Oral Answers to Questions
Debate between Caroline Flint and Ed Davey
Caroline Flint (Don Valley) (Lab)
I join the Secretary of State in thanking you, Mr Speaker, and others. Thursdays have become the ticket to have in questions, and there is no doubt that over the past four years energy has been front and centre of pretty much every debate across the policy range. I wish those on the Government Front Bench a happy retirement.
On a serious note, the devastation wrought by Cyclone Pam in Vanuatu has reminded us that climate change is a national security threat, not just overseas but in Britain. It is vital that the UK plays a leading role to secure a binding global agreement to tackle climate change at the Paris conference later this year. Does the Secretary of State agree that we will secure influence abroad only if we show leadership at home, and will he reaffirm his support for Labour’s Climate Change Act 2008?
Mr Davey
I am grateful to the right hon. Lady, who makes a serious point about the impact of climate change on some of the most vulnerable people on our planet. We need to lead in the world, as indeed we are doing. She will also know that not only the Liberal Democrats but the Prime Minister, on behalf of the Conservative party, and the Leader of the Opposition recently signed a letter to confirm their support for the Climate Change Act 2008. That had huge consensus across the House—[Interruption.] As the right hon. Member for Hitchin and Harpenden (Mr Lilley) notes, five people voted against it, and nine Members also voted against the Energy Act 2013, which I put through the House and is the practical way of delivering on the Climate Change Act 2008. It is important that the world should understand that across the parties there is a lot of agreement on this issue.
Energy Prices
Debate between Caroline Flint and Ed Davey(9 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint
I think that in a number of policy areas, the Government are—to put it in a not very academic way—all over the shop. When it comes to energy, they contradict themselves daily, and I can provide the House with evidence of that.
Our motion raises four questions. First, have wholesale costs fallen, and are they continuing to fall? The answer to both parts of that question is clearly yes. Ofgem—the independent regulator with access to market data—confirms that that is the case. Its most recent estimate suggests that contract prices for the delivery of gas and electricity this winter are, respectively, 17% and 7% lower than they were this time last year. The Government’s own figures also show a fall. In a written parliamentary answer that I was given on 26 November 2014, the Minister for Business and Enterprise revealed that wholesale gas prices had fallen by 20% between November 2013 and November last year, and that wholesale electricity prices had fallen by 9%. Those figures relate to the day-ahead market. Platts, one of the price reporting agencies, thinks that the fall has been even more substantial: its estimates suggest that gas prices fell by 26% last year. On the forward market, in which energy companies are buying and selling energy ahead of time, the fall has been bigger still, with gas prices falling by as much as 30%.
There can be no doubt that the wholesale prices of both gas and electricity have fallen—not just a little, but quite a lot, and not just in the past few days or weeks, but for a sustained period of more than a year.
Caroline Flint
I will give way shortly.
That brings us to the second question that the House needs to consider today. Have those savings been passed on to consumers? Yesterday, E.ON announced a price cut of 3.5%. Of course, any cut to anyone’s energy bill is to be welcomed, but E.ON is just one company, and it has cut the price of only one fuel—gas. Electricity prices remain unchanged, and it just so happens that E.ON has more electricity customers than gas customers. Moreover, it has cut its gas price by only 3.5%, which must be set against falls of between 20% and 30% in wholesale gas prices. Even if we allow for the fact that wholesale costs make up only half the energy bill, that suggests that, after cutting its price, E.ON has still pocketed most of the savings from falling wholesale prices. The idea that we are
“winning the war on energy bills”,
as the Secretary of State told The Northern Echo last week, is about as far from reality as the right hon. Gentleman’s chances of becoming leader of his party—much though some of us relish the prospect.
Some of the energy companies collude with the Government in perpetuating the idea that bills are falling. According to a press release issued on Sunday by Energy UK, the trade association for the energy companies,
“Energy suppliers are already passing on price cuts to customers.”
Apart from E.ON, none of the suppliers—notably the big six, which have millions of “sticky” customers on expensive tariffs—have cut the price of their standard variable tariff, which is the tariff that most people are on. What they are doing is offering cheaper tariffs in order to acquire new customers, but offering cheaper deals to a small number of new customers is completely different from passing on savings to existing customers. The obvious question to be asked is this: if companies can afford to offer cheaper deals—often hundreds of pounds cheaper—to acquire new customers, what is preventing them from reducing bills for the rest of their customers? That is the second fact that we have established this afternoon: wholesale costs have fallen, and the savings have not been passed on to consumers.
Mr Davey
On Sunday, on “The Andrew Marr Show”, the Leader of the Opposition told us that Labour wanted “fast track legislation” to ensure that Labour’s idea was implemented before the election. Can the right hon. Lady tell us which wholesale price Labour would use for its regulation? Would it be the daily price, the weekly price or the monthly price?
Caroline Flint
As I have said in the House before, we will give the regulator a power and a duty to ensure that when wholesale costs fall, it will make the decision—as is only right—to ensure that those reductions are passed on to consumers. I should have thought that the Secretary of State would welcome that. As was pointed out by my hon. Friend the Member for Denton and Reddish (Andrew Gwynne), Ofgem—which I understand the Secretary of State supports—has a duty and a responsibility to protect consumers, and one way of protecting consumers is to ensure that they are paying a fair price for their energy. I see absolute clarity in our policy, but no clarity on the Government Benches.
That brings me to the third question. This is where things really begin to get interesting. Why have suppliers failed to pass on these savings? A number of different explanations—although they might more accurately be called excuses—have been provided, both by energy companies themselves and by their friends in the Government.
The first excuse that we have been given is that, because there is a gap between the point at which an energy company buys its energy and the point at which that energy is actually delivered, a company might be buying energy 18 months or a year ahead of time. That is true, but wholesale energy costs have been falling for over a year, so even if companies bought their energy a year or more in advance, bills should still be coming down by now. That explanation simply does not hold.
Mr Davey
I am surprised by the hon. Gentleman’s question, because he is an real expert in this area. He sits on the Select Committee and he also served on the Bill that became the Energy Act 2013, so he will know that the capacity market that we created in that legislation had the support of the Opposition. It was needed because the objectives of energy policy are not confined to lowering prices; they also involve energy security. That is where the capacity market plays a role. He will also know that the results of the capacity auctions were far better than we had predicted. The closing price—the clearing price—was significantly lower than we predicted, so there will be a lower impact on consumer bills. That is good news for consumers, because it means that energy security has been achieved at a lower cost. He is wrong to say that all that money is going to the big six; a plethora of energy generators will benefit from it.
Let me be frank with the House. It has taken some time to turn around the mess in the energy markets that we inherited. We cannot switch competition on and off like a light bulb. We know that, until recently, energy bills have been rising over the course of this Parliament. The fact that they have risen more slowly during this Parliament, compared with the last Parliament, is frankly irrelevant to the consumer who still has to pay a higher bill. So, although we have increased competition and although that is working, I am determined to go further still. That is why, back in 2013, I commissioned the first annual competition assessment of our energy markets and why I strongly backed Ofgem’s referral last year of our gas and electricity markets to the Competition and Markets Authority.
The past 12 months have seen the first big test of the extra competition that we have introduced. Have consumers been able to benefit as wholesale prices have fallen? The answer is yes. Not all consumers have benefited, of course, but several million have switched to new suppliers and to new deals in which the fall in wholesale prices has been passed on. They have seen the benefit of our extra competition. Indeed, many people who have switched have seen savings far bigger than the fall in wholesale prices alone would produce. Our latest estimate suggests that many people could save about £300 a year by switching.
Caroline Flint
Would the Secretary of State admit that Ofgem believes the situation to be getting worse? Even if people are switching, which is welcome, their numbers are falling. Does he agree that it is only those who switch who are getting the benefit of new tariffs? What does he say to the many more customers who are on tariffs that provide no benefit as a result of the fall in wholesale prices?
Mr Davey
I think I counted three questions in there, and I shall try to answer all three, if I can remember them. The right hon. Lady said that Ofgem believed the situation to be getting worse. Certainly, its 2013 report compared the situation with the one outlined in its previous report and said that there were reasons for concern. That is why we supported its referral to the Competition and Markets Authority of our gas and electricity markets. She then talked about switching, and she was right to say that switching rates fell a little bit in recent years. The reason for that is that we have got rid of doorstep mis-selling. Doorstep mis-selling was responsible for a big boost in switching figures, but people were switching from one big six supplier to another, and often getting a very bad deal as a result. I am delighted that it has now been got rid of, even if that means that overall switching figures are down. Now, because we have made switching easier and faster—through collective switching and so on—we are seeing that situation turn around. This time, people are not switching between big six companies and getting a poor deal; they are switching away from the big six into the small suppliers and getting a much better deal. That is something that never happened under Labour.
Mr Davey
There is no difference between me and the Chancellor here: of course we want to see price cuts go through to consumers. The question is: what is the best way of doing it? Is it through heavy-handed regulation, which has to be changed? As we have heard today, the price freeze has had to be changed because bills are coming down. If that regulation had been put in place, consumers would have seen higher bills now, not lower ones. That is why regulation is not—
Caroline Flint
On a point of order, Madam Deputy Speaker. As I said in the House on 2 April 2014 and have done many times since—I reminded the House about this today—the price freeze will stop energy companies increasing their prices but will not stop them cutting them. Therefore I am afraid the Secretary of State’s statements are seriously misleading, albeit unintentionally, I am sure. Can you tell me how he can correct the record?
Madam Deputy Speaker (Dame Dawn Primarolo)
That is not a point of order; it is a continuation of the debate. The Secretary of State is responsible for what he says at the Dispatch Box. Fortunately, I am not, unless it is unparliamentary, and so far he has not been.
Mr Davey
I will try my best not to be unparliamentary, Madam Deputy Speaker. For the benefit of the House let me quote what the hon. Member for Leeds West (Rachel Reeves), a shadow Cabinet colleague of the right hon. Member for Don Valley, has been reported as saying on Andrew Neil’s programme this morning: She said:
“We didn't use the word ‘cap’.”
I can show the House the Labour advert for the price freeze. I see a block of ice, and I see the words “frozen” and “freeze” but I do not see a picture of a cap. There is no cap on that advert. It is that there has been a change and that the Opposition are in complete confusion.
Let me put on record the fact that I am grateful for the support of the right hon. Member for Don Valley—she has supported, rather belatedly, our support for the deepest ever investigation of energy markets by the Competition and Markets Authority, which is now under way. However, there is one major caveat. Labour’s support for the CMA would be more credible—Labour would be more credible—if Labour was prepared to wait until just later this year to see the report; Labour could wait for the independent advice of the CMA before anyone regulates. If the CMA says that new regulations are needed to protect the consumer, I, for one, will back that. I doubt that new regulations will be its main recommendation, but I am sure of one thing: any regulation the CMA comes up with will be far more effective, far better thought out and far more likely to work than the frankly daft regulations Labour continues to propose. The fact that Labour will not wait for the independent CMA exposes its policy for what it is: a cheap political gimmick.
That is my second argument: Labour’s regulation would be bad for consumers and would put up prices. The first issue is the utter incoherence and inconsistency of Labour’s proposed regulations. Labour wants to freeze prices and, at the same time, force retail prices to go up and down with wholesale prices. As we saw earlier, the right hon. Member for Don Valley cannot explain which policy Labour now prefers: a freeze or yo-yo bills. Worse still, it now seems that Labour’s price freeze is not really a price freeze. She keeps on trying to deny it, but I have quoted the hon. Member for Leeds West and shown the figures. I can also quote The Sun. Under the headline “Mili may ditch price freeze vow”, a senior Labour source is quoted as saying:
“If bills are coming down there will have to be a rebranding to make it a cap.”
Clearly, Labour’s high command is worried: it knows that its price freeze would mean higher bills, as some of us have warned all along.
