that requires 53 pieces of information to be submitted for one measure to be installed. When they talk about moving policy costs from people’s bills to people’s taxes, let us remember that it was this Government who abolished Warm Front and now have the unenviable record of being the first Administration since the 1970s not to have a publicly funded energy efficiency scheme.

Today’s motion might refer only to energy prices, but it is about much more than that. It is about who our country is run for. Is it a country that works for hard-working people or are we settling for a country where only a few at the top do well and everyone else struggles? The Opposition know that the first and last test of economic policy is whether living standards are rising for ordinary people. Today, the House faces a choice: a choice between whether it is people’s bills that will be frozen this winter or their homes; a choice between whether we reform broken markets or defend them; a choice between whether we stand up for the 60 million people who live in this country or the big six energy companies, for the 2.4 million businesses or the big six energy companies. The reality is that if we do not fix this broken market, nobody else is going to. Today, in this House, we have it within our power to provide real help now to millions of people who are facing the cost of living crisis and to reform the energy market to deliver fairer prices in the future. I commend the motion to the House.