Caroline Flint
Perhaps, as we are quoting from journalists in the press, the Secretary of State will want to comment on what the energy editor of The Daily Telegraph tweeted today. She said:
“To be fair to Labour, heard them say energy ‘freeze’ is ‘cap’ many times.”
This morning, the Financial Times stated that
“the Government is still in disarray over how to respond to Labour’s campaign for lower energy prices.”
Perhaps the Secretary of State would like to comment on those reports.
Mr Davey
Did Members note that there was no quote from a source? The right hon. Lady was trying to compare a quote from a Labour source with a quote from a journalist—not terribly good.
We have always known that the freeze would be a bad idea. If wholesale prices rose during the freeze, small firms would go bust, damaging competition. If wholesale prices fall, energy firms would just make massive profits. If the freeze has become a cap, then that raises more questions. A cap implies that Labour’s regulation would work only one way. Wholesale price cuts would have to be passed on, but not price rises. Energy firms could only lose from such a regulation.
Opposition Members may not care about that, but they should remember that that means that consumers lose. For if the risk is only one way—lose—the energy firms will have to price in that risk in the prices that they charge, which means higher prices. Indeed, they will also have to price in extra regulatory uncertainty from Labour’s wholesale return to regulated prices. This will, therefore, be disastrous for consumers. Clearly, Labour’s policy would end up raising prices, but what about its proposal to force, by regulation, wholesale price cuts to be passed on to consumers? How would that work? First, there would have to be a wholesale price—the reference wholesale price—used for the purpose. Last June, I asked the right hon. Lady whether that wholesale price would be priced daily, weekly or monthly and she did not answer. I have asked her again and she still has not answered. That is strange, because the Leader of the Opposition told Andrew Marr this Sunday that he wanted to fast-track regulation, so one would assume that he had worked this out. We can only guess. Will consumer energy prices yo-yo up and down every day, every week or every month with wholesale prices? We just do not know.
One of the main purposes of energy firms buying ahead and hedging is to protect consumers from yo-yo prices. Forward buying smoothes prices for consumers. Let me explain this rather fatal problem with the Opposition’s proposal another way. Let me use data from last year to show how Labour’s policy would work—or actually not work. Over the whole year, day-ahead wholesale gas prices fell by almost 18%. But that fall over the whole year masked significant ups and downs during the year. For example, between March and July, gas prices fell by almost 40% before rising again by nearly 50% by December. If Ofgem had forced suppliers to drop retail prices to consumers to reflect the lows in wholesale gas prices in July, would it have had to force companies to raise retail prices to reflect the highs of December? Or would the right hon. Lady expect the firms simply to bear that loss? No answer cometh. What a lot of nonsense this is.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey(9 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
My hon. Friend is right to say that we have had some disappointing announcements on Marine Current Turbines and Pelamis, which is unsettling for those companies and the families involved. However, there has been some good news: as I said to the hon. Member for Ynys Môn (Albert Owen), MeyGen is the world’s first tidal array project, and I think that the Lynton and Lynmouth demonstration zones will be able to take forward further tidal arrays. The fact that we are looking very intensively into tidal lagoon power is a real shot in the arm for the tidal industry.
Caroline Flint (Don Valley) (Lab)
May I take this opportunity to wish you, Mr Speaker, and all hon. Members a very happy Christmas? May I also wish the Secretary of State good luck, as I understand he is appearing in pantomime this Christmas? I am sure that we all want to wish him the best of luck. It is good to know that the Liberal Democrats are beginning to think about their career options after the next election.
Caroline Flint
I understand that he is playing a drunken monk in “Robin Hood”.
The best way to help households permanently to cut their energy bills is to make their homes more energy-efficient. According to the Government’s own figures, 5 million households would still benefit from cavity wall insulation and over 7 million would benefit from loft insulation. Why, then, has the number of households getting loft and cavity wall insulation fallen by more than half compared with last year?
Mr Davey
First, Mr Speaker, may I wish you, the right hon. Lady and all other right hon. and hon. Members a happy Christmas? I am afraid that those who wanted to buy a ticket for the pantomime at the last moment will be disappointed, because I appeared with St Paul’s Players in Chessington two weeks ago; I should have given more notice. It was “Robin Hood”, and some of us originally from Nottingham believe in some of those principles.
The right hon. Lady asked a very important question about energy efficiency. She will know that our approach has been to go after measures not only on loft insulation and cavity wall insulation—which are very important but declining in terms of availability and options because so much has been done—but on solid wall insulation, which is more expensive but vital for tackling fuel poverty and climate change.
Caroline Flint
The Secretary of State does not want to admit it, but the reason so few households are getting help is that the Government caved in to the energy companies and cut the number of households they have to help. The chaos does not stop there. The latest round of the green deal home improvement fund for solid walls opened last Wednesday and closed the very next day. This is not just incompetent but wasteful. Instead of just giving money away, we could make the funding go further, in a fairer way, if it was used to support zero-interest loans for energy-efficiency, as we have proposed in our green paper.
Mr Davey
The right hon. Lady picks an odd day to ask about energy-efficiency when we have announced 1 million energy-efficiency measures through the green deal and the energy companies obligation. The solid wall part of the green deal home improvement fund had to close early because it was so popular and successful, so for the right hon. Lady to criticise that is remarkable. All those people who will benefit from that measure will note her words.
Annual Energy Statement
Debate between Caroline Flint and Ed Davey
Caroline Flint (Don Valley) (Lab)
I thank the Secretary of State for what I hope and expect will be his final annual energy statement. What a curious statement it was. He looked very satisfied with himself, but consumers worried about how they will afford their energy bills this winter are not satisfied with the Government; families living in cold and draughty properties are not satisfied with the Government; and businesses—people who want to invest in this country, create jobs here and put us at the cutting edge of innovation in new forms of clean energy—are not satisfied with the Government either.
Let me start with consumers and the energy market. In his statement, the Secretary of State seemed to suggest that the energy market has never been working better, but will he confirm that, with the exception of a brief spike at the end of last year that followed Labour’s price freeze announcement, switching levels are at their lowest point for almost a decade? If things have improved so dramatically, will he also explain why, according to Ofgem, in the past year the profits of the energy companies have increased, as have the number of complaints about poor customer service? Is that what a functioning competitive market looks like? For the record, will he also confirm that under this Government energy bills have risen twice as fast as inflation, four times faster than wages, and faster than those in almost any other developed country in the world? That is why, on the Government’s latest figures, fuel poverty is rising, not falling. Is that a record he can be proud of?
One of the reasons why households and businesses have been hit so hard by recent energy price rises is that we have such low levels of energy efficiency. Looking back at the annual energy statements delivered in this House in 2010 and 2011, it is very interesting to see what high expectations the Government had for their beloved green deal. Yet today, there was barely a mention. I think we all remember when the right hon. Member for Bexhill and Battle (Gregory Barker) said that he would be having sleepless nights unless he achieved 10,000 green deals by the end of 2013. Well, maybe he left the Department to get a decent night’s sleep. So far, despite being billed as the biggest home improvement package since world war two, just 2,500 households and no businesses—not a single one—have had measures installed under the green deal. Does the Secretary of State also regret that, in his panicked response to our energy price freeze announcement last year, he announced sweeping cuts to the energy company obligation that will result in nearly half a million fewer households receiving energy efficiency improvements? Let me tell him that the next Labour Government will not make the same mistakes that he has, as will be clear when we publish our energy efficiency green paper next week.
Never let it be said that I am not a fair woman. Some things have moved slightly further forward in the past year. On oil and gas, we support the Government’s intention to implement the Wood review and establish a new regulatory body. A greater share of our electricity is coming from renewable sources. However, two thirds of the projects that have come online in this Parliament started under the previous Labour Government. The energy legislation we supported is now finally on the statute book. Progress has been made at Hinkley, too. Thanks to the European Commission, consumers will now get a better deal than the one the Government were able to negotiate. In a similar vein, does the Secretary of State agree that the National Audit Office should publish its analysis on the Hinkley deal before he finally signs the contract? Figures from Bloomberg New Energy Finance published just a few weeks ago show that investment in clean energy this year is substantially down on last year. After well-publicised spats and U-turns in Government—first on wind, now on solar—is it any surprise that Ernst and Young has downgraded the UK to seventh in its index of attractiveness for renewable investment?
I understand the Secretary of State has leadership ambitions. Does he agree with me, however, that those ambitions, and the investment climate for low-carbon generation, would be better served if he, like 16 of his Liberal Democrat colleagues, had supported a decarbonisation target for the power sector for 2030, as Labour proposed? The fact that we are missing out on this investment is not just a loss for the jobs and growth it would have supported but for our energy security, which the Secretary of State covered in his statement. As he said, this winter National Grid is taking precautionary measures to maintain the security of our energy supply, which, again, we have supported. However, is not the reason why those measures need to be taken precisely that we have seen so little investment in our energy infrastructure in the past four years? In our last few years in Government, construction on six new gas-fired power stations began, but will the Secretary of State confirm that under this Government just one new gas-fired power station, at Carrington in Manchester, has been commissioned and that even this will not be operational until after the next election?
One area on which there is greater consensus is international climate change. I welcome the progress made with the EU 2030 package last month, which, as the Secretary of State knows, we supported. I also send our best wishes to him and the officials who will be representing us in Lima as we build towards the Paris climate conference next year. In that regard, he has the full support of the Opposition, even if the same cannot be said for all Members on the Government Benches.
I am afraid that that is as far as my good wishes extend, because this time next year I hope that I will be delivering the annual energy statement, as part of a Labour Government who have capped energy prices and begun the work of reforming our energy market, ending the scandal of cold homes and securing the investment that our country badly needs.
Mr Davey
I thank the right hon. Lady for her reply, even if her last bit was slightly delusional, and for her support for things such as the Wood review, the Oil and Gas Authority and the European deal we secured and led on.
On the energy market, the right hon. Lady talked about switching levels. It is true that switching levels were higher under the last Government, but that was because there was an awful lot of doorstep selling and mis-selling. Does Labour plan to encourage doorstep selling to increase switching levels? Unfortunately, it was a very bad strategy. Under the last Government, we saw lots of people switching between the big six—the big six quite liked that approach to switching—but under this Government we have seen record levels of switching from the big six to new suppliers. That is why consumers are getting a better deal. Switching levels in this country are among the highest in Europe, and are higher than in telecoms or the banking industry, so I think we have a very good record here.
The right hon. Lady rightly talked about profits and complaints about energy companies. We are very focused on that, and it was one reason why I was keen to support the independent competition inquiry into the energy market—it is a shame that the Leader of the Opposition did not do the same when he was doing my job. Energy bills rose faster under the last Government than they have under this one. Between 2005 and 2010, they rose 10.3% in cash terms, whereas, under this Government, they have risen by 8% in cash terms. So she and Labour have a very poor record on electricity and gas bills.
The right hon. Lady talked about the green deal, but she did not mention the green deal home improvement fund, which was so successful it unfortunately ran out of money quicker than we expected, or the fact that in response we have announced another £100 million for the fund. She also failed to notice that the number of green deal finance plans being taken out is at long last beginning to rise.
The right hon. Lady’s characterisation of ECO will not be recognised by the hundreds of thousands of people benefiting from this scheme, which has been much more successful than its predecessor. As a result of the green deal and ECO, we are on track to install energy efficiency measures in 1 million homes. She also keeps making this astonishing request that the NAO audit a contract before it is finalised. It sounds like a rather odd approach for an audit. I have told the House before that, of course, I would expect the NAO to look at the contract after the deal has been agreed and that we would co-operate with it.
The right hon. Lady made some rather odd points about renewables investment. If the investment was all down to the last Government, why was last year a record year for investment and why do we have such a healthy pipeline set to more than double investment in renewable electricity? Bloomberg New Energy Finance, which she quoted, marked the UK down as fourth in the world in 2013 for clean energy transactions, with more than $21 billion of transactions. I think she was referring to the 2014 figures, which she says are coming out soon, but I am afraid she needs to check her facts, because there is a bit of a difference between raw data and model data. I am happy to explain that later, however, because it is an important debating point.
I was glad to have the right hon. Lady’s support for the 2030 deal—it was significant, as was the confirmation that we would keep to the fourth carbon budget, meaning that the Government have met their climate change objectives. She talked again about the power sector decarbonisation target and I have made it clear that the Liberal Democrats will pursue that. I also made it clear why I put in the Energy Act 2013 the power for the next Government to implement such a target.
The right hon. Lady also talked about gas stations. I can confirm that fewer gas stations have been constructed during this Parliament than were previously expected. That has been the case, by the way, across the whole of Europe, because of the changes in the relative prices of coal and gas, which have affected all European countries. That is one of the reasons why we were right to put in place a carbon price floor and reform the EU emissions trading scheme, so that we can get the incentives to move from coal to gas, as part of our climate change strategy.
But overall, I think I detected some consensus from the right hon. Lady.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey
Mr Davey
The hon. Gentleman has not noticed that in the competitive energy market that we have helped deliver, the large energy companies are announcing price freezes that have been delivered by competition, not regulation. Moreover, a lot of smaller independent suppliers that have come into the market are offering good deals that people can switch to and save literally hundreds of pounds. I hope he will recommend those to his constituents.
Caroline Flint (Don Valley) (Lab)
According to Government figures nearly 2.5 million households are in fuel poverty in England alone, with 1 million more in Scotland and Wales. A written parliamentary question to me on 4 September revealed that the Government’s flagship policy—the energy companies obligation—will lift just 10,000 households out of fuel poverty between 2015 and 2017. Will the Secretary of State explain why out of a budget of nearly £2 billion, and with hundreds of thousands of measures due to be installed, so few people living in fuel poverty will be helped?
Mr Davey
Fuel poverty increased massively under the previous Government and it is falling under this Government because of a range of measures that we are taking. We are about to publish—either this year or early next year—the first fuel poverty strategy in a decade. I think we have been very active, and I am totally committed to helping people in fuel poverty.
Caroline Flint
Under Labour fuel poverty fell by 1.7 million, but this Government have changed the definition of fuel poverty—that may be the reason for the answer given by the Secretary of State. Let me tell him why the ECO has done so little for the fuel poor. It is because nearly half the funding goes to people who are not in fuel poverty, and households in fuel poverty get only one measure, which is not enough to make a difference. Despite that, the Government have announced a further £100 million for the green deal home improvement fund—another scheme that goes to people with no assessment of their ability to pay or need for energy efficiency improvements. Is that just throwing good money after bad, and will the Secretary of State make a decision today to ensure that all that funding goes to the people who need it most?
Mr Davey
Fuel poverty increased under the previous Government under both their measures. We changed the measure of fuel poverty after an independent review because the previous Government measured fuel poverty so inaccurately that the Queen was deemed to be in fuel poverty. We thought that needed to change. Under the right hon. Lady’s approach, a lot of the money she would have spent would have been wasted—it would not have gone to people in need. Under our more accurate approach, we are ensuring that the money goes to the right people. She should know not only that more than 50% of the ECO goes to those in fuel poverty, but that because we have protected the affordable warmth part of the ECO for fuel poverty until 2017, even more people will be taken out of fuel poverty.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey(10 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
We need a mixed approach to energy supply and generation. The Government have always argued that we need renewables, gas and new nuclear and that diversity gives a country extra strength in its security of supply. When we do our analysis we consider all the system costs, not just of renewables but of nuclear and other systems, and no type of electricity generation is without its challenges. For example, in the short term, we have seen fires at two coal plants, Ironbridge and Ferrybridge, that we are having to take into account in our analysis to ensure that our capacity margins are okay over the winter. The mixed approach that we propose is the most secure.
Caroline Flint (Don Valley) (Lab)
The future of Thoresby and Kellingley coal mines has now been in limbo for more than five months, which raises concerns about energy security. Both the Business Secretary and the previous Energy Minister, the right hon. Member for Sevenoaks (Michael Fallon), said that they were not open to supporting or providing state aid, but the new Minister of State has indicated in meetings that he may be open to state aid, so will the Secretary of State clear up once and for all whether the Government will consider providing it?
Mr Davey
Important though the issue is, it is not an issue of energy security. Even if those collieries were in any way to be suspended, the energy security of the country would be okay. The Government have worked tirelessly with the different companies involved to do what we can to help them reach a deal that will ensure the future of those pits, and we will continue to do just that.
Caroline Flint
It really is important that we have clarity about the future of these mines. It helps no one—not UK Coal, not other potential investors and not the work force and their representatives—for this uncertainty to continue. The Business Secretary and the previous Energy Minister indicated that they were not open to providing state aid, whereas the new Minister has indicated that he may be open to state aid, so will the Secretary of State clarify? Will the Government not support state aid or have they changed their mind?
Mr Davey
We consider all options, but the right hon. Lady presents state aid as a “get out of jail free” option when it is not. If the European Commission were presented with the state aid case, it is extremely likely that by the end of the support it would require the collieries to close. We think that there is an advantage in a commercial approach and that is what our attention is focused on.
Mr Davey
As my hon. Friend will know, we have published a draft fuel poverty strategy. It sets out a range of measures that we would like to take, not least some ambitious new targets for tackling fuel poverty, and the issue raised by my hon. Friend is part of that. Ofgem’s retail market review looked at standing charges and their operation, and that analysis will feed into the consultation on the strategy.
Caroline Flint (Don Valley) (Lab)
In the early exchanges, a difference of approach seemed to arise out of the support or non-support for Thoresby and Kellingley coal mines. Will the Minister of State clarify whether he is open to a state-aid application, and say what form of assistance he would make available to UK Coal? If a formal application is made, how quickly will the Department for Business, Innovation and Skills decide whether to present the case to the Commission? If that is not the case, will he explain why the £4 million loan has been delayed, and say when he expects that money to reach the mines?
Energy Company Licence Revocation
Debate between Caroline Flint and Ed Davey(10 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint
No, I do not accept that. We can clearly see that where wholesale costs have fallen the public as the bill payers have not seen a reduction in their bills—this has nothing to do with other aspects asked of these companies in terms of helping to tackle fuel poverty or helping to support the renewable sector—but when wholesale costs have gone up, the energy companies, and in particular the big six, are quick to remind everyone that is because their costs have risen. We expect the reverse to happen when wholesale costs go down.
As I said, the reason bills have risen is that the energy market is broken. We have already set out a number of proposals that we will put in place if we are elected in eight months’ time: an energy price freeze until 2017, saving the average household £120; all those over the age of 75 put on the lowest tariff; a ring fence between the generation and retail arms of vertically integrated energy companies; a pool for all electricity to be traded in, and greater transparency for trades in the gas market; and a tough new regulator with new powers to police the market and protect consumers, including new powers to protect off-grid households and small businesses, and to force energy companies to cut their prices when wholesale costs fall if they do not do it first. All of these proposals have been put before the House, but Conservative and Liberal Democrat Members have voted against each and every one of them.
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
If Labour were to be elected at the next election, would it make the changes the right hon. Lady mentions ahead of the reporting of the investigation by the independent Competition and Markets Authority?
Caroline Flint
Of course some of the issues the CMA is looking at are the very issues we have been raising for the last two to three years, so I have welcomed the CMA review. As I have said in public already, it is working out quite well, because the CMA review is, in terms of when the clock started ticking, scheduled to finish around December 2015; it has 18 months in which to do its inquiry. If we get elected next year, our plan is to publish a White Paper, having taken through emergency legislation on the price freeze, and we can see a very good way that our White Paper and proposals can dovetail with the discussions happening with the CMA. In fact I am very open to the fact that the CMA may come up with further proposals that need to be addressed. So I do not fear the CMA; I welcome it. But what I do believe very strongly is that whatever reviews are being undertaken by the CMA, that should not paralyse politicians and those in government from doing the right thing.
Caroline Flint
I really think the Secretary of State is clutching at straws here. We believe very strongly—this is why we set out a Green Paper for energy market reform—that we have identified and tapped into some answers as to how to reform this market. I have to caution the Secretary of State. He may be surprised, if he asks his advisers, and perhaps speaks to some of the energy companies, how in a number of areas they welcome some of our reforms. So he needs to be a little more cautious about putting down Labour’s proposals. A number of them command respect across this House—even though it might not be said publicly—and, actually, in the energy sector as well.
Caroline Flint
I could not have put that better myself. There is no evidence that the shareholders or managers of the companies take a hit in terms of the benefits they receive; the cost of the fines is often absorbed back into the pot that the bill payers have to pay.
We have heard about the 31 investigations and about the fines that have been imposed. The Secretary of State might claim that this is a sign of success and evidence of a tough new regulatory environment, but that would be true only if there were evidence that companies had changed their ways and that the fines had deterred them from breaking the rules again. The evidence shows that they have not learned their lessons despite all the previous fines and penalties. Information that I have obtained under the Freedom of Information Act reveals that those firms are now facing another 15 probes into poor customer service, incorrect billing and other bad practice. No company has a God-given right to be in the market, to charge its customers and to make a profit just because it has always done so—least of all, those that inherited millions of customers from before the industry was privatised and opened to competition.
Today’s motion proposes a new power for the regulator to revoke energy companies’ licences when there have been repeated instances of the most serious and deliberate breaches of their licence conditions that harm the interests of consumers. Of course, any decision to revoke a licence would have to be subject to due process and to be consistent with the regulator’s overriding objective of protecting consumers and promoting a competitive, transparent and fair energy market.
This proposal would build on best practice from regulators overseas. In some parts of the United States, energy regulators already have the power to revoke an energy supplier’s licence. The Pennsylvania Public Utility Commission, for example, has the power to revoke a supplier’s licence if it breaks consumer protection law or transfers customers without their consent. That sends out the clearest possible message to energy companies that if they carry on mistreating their customers, their licence will be on the line. That strikes me as a pretty common-sense measure.
I hope that the Secretary of State will be able to support our motion today. I say that because when I announced this proposal in August, it was telling that the Government did not put anyone up to discuss it on television or on the radio, and that no Minister commented on the proposal. All we had were anonymous quotes from a Conservative spokesman and a Liberal Democrat source, and between them they could not muster a single good reason not to support the measure. All they seemed to suggest was that Ofgem already had this power, which is simply not true. I have discussed the issue of non-financial penalties with Ofgem and written to it about our proposal, and it has made it absolutely clear that this would be a new power. Indeed, the statement that it issued on the day of my announcement began
“Ofgem is always interested to work with government on any new powers or refinements to existing powers which would help to further protect consumers.”
As today’s motion notes, the regulator has limited powers to revoke licences in certain specific cases, but they are largely of an administrative nature—for example, if a company goes into administration, if it gets a licence but does not supply any gas or electricity in the following year, or if it does not pay a fine.
Caroline Flint
Absolutely. As I have said, the regulator cannot at any point say, “Enough is enough.” That is the key difference between what we are proposing and the status quo. Our proposal would deal with the problem that we have seen in the past, wherein companies are allowed to get away with repeatedly breaking the rules in slightly different ways, or breaking different rules, without fear of losing their licences.
Clearly, the intention behind this policy is to encourage companies to treat their customers better, and the best outcome would be if the power never needed to be used. But if the regulator did decide to use it, the provision would need to have a clear legal basis, almost certainly set down in legislation, in order for it to be exercised with confidence. Otherwise, the threat of legal challenge would probably prevent it from ever being used. That is why it is important that this new power should be clearly put into law, just as the existing power to fine a company up to 10% of its global turnover has a clear basis in law. This would undoubtedly represent a significant addition to the regulator’s powers, and there are important questions about how it would work and about its implications, which I want to address before I finish.
I want to make it clear from the outset that the regulator would remain operationally independent and free from any interference from Ministers. Any decision about whether to revoke a supplier’s licence would be made by the independent regulator alone, but, like all economic regulators in the UK, its functions and powers are defined in statute. What we are debating today, therefore, is not whether any particular company deserves to lose its licence, but whether the regulator should have the power to make that decision, if it thought it necessary. We think that it should have that power.
The process itself would also be very similar to the existing enforcement process, except that, at the end, the regulator would have the power to revoke a supplier’s licence. In practice, an investigation of an allegation of a breach of the rules would begin and the normal process would follow, with a period of information gathering, investigation and notification of the supplier concerned. If the regulator believed at the end of the process that there had been a breach of the rules that had been serious and deliberate and had harmed consumers, and if there had been repeated instances of such behaviour in the past, under our proposals it would have the power to revoke a supplier’s licence in the same way as it has the power to impose a financial penalty or make a consumer redress order. Within the existing enforcement framework there would be clear guidelines for energy companies and a system for appeals.
In the event that a supplier lost its licence, it would mean in practice that it was no longer able to operate as an energy supply company. Let me make it clear that at the moment, companies wishing to supply and generate energy or supply and distribute energy require separate licences for each activity. We have already proposed that vertically integrated energy companies would have legally to separate their generation business from their supply business, and that as a result any decision to revoke the licence would apply only to the licence in question and not to other licences the parent company had. There would be a notice period between the decision to revoke a licence and its coming into force that, by law, must be no less than 30 days. During that period, the company would have to arrange for a trade sale for another supplier to take on its customers.
Energy companies already market and compete to win new customers. Acquiring new customers in such a way would represent a valuable commercial opportunity and avoid the normal acquisition costs. Small suppliers might wish to expand, and if a significant number of customers were available, new entrants might enter the market. In the event that a trade sale is not arranged, the regulator has the power to appoint a supplier of last resort and the rules are in place to ensure that any consumers who are moved to another supplier are protected. Either way, the supply of energy would continue as normal.
This is what I mean by a tough new regulator overseeing a market that works for consumers, not just the companies in it.
Mr Davey
I am grateful to the right hon. Lady for giving way. She is explaining her policy and asking the House to say that this is needed because of things going wrong in the market and because energy companies keep treating their customers badly. I have some sympathy with that observation and shall make some comments about it. However, as she is asking for a new power, surely she has to give an example of where the power would have been used in the past. She is saying that the power is needed because companies are getting away with things at the moment and that the power would have been used in certain circumstances, but can she give us an example?
Caroline Flint
It is already on the statute book that the regulator has the power to fine up to 10% of the global turnover of any company. I might need to go back and check, but I believe that nobody had to prove that that had been used anywhere else before the power was put on the statute book. The Secretary of State is following a ridiculous line of argument. In recent years, a number of instances have led to investigations and fines and have shown repeated evidence of ways in which customers have been let down. We are saying that that is not good enough and that there has to be the ultimate sanction of companies losing their licence. That is the proposition. The detail needs to be discussed before it is put into law. I have been up front and honest about that, but I find it hard to believe that the Secretary of State has seriously set his face against the proposition.
Mr Davey
I will explain to the House that under current rules licences can be revoked, and I will deal with these issues. I am admitting that this a good debate to have, because there is a problem—nobody is suggesting otherwise. But, as always, the question is: what is the best way to deal with that problem? What is going to work? What is the best way to crack down on this to punish firms that get it wrong? In essence, we can use three tools: competition; regulation; and technology. The right hon. Member for Don Valley has focused on regulation, and I want to address her proposal in detail, for tough regulation certainly has a vital role to play in holding companies to account. However, I regret that her motion and her speech totally failed to mention competition and technology—those were not even mentioned once. That is a serious mistake, which the Opposition keep making. For many of the smaller suppliers now competing—
Caroline Flint
Does the right hon. Gentleman accept that in different ways the Opposition have put forward motions for debate in this House where we have engaged with competition? In my speech I mentioned a number of our proposals to create a pool to separate the energy generation and supply side. Today, we have tabled a motion that tries to identify a particular problem. We have done that because we think it is the right thing to do, and we find it hard to believe that we could not get the full support of the House on this one issue.
Mr Davey
When a Welsh MP gives a rugby analogy, one should be careful. However, I will address that point, because I have a lot of sympathy with what the hon. Gentleman is saying. I am grateful that he at least recognises that competition has a role to play. Technology also has a key role to play. The smart meter roll-out, for example, will be crucial in tackling some of the issues that consumers complain most about, especially inaccurate bills. Smart metering will help us to address even more problems faced by prepayment meter customers and it will enable 24-hour switching. So technology and competition are important in addressing these matters, and we need to have them on the table.
Despite those differences, there is no disagreement between parties over the importance of the regulation tool. Strong regulation has a vital role to play in protecting consumers. The previous Labour Government recognised that, and set up Ofgem. Indeed the Leader of the Opposition, when he was doing my job, reformed Ofgem to give it more powers to protect the consumer. He chose not to give it the power that the right hon. Lady wants, but we will leave that aside for the moment. This Government recognise the role regulation has to play for customers, which is why we have strengthened it. We have ensured that when an energy firm is fined and punished, the money does not just go to the Treasury. Customers who have been wronged are now properly compensated; we have put money in their pockets. We are even introducing criminal sanctions into the regulatory armoury. In the future, if an individual is found guilty of manipulating the energy market, they could go to prison.
Caroline Flint
Will the Secretary of State admit that even when fines are imposed, the money does not always go back to the victims? In some cases, it has gone to other groups of customers. Will he now correct himself and say that it does not always go to the victims of the problem under investigation?
Mr Davey
Before the implementation of the powers in the Energy Act 2013, some redress schemes were on a voluntary basis and the money did not always go to the individual customers who were wronged. The real intention of the new powers is that money will go to the customers. There will be proper consumer redress. That did not happen before. Under us, it is now happening. I repeat what I was saying before the right hon. Lady intervened. This Government are passing rules that stipulate that people who manipulate energy markets could go to prison. No one can accuse this Government of being unwilling to use the regulatory tool in the toughest way possible on behalf of consumers.
The right hon. Lady’s motion is focused not on regulation in general, where there is agreement, but on one new regulation. No, that is not quite true. I apologise, Madam Deputy Speaker. Her motion states quite clearly that it is focused on reforming an existing regulation—changing an existing power. Currently, Ofgem can remove a company’s licence. In other words, the regulator can now shut down a company. The regulator already has the power effectively to say to a company—its employees, customers, suppliers and shareholders—“What you have done is so bad that you can no longer trade.” It is a tough power, and rightly so. It is what we might call the “nuclear” option, because the consequences are severe for the customer as well as for the company.
Let us imagine that the nuclear option is taken by the regulator. It does not matter whether we use the current carefully designed system, which I will describe later, or the more arbitrary system being proposed by the right hon. Lady. The time spent preparing to use this nuclear option will be critical. Under the current situation, because of the ratcheting up, contingency arrangements could be put in place. If things are done more quickly and directly, as the right hon. Lady wants, there could be chaos. It would be bad for the staff, as there would be a significant loss of jobs. It would be bad for consumers, as they would have to be switched to another company or companies very quickly. That is not easy, not even in 30 days, without real difficulties and challenges. If it were a large firm that was being closed down, it is likely that only other large firms would be able to absorb that number of customers quickly. The result is that Labour's big six would become Labour's big five—genius!
Caroline Flint
Does the Secretary of State agree that the grounds on which Ofgem may revoke a licence do not contain any mention of consumers, or even the word “consumer”, or tackle the issue of repeated offences of harmful, abusive behaviour in customer practice?
Caroline Flint
Does the Secretary of State remember that I said that of course Ofgem can revoke a licence if there is a failure to pay a fine? The problem is that, once the fine is paid, there is nothing in the revocation terms to enable Ofgem to find against the company if there are repeated offences. That is the clarity that we need in law—not to wipe the slate clean.
Mr Davey
The right hon. Lady should allow me to explain the current system, because I think she will find that a failure to comply with a final order can result, in extreme circumstances, in revocation. It is the process leading up to the issuing of the final order that she does not seem to understand, so let me deal with it.
Under the right hon. Lady’s proposals, the nuclear option has considerable—potentially large—negative consequences for competition. Just think how the customers would feel. Would the confusion and hassle of a forced move make them feel any better? Other companies would need to take on those customers, and that means changing tariffs, with consumers possibly paying more. All those issues would need to be worked through at a chaotic moment. It is quite right that the current rules limit the circumstances in which the nuclear option can be used, and the process that Ofgem would effectively have to go through before it can be invoked. Indeed, Parliament, under the previous Government, set the bar for the nuclear option quite high. The list of circumstances in which the power can be used includes a variety of things, from the failure of a company to comply with a final order from the regulator, to a company’s making false statements when applying for a licence, to a firm’s not paying a financial penalty.
The right hon. Lady is proposing to lower the bar for the nuclear option. Labour now wants to amend the existing power, so that the regulator can close down a company for—I quote from the motion—
“repeated instances of the most serious and deliberate breaches of their licence conditions”.
How does that differ from the existing situation? Well, at the moment Ofgem cannot explicitly close down a firm for persistent behaviour; that is true. It cannot go quickly or directly to the nuclear option, as the right hon. Lady wants. Ofgem would instead have to ratchet up its sanctions: first, higher fines, and regulatory orders requiring specific improvements in performance by specific dates—ever-tougher, and increasingly damaging for the firm.
Mr Davey
That may have been the case in the past, but increasingly it is not because the companies are losing customers, the fines are getting heavier and Ofgem is getting tougher. I wish it had been tougher in the past. Just look at the fines that have been levied and can be levied. We have seen fines of £3 million, £4 million, £10 million, £15 million. Indeed, under the coalition we have seen Ofgem fine more companies than ever before, and by higher amounts. In the nine years after Ofgem was established, it took enforcement action in just 10 cases. Since 2010, in four years, we have seen 27 cases, with fines totalling nearly £51 million. Moreover, because the current Government wanted to ensure that it was not just the Treasury that benefited from enforcement action against energy firms that misbehaved, there is now money for consumer redress as well—since 2010, nearly £60 million has already been paid out directly to consumers, the people who have suffered. Nothing like that happened under Labour. So under us, as the fines on a persistently poorly performing firm went up and up, so could consumer redress; so could the consumer compensation.
What is the maximum that could be levied? Well, if a firm continually failed to comply, the fines and redress could be increased up to 10% of a firm’s turnover, as the right hon. Lady said. For a huge energy company such as British Gas, that could equate to a whopping £1 billion —not a figure that any company, however large, can take lightly. That is what the law currently allows for, and these fines are being used, under this Government, far more than they were under the softies opposite.
Caroline Flint
Does the Secretary of State agree that if Ofgem investigates a company and the company pays the fine, and later the company breaches again the rules relating to fairness to customers in the way that I have outlined, what Ofgem cannot do is revoke the licence? It has to do another investigation, which may result in a fine, but what it cannot do is take into account past history on these issues and revoke the licence where there is persistent abusive behaviour to the customers. Does he support the recommendation that we are making or not?
Mr Davey
When Ofgem has another breach put to it, it has to look at that breach; it has to look at what has happened in that breach. It does not, as I am about to say, only have the fine/penalty option; it may issue improvement orders, as we are seeing. Let me come to the process, because I think the right hon. Lady’s policy will not stand up, and she will see that we have lots of powers to help consumers.
Mr Davey
The right hon. Lady really must tell the House, would she have pressed the nuclear button yet? Is there one example of energy company bad behaviour that she thinks would have merited her policy?
Ofgem could close an energy company down, but it would have to give that firm the chance to improve. If a company ignored improvement orders, Ofgem could then issue a final order, and if that was ignored, it could then close the company down under current law. But the right hon. Lady seems to want the regulator to be able to intervene before an improvement process has been gone through—before a final order.
Mr Davey
I reassure the hon. Lady that we have legal advisers in the Department, as does Ofgem.
Looked at together, the Labour party’s proposals—not just the one before the House today—are clearly designed to upset the current balance between competition and regulation. Labour seems to want to rely on more heavy-handed regulation and even price controls to try to micro-manage energy costs and customer service standards from the desk of the Energy Secretary in Whitehall. We know what the consequences of that approach are because we have seen them before: distorted markets, reduced competition, poorer service and lower investment.
Let me gently remind the right hon. Member for Don Valley of her party’s record in government and, indeed, in opposition. The Labour Government set up Ofgem and decided what powers it would have, and when they realised they had got it wrong they reformed Ofgem. In opposition Labour decided it would scrap Ofgem. Now it seems to have U-turned and is looking at Ofgem’s powers instead. First, Labour proposed making Ofgem force companies to track wholesale prices in their retail prices, something which would destroy forward markets and force energy companies to purchase energy in the short-term markets. That is bad news for their customers, as I demonstrated the last time we debated energy policy. It is a recipe for chaos and yo-yo bills, with prices as volatile as the wholesale markets themselves, and on average higher than now.
Now the right hon. Lady proposes to lower the bar on the most extreme sanction the regulator has—revoking a licence, putting companies out of business, reducing competition and causing chaos for their customers. One has to think very carefully before changing the existing power to revoke a licence.
Caroline Flint
A final order could include a company being told to change the telephone script that it uses in its sales work, and it could comply with that order. Does the Secretary of State accept, however, that if the same company slightly breaks the rules again or undermines its service to its customers in a different way, the present guidance to Ofgem does not enable it to show that company the red card and deal with repetitive abusive behaviour that is slightly different from investigations that have led to sanctions in the past? Does he accept that that is a loophole in the current system?
Mr Davey
No, I do not because if a situation gets to the point of a final order, the regulator will look at other behaviours, but it will judge that particular breach. The right hon. Lady gives one example, but we could give many more. For example, we have heard from npower and Ofgem today that npower has made the improvements that were required of it. Presumably, if it had not done so, there would have been another improvement order and, potentially, a final order. Of course, it does not automatically follow that after a final order we go to revocation of a licence, but it is a process that could result in revocation after the matter has been properly investigated. I am glad that I have had a chance to explain that to her.
So far today the right hon. Lady has not been able to come up with one circumstance in which her proposal would be used. She has not given us one example of a case in which Ofgem has fined a company and she thinks that, under her power, Ofgem should have closed it down. She has simply failed to make the case for reforming the existing power. She has failed to make the case for lowering the bar. I have shown that this power exists but it is a nuclear option, and rightly so because the consequences of its use are so severe.
I say to the House that we have the right balance. We are making progress and have achieved more competition, tougher regulation, more choice and higher fines. People are able to punish firms themselves, without having to wait for the Government to do something. But when the regulator does punish a firm, under this Government, there is real financial redress. I thank the right hon. Lady for giving me this chance to show that not only do we take this issue seriously, but we have acted. I say to her and the House that the nuclear option of revoking a licence should remain, but it should remain one of last resort because that is in the consumer interest.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey
Mr Davey
My hon. Friend makes a really important point. The Minister of State, my right hon. Friend the Member for Sevenoaks (Michael Fallon) has been working with the industry on the concordat. The statistics that have emerged from the new fuel poverty definitions show, unlike previous ones, that much fuel poverty is in off gas grid areas. When we bring forward the fuel poverty strategy shortly, we will be focusing on off gas grid customers, because they are really suffering, and—guess what?—the previous Government did nothing about it.
Caroline Flint (Don Valley) (Lab)
There are more than 1 million families with children in fuel poverty, which is more than there have been at any point during the past 10 years. If wholesale prices are falling but those reductions are not being passed on to consumers, it is a clear sign that competition is not working. Yesterday, the Government opposed our proposal to give the regulator the power to force energy companies to pass on falls in wholesale prices if they have not done so. If the regulator does not have the power to protect consumers and if the Government will not give it that power, how does the Secretary of State expect the public, particularly the 1 million families with children in fuel poverty, to have any confidence in the energy market?
Mr Davey
The right hon. Lady will remember that yesterday I made it clear that we have real concerns about the energy market. That is one reason why we support the competition inquiry. I made it very clear that we are worried about the fact that when wholesale prices go up, retail prices follow them quickly, which is the rocket effect, but that when wholesale prices come down, retail prices do not come down as quickly—the feather effect. We believe that that has to be addressed. The previous Government had the same problem and they did not address it. We are addressing it.
The problem with the proposed regulation, as I told the House yesterday, is that when we look at the detail we can see that it would fail and would lead to prices going up. It is a bungee-jumping approach to energy prices and it would increase volatility and fluctuations. If the House wants a little more analysis, let me point out that a few months ago wholesale prices were coming down, yet in the past few weeks they have gone up. Are the Opposition saying that they would force energy companies to move directly with daily and weekly moves in the wholesale costs? That is surely madness.
Mr Davey
My hon. Friend is absolutely right. The interest from around the world in the UK’s reformed electricity markets, particularly the world’s first ever low-carbon electricity market, is profound. It is not just the Chinese; there is interest from the French as well as from Japanese companies such as Hitachi and Toshiba-Westinghouse—and not just in nuclear, but across the low carbon piece.
Caroline Flint (Don Valley) (Lab)
The capacity market is meant to help secure our energy supply, but that must be done with as little cost to consumers as possible. There are 15-year contracts for new plant, compared with three-year contracts for existing plant. Will that not create perverse incentives, particularly for the big six, to build lots of new power stations, when it could be quicker and cheaper to refurbish existing plant?
Energy Prices
Debate between Caroline Flint and Ed Davey(10 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint
The proposition is that we should, across the House, recognise that when wholesale costs fall they are not passed on quickly enough. Does the right hon. Gentleman agree that leaving things to the market does not achieve that and that the proposition that a regulator should have the power is the way forward—yes or no?
Mr Davey
I have already said that I believe that there is a problem—Ofgem and the competition authorities told us that in the report I commissioned. I think there is a need for intervention—that is what I have been saying. The question is: what is the right intervention? Is it the price regulations proposed by Labour—the quite big interventions that I shall explain when I describe how they would work—or is it to ask the independent experts from the competition authorities to ensure that our markets work for consumers. The latter is what we are doing, and I think it is the right approach.
The Leader of the Opposition tells the Government all the time that we should stand up to the energy companies. That leads me to the not unreasonable conclusion that he must have stood up to the energy companies—that he must have a proud record of taking on energy firms at some stage. So I did some more research to find out what tough action the leader of the Labour party took. I was convinced that he of all people, faced with much larger falls in wholesale prices than we face today, would have acted. I therefore commissioned the research on what action Labour’s leader, when Energy Secretary, had actually taken on wholesale energy prices—what announcements he had made.
The research has come back, so let me read it:
“You asked for any statements of information provided by the last government on the link between wholesale and retail energy prices”—[Interruption.]
The right hon. Lady should listen to this:
“I’m afraid there was no substantial policy in this area by the previous government and as a result no announcements.”
There was nothing. The Leader of the Opposition simply did not have the same great ideas as the right hon. Lady.
Perhaps I am being too harsh. Perhaps the Leader of the Opposition was not advised to take the various actions we have taken, such as our support for a reference of such problems to the independent competition authorities—in other words, the experts. My research, however, suggests that the Labour party was told to act when he was doing my job. In fact, we have found that he was told to act on at least three occasions.
The Leader of the Opposition was asked three times to refer the issue of energy prices to the Competition Commission, and three times he refused. On 5 March 2009, he said:
“I do not think that at this stage a referral to the Competition Commission is the right way to go”.—[Official Report, 5 March 2009; Vol. 488, c. 983.]
On 7 December 2009, he said:
“It is better to look at policy options…rather than at a lengthy Competition Commission investigation.”—[Official Report, 7 December 2009; Vol. 502, c. 45.]
Of course, he did not actually take any policy options. On 25 February 2010, he was still in denial:
“I am not in favour of referring these matters to the Competition Commission”.—[Official Report, 25 February 2010; Vol. 506, c. 444.]
That is what Labour’s then Energy Secretary said, so my advice to the right hon. Member for Don Valley is this: stop embarrassing your leader.
For the sake of debate, let me accept another Labour U-turn on energy policy. Let me imagine that the Labour leader has thought more about it, listened to the right hon. Lady and changed his mind. Let me examine their proposals for two new price controls and how they would work.
As set out in the motion, Labour now has two competing ideas. The first is a temporary energy price freeze for 20 months, which is a policy to lock in a price, regardless of what happens in the wholesale markets. If wholesale prices go up, the smaller energy suppliers that cannot soak up the losses will go bankrupt. We have never received an answer to that. If wholesale prices go down, companies hedging against the freeze will have to maintain their prices and customers will lose out. The right hon. Lady is shaking her head, but companies that hedge against a freeze will lose money and potentially go bankrupt under her policy. She does not understand how markets work.
Mr Davey
I am grateful for that intervention because it shows that Labour has not even looked at what is happening to the economy. Employment is going up and unemployment is going down; inflation and the deficit are going down, and growth is up. The hon. Gentleman ought to notice that.
Let me ask a few questions about Labour’s latest policy. How would Labour’s bungee-jumping energy price regulation work? Let us try to get our heads round what is proposed—Labour wants to be in government in under a year, so I am sure it has thought through the detail. Would Labour legislate to force companies to pass on each and every cut in wholesale prices? Would it give Ofgem that power? How frequently would the link between wholesale and retail prices be made, and which wholesale price would Labour choose for Ofgem to intervene with? The day-ahead or the month-ahead price, or perhaps something else in the futures market? I think we should know. Which all-seeing, all-knowing official in Labour’s new energy Gosplan regulator would work that all out?
Caroline Flint
I understand that Ofgem—the regulator —wrote to all energy companies last week to say that they should pass on reductions in wholesale costs. Has the Secretary of State had a word with Ofgem about its expectations of how that should be achieved?
Mr Davey
I have spoken to Ofgem’s chief executive, Dermot Nolan. He is worried because the Labour party wants to get rid of Ofgem, even though it is doing this fine job and talking to energy companies. Ofgem is worried that Labour wants to undermine the regulatory system. Interestingly, who set up Ofgem? The Labour party. Who reformed Ofgem just a few years ago to make it more effective? The Leader of the Opposition. There is no consistency or coherence about anything on energy policy from Labour.
Let us consider some more basic questions—Labour Members will have to answer them at some stage if they are to be vaguely credible. If the regulation forces energy bills to drop immediately when day-ahead wholesale prices drop, what will that mean when wholesale prices rise? Will the regulation be exactly same both ways? If regulation forces retail prices to track wholesale prices, how often will a consumer’s energy bill have to be recalculated and what will be the cost of that? Who will be the genius who second-guesses companies’ forward buying strategies, and decides whether they are good or bad? Will all suppliers have to purchase at the same time for the same contract period in Labour’s brave new world?
The logic of the massive state price control that Labour is proposing is clear: Labour wants to destroy the forward energy markets. It wants to end competition between companies, which is based on who has the brightest and best purchasing strategy to deal with things such as events in the UK or in Iraq, and manage those sorts of problems. If we end that competition, who will lose when the risks are greater? It will be consumers who pay in higher prices.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey
Mr Davey
I am grateful to the hon. Lady for that question. She will know that this Government brought in a power in the Energy Act 2011 that would allow us to introduce legislation and regulations for the private rented sector. We plan to consult on that soon and take the sort of measures I think she will support.
Caroline Flint (Don Valley) (Lab)
The most sustainable way to cut bills is to improve the energy efficiency of our homes. On 16 January the Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker), told the House:
“we have extended the ECO out to 2017 and increased the number of people that it will help.”—[Official Report, 16 January 2014; Vol. 573, c. 987.]
Will the Secretary of State explain why the impact assessment published by his Department on 5 March says that 440,000 fewer households will get help with energy efficiency following the changes to the ECO?
Mr Davey
I can confirm that. Obviously, we have been preparing for that for some time and working with the industry, National Grid and Ofgem. As I said, we have short-term plans with National Grid to have a reserve of power plants, as well as our longer-term reforms regarding the capacity market, so I can confirm that the lights will stay on.
Caroline Flint (Don Valley) (Lab)
Under this Government, just one new gas-fired power station is being commissioned and three power stations have been mothballed. Last week, National Grid warned that any delays to the planned capacity mechanism auction in December could lead to brown-outs throughout the UK. The Secretary of State indicated earlier that the plans are on track, but will he clearly confirm once and for all that there will be no delays to the auction later this year?
Mr Davey
We are on track. We are working both within the Department and across Government. We saw the Chancellor of the Exchequer confirm in the Budget that all the remaining issues are being taken forward in secondary legislation. The right hon. Lady will know that there is a state aid case at the Commission. We do not control the Commission—no Government ever do—but our communications and partnership working with the Commission have been very fruitful.
Caroline Flint
My understanding is that the auction can be held before that, but let me ask another question. Even if capacity auctions are not delayed, they will not be operational until 2018-19, which is why we need the supplemental balancing reserve in time for the capacity crunch this winter and the next. The timetable for that has already slipped, meaning that some plant cannot be brought out of mothballing in time for this winter. Does the Secretary of State believe that the supplemental balancing reserve is still required, and if it is, when will it be operational?
Mr Davey
As the right hon. Lady will know, Ofgem has to consult on this. It is expected to complete and announce its plans in May. If, as I expect, Ofgem believes that we should continue for this winter with a supplemental balancing reserve, the working assumption is that the auction would follow fast behind that.
Energy Price Freeze
Debate between Caroline Flint and Ed Davey(10 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint
The price freeze we have suggested is in recognition of the dodgy dealing that has been going on, and we have proof of the fact that when wholesale prices have gone down, they have not been passed on to the consumer. If the hon. Gentleman does not get that, he will not win at the next general election.
The Government were wrong about our price freeze, and today is their chance to atone for their error. They have been wrong about much else besides. The Secretary of State likes to claim that Labour created the big six, but who botched the privatisation of our utilities, sold off our country’s assets for much less than they were worth, and removed the restriction on vertical integration? It was not us; it was the previous Conservative Government. As this week’s revelations about Royal Mail remind us, they are the same old Tories. They might think they know how to run a business, but they are not fit to govern.
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
It is not normally that I come to some colleagues’ defences, but since the right hon. Lady is talking about privatisation, which party lifted price controls on energy markets, and when?
Caroline Flint
It was a recommendation from Ofgem that we want to abolish. It was wrong and it did not work, and I will get to that point. Unlike the Secretary of State, I came to this job to look seriously at what has gone wrong in the energy market, and since privatisation over 30 years ago, mistakes have been made. Mistakes are being made now that could be put right if the Secretary of State had the gumption to do it, but he does not.
Caroline Flint
I will give way shortly but I want to make a little progress.
The Secretary of State lauds the days when there were 15 energy suppliers, as if it were some nirvana of competition where consumers had choice, customer service was great, and bills were low. He does not mention that the reason there were 15 suppliers was that there were 14 regional electricity suppliers, each with a complete monopoly in their own area, and only one gas supplier, which had a monopoly across the entire country. Consumers had no choice at all; nobody could switch, and that was that. Who gave ordinary consumers the power to choose who supplied their electricity, and who tried to open up the energy market to full retail competition? It was the previous Labour Government.
Caroline Flint
I will give way shortly but I want to make this point. The Secretary of State also boasts that on his watch 18 new entrants are challenging the dominance of the big six. He is right: 18 other suppliers are in the domestic market, but when did they enter it? When did companies such as Good Energy, First Utility, and Ovo Energy enter the market? Was it under this Government? No, it was not—it was under the previous Labour Government.
Caroline Flint
The energy companies have clearly been making profits that have not been reflected in efficiencies in their organisations or a fair trade off between what they should spend on getting bills down and investment. I believe in this sector and that its potential growth is enormous. The truth, however, is that staff in those organisations are not served well by a management that refuses to faces up to its responsibilities to provide good customer service and efficient services in which everyone can gain. The only people gaining at the moment are the big six chief executives and their management boards, and those who benefit from the profits they have made—unfair profits that have not been passed on and shared with consumers and investment.
Mr Davey
I am pleased that the Labour party now supports the market investigation reference. Will the right hon. Lady confirm that that was not the case a few months ago, and that when the Leader of the Opposition was doing my job and had a chance to take such action, he did not?
Caroline Flint
In 2011, Labour, under my right hon. Friend the Member for Doncaster North (Edward Miliband), a previous Secretary of State for Energy and Climate Change, supported a full market investigation. The former Secretary of State opposed that. [Interruption.] No, I am sorry, but this is a very important point. Labour supported an investigation two and a half years ago and the Government opposed it. Labour then looked at ways of reforming the market, short of a CMA. The truth is that we welcome the CMA, but we also know that we should not allow this issue to be kicked into the long grass. We should be planning our reforms now. The Secretary of State cannot ignore that.
The Secretary of State told the House in a statement last week that the energy market has improved since 2010. Ofgem’s assessment shows precisely the opposite: things have got worse since 2010, not better. Apart from a spike in switching in a couple of months at the end of 2013—which I have to say had more to do with the Leader of the Opposition’s speech at the Labour conference than anything the Government did—the number of people switching has fallen. The latest statistics, published by the Government last week, show that 2013 was the second-worst year on record for the level of switching. The spike at the end of 2013 appears to have been completely reversed.
Small suppliers have been gaining customers and their market share has been growing, but paragraph 5.16 of Ofgem’s assessment is clear that last year, for example, half the so-called growth in market share for smaller suppliers actually resulted from npower selling Telecom Plus, which just so happens to have a 20-year contract with npower for its energy supply. In any case, as figures 28 and 29 show, the overall rate at which suppliers have been winning customers has fallen. Figure 39 of Ofgem’s assessment also clearly shows that the total amount of energy being traded has fallen in each year since the general election, as has the churn rate.
The only things that have increased on this Government’s watch are people’s bills and the profits of the big energy companies, which, paragraph 6.10 of the report notes, have increased five-fold in the last three years—up from just £200 million in 2009 to £1.2 billion in 2012. Let us not forget the increase in households in fuel poverty, and the growing queue of people who cannot get their home insulated after the Government’s tinkering with bills last autumn. The Secretary of State must be so proud.
The notion that the energy market is, as the Secretary of State puts it, “improving”, is very obviously wrong. What the report shows, and again I quote directly from section 4, is that
“things are getting worse for consumers.”
That is the conclusion of the report; and that is a verdict on this Government’s record.
Mr Davey
I am glad that the hon. Lady has mentioned the Energy Act 2013, because she voted for it. If she looks at the detail, she will see that not only did it reform Ofgem by giving it more powers to grant compensation to consumers who were badly treated, but it supported Ofgem’s retail and wholesale market reforms by having reserved powers to make sure they went through. Those powers are in place and are making sure those reforms go through.
I was talking about Labour’s bad energy policy, and let us look at its record in government on energy markets and prices. In the retail markets, Labour allowed the big companies to choke off proper competition—the very competition that privatised markets need in order to operate in the interests of consumers. It created Labour’s big six—the big six that dominate retail and wholesale markets.
Caroline Flint
As I said in my speech, when we left government there were 18 suppliers including the big six, and also it was under Labour that we gave the first opportunity for people to switch. Is it not the case that there were more than just six suppliers when we left government? Is it not also the case, as confirmed by the House of Commons Library, that energy bills have risen three times faster under this Government than under the last Government?
Mr Davey
I will come to that point in a second because I do not believe that is true; I have got completely different figures. The right hon. Lady is right to say, however, that it was not just the big six who were competing in the retail market. There were at that time eight other independent suppliers—there are more now, as we have increased the number. However, the critical figure is not the number of energy suppliers, it is how many customers they have. Under Labour, the small suppliers were not able to grow. Very few—only one, I think—had more than 100,000 customers, and they were not able to expand. What we did very early in our time was deregulate, and because we deregulated, those independent suppliers were able to grow their customer base. So it has been the actions of this Government that have increased the competitive pressure on the big six—it is nothing to do with the last Government.
Mr Davey
My hon. Friend is right: the licence lite introduced under the last Government has not been working very well. However, the Greater London authority has been talking to Ofgem to see if it can get a licence lite for London in order to help community generators and act as a sort of enabler. When we were drawing up the community energy strategy—which has not been mentioned in a single question from Opposition Members—we sat around the table and looked at this issue and we realised that this needs to continue further. So if my hon. Friend looks at the community energy strategy, he will see that we are taking action. We have set up a working group to look at it—not just to take on the licence lite issue, which was so badly handled under the last Government, but to see what else we can do to help precisely the people my hon. Friend is talking about. [Interruption.] The right hon. Member for Don Valley says from a sedentary position that Ofgem is failing again. Let us remind the House who set up Ofgem: it was Labour. Let us remind Labour and the rest of the House that when the Leader of the Opposition was doing my job, he reformed Ofgem to make it function more in the interests of the consumer. That was just a few years ago, so perhaps the right hon. Lady will tell us what went wrong with Ofgem under Labour.
Caroline Flint
As everybody knows, Ofgem was a merger of the gas and electricity regulators. The difference between the Secretary of State and me is that I am prepared to acknowledge when things are not working, and he is not. When is he going to stop defending a regulator that has not been doing its job?
Mr Davey
This is good—let us examine what the right hon. Lady wants to do. She wants to abolish a regulator quango and replace it with another one. She promises lots of tougher powers but never tells us what they are. We have legislated in the Energy Act 2013 to increase the powers. She needs to tell us why, under this Government, Ofgem has been far more proactive on competition. Why was it that under this Government, Ofgem undertook the retail market review? Why was it that under this Government, it addressed the wholesale market, and when we debated its reforms the right hon. Lady had to admit that she had not even read its paper?
Caroline Flint
Honestly, the Secretary of State is just living inside his own thought bubble. We have made very clear on countless occasions some of the changes we would expect to see under a tough new regulator, as I reiterated today. One significant power would be that if our regulator saw that reductions in wholesale costs were not being passed on to the customer, there would be a statutory power to enable it to force them to be passed on if the energy companies do not play ball. Does the right hon. Gentleman agree with that?
Mr Davey
I agree with the market investigation reference looking at all those issues. Not only is the Labour party’s policy position behind the curve, as I will explain in a second; it wants to pre-judge the outcome of the conclusion reached by the competition authorities. We have expert, independent competition authorities that will look at these issues in a considered way, but Labour wants to pre-judge them. That is not surprising, however, because its policies in this area are so hopeless.
The right hon. Lady talks about a pool. She does not know that the day-ahead market, which is very much like a pool and was trading only 5% of electricity when Labour was in power, is now trading over 50% of electricity—a massive increase in liquidity in the day-ahead market. Moreover, the Ofgem analysis, which the right hon. Lady clearly still has not read, shows that the small independent generators that would benefit from more liquidity said that the problem is not in the day-ahead market, and that the pool would not help; rather, the real problem is with the liquidity in the forward market, and that is exactly what Ofgem is dealing with. As of this month, the market maker obligation will create far greater transparency than ever existed in the markets under the last Government. Whether it is through Ofgem or this Government, we are taking action—real action—to bring in competition where Labour did nothing.
Mr Davey
That is simply not true. I have talked about the powers to back up Ofgem on the retail market and wholesale market review, which clearly the hon. Gentleman either does not understand or did not notice. For example, there is the power of the off-taker of last resort to promote greater competition in the generating market. I do not know where Labour Members have been, but they certainly have not been focusing on the debate.
The right hon. Member for Don Valley asked me about energy prices under the last Government and this one, so let us go through them. We should not fall into the trap of simply blaming the energy markets and Labour’s big six for higher energy bills. Let us be honest: everyone in this House knows that the main driver of energy price rises in recent years has been rising wholesale costs. The average wholesale gas price in 2013 was more than double that of 2007. [Interruption.] I will say that again, because the right hon. Lady was not listening. The average wholesale gas price in 2013 was more than double that of 2007. The wholesale electricity price was up by almost two thirds. According to DECC statistics, in almost every year under Labour, energy bills rose. Under Labour in 2005, energy bills went up by 12%. In 2006 under Labour, energy bills went up by 20%. In 2008 under Labour, energy bills went up by 16%. In the last Parliament under Labour, energy bills rose by a whopping 63%. In this Parliament, yes, they have risen, but at a significantly lower rate than in the last Parliament, when the current Leader of the Opposition was Energy Secretary—8% a year in this Parliament compared with 11% a year in the last.
Caroline Flint
I asked the House of Commons Library to look into this issue on Monday, and it confirmed that energy bills are rising more than three times faster under this Government than they did under the last Government. The Office for Budget Responsibility has shown that prices are rising at twice the rate of inflation. We can bandy around figures all we like—the truth is that people want fair prices. They are prepared to pay a fair price if they think the market is not fixed, and the Secretary of State has failed to attempt to deal with that situation, which is of great concern to the British public.
Mr Davey
The problem with the right hon. Lady’s analysis is that she fails to understand that the wholesale gas market drives the vast majority of the bill. I set out that history to show that when wholesale gas and electricity prices were going up—actually, faster under the last Government than this one—we were not saying that it was all the fault of the energy companies; a lot of the fault lay with wholesale gas and raw energy costs. Frankly, the right hon. Lady’s unwillingness to recognise that demeans her, because it shows that she is not dealing with the real problem and could not really do the job.
Caroline Flint
Does the Secretary of State acknowledge that four years-worth of data show that in 2009, wholesale gas and electricity prices fell by some 46% but that reduction was never passed on to the consumer in the following years?
Mr Davey
The right hon. Lady is absolutely right in that, as the recession took place there was a period when wholesale gas prices plummeted, because the economy was in such a mess that the demand for energy was reduced. However, she ought to be careful about going too far on this issue.
Whatever the price rises are, there is a problem for consumers. We know that incomes have fallen as we have emerged from Labour’s great recession, and the fact that price rises have been slowing will be of little comfort. I can, therefore, understand why a promise of a blanket, Government-imposed energy price freeze might seem popular, but as I will demonstrate, it is not a price freeze but a con.
At no point have the Opposition explained how their proposal would actually work, so let us try to get to the bottom of their thinking with a few questions. Are they proposing to freeze all current tariffs in their existing state, in real cash terms? Would people be able to switch back from a higher but longer fixed-rate tariff to a lower, variable-rate tariff before that variable rate became fixed by law? If a cut-price deal was set to end during the freeze, would suppliers be forced to continue it until the freeze ends, penalising firms who try to help their customers?
We know the problem for smaller competitors if wholesale prices rise. They tell us that they would go bust under Labour’s energy price freeze. But what if wholesale prices fall during the freeze? Is Labour proposing to prevent firms from passing on that price fall? [Interruption.] I am delighted that the right hon. Lady said that, because it is clear that Labour will not prevent bills being cut. Instead, would Labour legislate to force companies to pass on each and every cut in wholesale prices, and how would that work? It is a reasonable question. Would Labour legislate to force price cuts during the freeze, or would companies be able to hold on? If a company has bought its gas 18 months ahead, paying a higher price on the wholesale markets, would Labour still force it to cut or freeze its prices, bankrupting it?
The Opposition want to intervene in the markets to control prices and second-guess global price changes, so they must have the answers to these questions. Would smaller suppliers be exempt from the price freeze? How would the price freeze be applied to new entrants? Alternatively, is Labour happy to see a return to the big six, with just a smaller number of suppliers?
This is a gimmick, not a policy. It is a shambles, and it is back to the 1970s. Given that it clearly will not work for consumers, might it work for businesses? Typically, large non-domestic customers have bespoke sophisticated fixed-term contracts which pass through each element of third-party costs. How would the price freeze work for them? What would happen to a contract whose term ended during the freeze? Alternatively, will comrades on the Opposition Benches decree that contracts need to be renegotiated ahead of a freeze? Will the comrades stop at energy price freezes? Are there plans to freeze rail fares or water charges? In the past six years butter and margarine prices have gone up faster than energy prices. What is the plan for butter and margarine prices?
The right hon. Lady tries very hard to paint her party out of the picture and to blame others for the problems we face, but after 13 years of Labour rule, it was not just a wrecked economy that the coalition inherited four years ago. We inherited an energy infrastructure future with a huge multibillion-pound black hole at its heart, the result of years of underinvestment, dithering and delay, and we inherited a retail energy market which, over 13 years of a Labour Government, had been stripped of proper competition and had become hugely complex and confusing for consumers, with prices rocketing and no avenue of escape from the clutches of the big six.
In both these areas—in investment in infrastructure and in reforming the markets—this coalition Government have had to clear up the mess that Labour left behind. Look at the investment figures. The Office for National Statistics figures show that from 2005 to 2009, average investment in the electricity sector was around £5 billion a year. That was far too low for the country’s needs. We had to work tirelessly to turn it around, and we have. Since 2010 investment has continued to rise. On average in this Parliament it has risen by almost £8 billion a year. In 2012 investment exceeded £10 billion—the highest figure on record—and we have a pipeline worth £187 billion, including the first nuclear power station in a generation.
There have been record levels of investment in renewables. Bloomberg estimates that average annual investment in renewables has more than doubled in this Parliament, compared with the previous one. Last year electricity generated by onshore wind rose by 36%. Offshore wind is up 45%. Solar is up by almost 70%. Low-carbon generation now makes up more than 35% of the electricity mix. Emissions are coming down, the share of clean power is going up and investment in new infrastructure is booming. Under this coalition the lights will stay on, and we will go green.
When it comes to their policy detail, we have learned nothing today about what the Opposition are proposing. It is a slogan, not a policy. This Government are getting on with the complex task of mending the markets to serve the best interests of consumers. We have transformed the retail market, increasing competition, challenging the power of the big six and putting customers more firmly in the driving seat. We have minimised the impact of Government policy on bills while protecting help to the poorest, protecting investment in low carbon and maintaining emissions reductions.
Energy Markets Competition Assessment
Debate between Caroline Flint and Ed Davey(10 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint (Don Valley) (Lab)
I thank the Secretary of State for early sight of his statement. The Opposition welcome the decision to refer the energy market to a competition inquiry. The launch of a full-blown market investigation is confirmation that the energy market is broken, but while it is happening, consumers should be protected from any more unfair price rises, and energy bills should be frozen until 2017.
Does the Secretary of State accept that Ofgem’s decision to refer the energy market for a full competition investigation is a clear admission that there are serious problems with the way in which the energy market works? Does he believe that the Government were mistaken to reject the proposal put forward by my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) for a competition inquiry in 2011?
In the light of today’s report, what assessment has the Secretary of State made of the effectiveness of Ofgem? As he will know, in the past six years, Ofgem has undertaken three major investigations into the energy market. In none of those did Ofgem feel the need to make a reference to competition authorities, or indeed to acknowledge that there are fundamental structural problems with the energy market. Just last December, the Secretary of State told the House:
“Ofgem is fit for purpose.”—[Official Report, 2 December 2013; Vol. 571, c. 634.]
However, is not today’s decision a clear admission that Ofgem has failed to protect consumers? Will he therefore ensure that the market investigations look not just at the players in the market, but at the regulator, too?
In the Secretary of State’s statement, he made the bizarre claim that the energy markets have improved since 2010, but the chief executive of Ofgem today told the BBC that it referred the energy market for investigation for the very reason that conditions in the market have got worse. Is the Secretary of State saying that he disagrees with that assessment?
Today’s assessment also clearly identifies vertical integration as one of the main issues for a full market investigation. The Secretary of State seems conveniently to have forgotten that the last Conservative Government privatised the energy industry and removed the restrictions on vertical integration. Therefore, if he wants to blame anyone for that, he should take it up with his colleague, the Minister of State, Department of Energy and Climate Change, the right hon. Member for Sevenoaks (Michael Fallon), who was a Minister at the time.
The Secretary of State has previously claimed that a ring fence between the generation and retail arms of energy companies had real problems and could push up prices. Therefore, in the light of today’s report, will he admit that he was wrong to rule out Labour’s proposals for a ring fence?
I want to ask the Secretary of State a few specific questions on the details of how the investigation will work. First, will the market investigation cover small businesses as well as domestic consumers? Small businesses face many of the same problems as households but enjoy fewer protections. Does he agree that it would be a mistake to exclude them from the remit of the market investigation? Secondly, on the timetable, when does he expect Ofgem formally to refer the energy market for investigation, and when will the investigation begin? Thirdly, when does he expect the CMA to appoint a market reference group to undertake the investigation?
The only reason for the statement today is the speech by my right hon. Friend the Member for Doncaster North (Edward Miliband) at the Labour party conference last year. The Secretary of State, the Prime Minister and the energy companies all said that a price freeze was unworkable and impossible to deliver. Yesterday’s decision by SSE showed that a price freeze is possible, and today’s confirmation that the energy market is broken shows that it is needed by all customers. The public want radical action to reform the energy market, as Labour has proposed, but while the review takes place, they rightly want to know what help they can expect now. If I were standing where the Secretary of State is standing, I would take action to impose a price freeze for all consumers. Instead of defending the big six and asking for their co-operation, why does he not just enforce a price freeze now?
Mr Davey
First, I welcome the right hon. Lady’s welcome for today’s announcement. That is very important for people outside this House to see: not just consumers and small businesses who will be the beneficiaries of this action, but investors and the industry. Cross-party agreement on the way forward to promote competition in energy markets is very important for investment, so I strongly welcome her welcome. Political agreement is a good step forward for energy markets.
I disagree, I am afraid, with some of the right hon. Lady’s other comments. Of course I agree that there are serious problems. One of the reasons why the Government have been reforming energy markets from day one is that we thought there were problems. One of the reasons we asked Ofgem and the competition authorities to do this work is because we were impatient that not more was happening in the markets. What is interesting about the referral is that the Leader of the Opposition could have done it when he was doing my job, but he refused to take this measure. He refused to do so when he had the power, so I have to say to her that Labour does not really have a leg to stand on. Labour created the big six; we are taking action to create competition.
I am surprised that the right hon. Lady continues to bash Ofgem, the independent regulator. It has taken action in the past few years, particularly under this Government, to improve competition. I thought Labour supported the retail market review and the wholesale market reforms of the market maker obligation. I know she was not on top of reforms in the wholesale market, but Ofgem has taken that action and is now proposing the referral. In the spirit of welcoming the statement, she should also welcome the action Ofgem has taken. Labour set up Ofgem and when the Leader of the Opposition was doing my job he reformed it to make it more effective, so it is ironic for the right hon. Lady and the Opposition to criticise their creation that they reformed.
The right hon. Lady asked one or two specific questions. She asked me whether small business would be covered in the reference. Yes, it will. That is, of course, the independent competition authority’s business, but we believe that it will be and that it should be. On the timetable, as I set out in my statement, we expect the consultation to finish by 23 May. Ofgem will then make its final decision. We expect all of that to happen and the assessment to get going before summer.
The right hon. Lady asked about the price freeze. The problem with Labour’s blanket price freeze is that it is a pro-big six policy. Labour created the big six and it is supporting the big six. Of course SSE is able to have an energy price freeze—it is a big company. Big companies have the balance sheets that enable them to buy 18 months ahead. We have never said that the big six could not have a price freeze. It is the smaller competitors who oppose the price freeze. When the Leader of the Opposition made his announcement to the Labour conference, it was the small companies that were complaining, saying that it would put them out of business. That is the true Labour party: putting the smaller competitors out of business.
The right hon. Lady needs to reflect on all her policies. I am delighted that she has, at long last, changed her mind and agreed to the market investigation reference. That is good to hear, but the Government have been acting to help people with their bills through the warm home discount for the 2 million lowest income households, through the average £50 we took off bills before December, and through our work on energy efficiency and switching. We have been extremely active and will continue to be active during the review, as will Ofgem. The Government are in favour of better prices through more competition to deliver secure green energy.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey(10 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
The fourth carbon budget review is under way. I will not prejudge that, and the hon. Lady should not expect me to do so. I will say that this Government are leading the international climate change debate in Europe. The 2030 energy and climate change targets, which will be discussed at the European Council in March, are critical in tackling climate change. She will know that we have to work internationally to do that. This Government and the UK have been leading that debate.
Caroline Flint (Don Valley) (Lab)
May I congratulate the Secretary of State and his wife, Emily, on the birth of their daughter? I commend him for taking paternity leave, although I know only too well that he will never have been far from the duties of his office.
The Secretary of State has criticised his Conservative coalition partners for undermining the consensus on climate change. Given that the Secretary of State for Environment, Food and Rural Affairs said that people should
“just accept that the climate has been changing for centuries”
and that the Minister of State, Department of Energy and Climate Change, the right hon. Member for Sevenoaks (Michael Fallon) said that he has
“not had time to get into the…climate change debate”,
will the Secretary of State tell us whether it was them that he had in mind? Are his comments not a bit rich, given that he voted against setting a decarbonisation target?
Mr Davey
I thank the right hon. Lady for her warm comments about the birth of our daughter. May I report to the House that mother and baby are doing well? It is nice to come back to Parliament for a rest.
When I made those comments, I was not talking about my ministerial colleagues; I was talking about some voices on the Conservative Benches, particularly in the other place, who question the science of climate change, and I think that is very unhelpful. The right hon. Lady talks about a decarbonisation target, but it was this Government who brought forward legislation on a decarbonisation target. The Labour party did not have one in its manifesto and neither did the Green party. We took the policy forward and it is in the Energy Act 2013.
Mr Davey
It would be wrong of me to anticipate what the annual competition assessment will conclude. We provided evidence for that, which was the right thing to do, but it is for that independent competition authority to decide what the problem is—that is why we have asked it to do it. It is doing detailed work, and when it has analysed the problem, it will decide what remedies are required.
Caroline Flint (Don Valley) (Lab)
The Secretary of State asserted in answer to an oral question on 16 January that Labour’s proposals to introduce a ring fence between generation and supply would cause “real problems” and push up prices. The Procedure Committee has ruled that the Secretary of State should provide me with evidence for that claim by 26 February, which was yesterday. Can he tell me today what the evidence says and whether he will publish it?
Mr Davey
First, the annual competition assessment will, of course, look at that issue in detail. As the right hon. Lady will know if she has read the details of Ofgem’s wholesale market reforms, for example, there is a lot of work to suggest that it is not at all clear that vertical integration is bad for consumers; it may be in some cases, but it will not be in others. The theory behind this is pretty clear: vertical integration was adopted so that people could hedge the risks between generation and supply. That can lower the cost of capital and lower prices for consumers.
Caroline Flint
The Secretary of State has asserted his own view in the House and in the media before Ofgem has even made its assessment, so I think my question stands. Even Government Members think that the Secretary of State is wrong. The hon. Member for Harlow (Robert Halfon) wrote on “ConservativeHome” on 18 February that if companies had separate licences for generation and supply, as Labour has proposed, it would
“shine a light in some of the murky areas”
of the energy market. Apart from some of the big six, can the Secretary of State name a single organisation that opposes a ring fence, and will he confirm that he is ruling out the introduction of a ring fence while he is Secretary of State?
Mr Davey
No, I will not do that for the simple reason that we have asked the independent competition authorities to look at the evidence. Unlike the right hon. Lady, I am not prejudging the outcome of independent competition regulators. We provide the evidence and we allow independent authorities to make judgments on that. It is quite odd that the Labour party is now turning its back on independent competition authorities.
Energy Bills
Debate between Caroline Flint and Ed Davey(10 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint (Don Valley) (Lab)
May I start by asking the Secretary of State a very simple question: does he accept that the sum total of everything he said in his statement today, which includes spending £600 million of taxpayers’ money and weakening the obligation on energy companies to deliver energy efficiency, is that the energy companies will still be allowed to put up people’s bills this winter? Does he really think that is a good deal for consumers?
The Secretary of State claimed that today’s announcement would lead to a £50 reduction in people’s bills. To be clear, will he confirm that if the average increase in energy bills this winter is £120, even if the companies do pass on the reductions from the cut in levies, the average household bill will actually be £70 higher than last winter? As I understand it, one supplier has announced that it will wait until March before passing on any price reduction, and another has made no commitment at all on reducing bills. What powers, if any, does the Secretary of State have to ensure that this reduction is passed on fully and immediately?
The Secretary of State will know that for the past two years we have said that the energy company obligation is bureaucratic, inefficient and poorly targeted. The scheme was designed and implemented under his Government. Indeed, the Prime Minister boasted in the House on 23 January that it was “bigger and better” than the schemes that had gone before it. When did the Secretary of State decide that the scheme needed to be cut? Was it this weekend? Could that explain why an impact assessment will not be published until next year? Will he also tell us how many fewer households will receive energy efficiency measures this year and next year than was originally planned under the scheme?
The Secretary of State wants to talk about the total number of households that will be helped, but if the scheme was meant to run for two years and will now run for four, does not that mean that half as many people will receive help in each year? Will he also tell us what discussions he has had with the insulation industry about the effect of this announcement, and what assessment he has made of any potential job losses in that industry?
As for the warm home discount, will the Secretary of State confirm that all he has actually done is move the cost from people’s bills to their taxes? Evidence that we published last month, and in our Green Paper last week, showed that increases in wholesale costs—which the Secretary State blamed in his statement for rising bills—cannot explain the price rises we have seen in the past two years, and neither can increases in network charges and policy costs.
Last month, the Secretary of State appeared to agree with our criticism of the way in which the energy companies had put up their prices, when he said that they were treating their customers like “cash cows”. In the light of that, will he confirm that there was not a single measure in the package that he announced today that will cost the energy companies a single penny? Hundreds of millions of pounds of taxpayers’ money is being spent, the energy companies are helping fewer households with energy efficiency, and people’s bills will still be higher this winter than last, yet the energy companies are still allowed to carry on overcharging people. Whatever the Secretary of State says today, if we genuinely want to get people’s bills down, nothing less than a price freeze and action to stop the energy companies overcharging will do.
Mr Davey
Members will notice that the right hon. Lady did not welcome this cut in energy bills for her constituents. Her constituents will want to know why she is not prepared to welcome it, and the constituents of every Labour Member who stands up to speak today will also want to know whether their Member of Parliament welcomes it.
We looked at the Opposition’s energy freeze proposal, and it was clear that it would not work. The energy companies would put up bills before it and afterwards. It was, and remains, a con. Worse than that, it would undermine competition and investment. Our proposals are real measures based on real facts, and they are going to help people across the country.
The right hon. Lady asked about the big six. We made it clear in our discussions that we expect them to pass on these cuts so that average bills go down by £50, and that is what will happen. She wants to know what we have said about the big six. We have pushed real competition measures. The big six were created by Labour. In 2000, there were 17 companies in the sector. By the time Labour left office, there were just six. The big six are Labour’s big six. This coalition has produced competition, which is really having an effect.
It was interesting to listen to the last Opposition day debate on this subject, in which the right hon. Lady revealed that she had not even read Ofgem’s proposals for competition in the wholesale market. That shows how much she is not on top of her brief. On the ECO, she has tried to suggest that we are cutting support for fuel poverty, but it is quite the reverse. As I made clear in my statement, we are not only maintaining support for the fuel poverty schemes within the ECO but extending them for two more years.
The right hon. Lady asked what had happened to the impact assessment. I have made it clear that we are going to consult, as she would expect. We will publish the impact assessment when we publish the consultation paper, as we would normally.
The right hon. Lady talks about the insulation industry. I am extremely concerned to ensure that it keeps people employed and keeps investing in people’s homes so that they can have permanently lower bills. Our proposal on the stamp duty—£1,000 off for people who move their homes, even if they do not pay stamp duty, to help the lowest-income home owners—will help the energy-efficiency industry, and it is welcoming it.
Finally, the right hon. Lady asked about shifting costs from bills to taxes. I would have thought she had spoken to the fuel poverty campaign groups, because it is they that have wanted this, as it is more progressive. So not only are our policies helping the fuel poor, but they are far more progressive than those we inherited from Labour.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey(10 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
My hon. Friend is absolutely right. The main reason people’s fuel bills have gone up over the past few years is that there has been a huge increase in wholesale gas prices, which accounts for 60% of the increase in people’s bills. We are becoming more dependent on imports of gas, and that is partly to do with the fact that the previous Government failed to make the essential investments that this country needs.
Caroline Flint (Don Valley) (Lab)
I know that the Secretary of State will share the whole House’s concern about the number of excess winter deaths last year, and it is revealing that 80% were among the over-75s. On 12 January 2012, Labour tabled a motion calling for the energy companies to put all those over 75 on the cheapest tariff, but sadly the Government opposed it. Given that the evidence clearly shows that the over-75s are least likely to be on the lowest tariff, most likely to live in poorly insulated properties and most vulnerable to the cold weather, will he reconsider and make the energy companies put all those over 75 on the cheapest tariff in time for winter?
Mr Davey
Of course the excess winter deaths figures are disturbing. I think that every Member and every party in this House is committed to tackling this, not least because it is a problem that every Government have faced. The solution lies in a combination of policies—health policies, social care policies, housing policies and energy policies. That is why our fuel poverty strategy, which we will publish early in the new year, is a cross-Government attempt to make sure that we are tackling the real problem. I am afraid that once again the right hon. Lady is offering a simplistic solution, and she forgets that this Government have already acted with Ofgem to make sure that everyone is put on the lowest available tariff.
Caroline Flint
To be very clear, our policy is about putting all those over 75 on to the cheapest tariff regardless of how they pay and regardless of whether they are online, which is one of the factors preventing them from getting the cheapest tariff. The Secretary of State’s policy does not affect 90% of people and will still leave those over 75 who are not online and do not pay by direct debit paying more than other people. I remind him that in his own constituency nearly 8,000 people over 75 would save up to £200 as a result of our policy. For those people, and for 4 million like them around the country, why will he not make the energy companies put them on the cheapest tariff and refocus the ECO budget on those living in fuel poverty?
Mr Davey
Because we are doing more for the elderly. This Government brought in the warm home discount, which is taking £135 off the bills of the poorest pensioners. That is real action, taking money directly off their bills. We will certainly take no lectures from the right hon. Lady.
Mr Davey
I am grateful to my hon. Friend for that question. However, power stations that have opted out under the large combustion plant directive must close by the end of 2015. The directive provides no derogation from that requirement. As a safeguard against the risk of low capacity, National Grid has consulted on a new system of balancing services to procure additional capacity in the winters of 2014-15 and 2015-16 if it is needed.
Caroline Flint (Don Valley) (Lab)
My hon. Friend the Member for Scunthorpe (Nic Dakin) asked an important question about the impact of the carbon price floor on energy-intensive industries. Those industries are concerned that they are not getting the compensation that the Secretary of States suggests they are getting. May I ask the Secretary of State about the carbon price floor again? Who does he agree with—his deputy, the Minister of State, Department of Energy and Climate Change, the right hon. Member for Sevenoaks (Michael Fallon), who said that it was an “absurd” waste of money and “assisted suicide” for British manufacturers, or his Liberal Democrat predecessor Chris Huhne, who said,
“We do not need it to drive decarbonisation… It was a straightforward revenue-raising measure by the Tories”?
Mr Davey
The idea that energy-intensive industries are not getting some of the support is not true. Payments under the scheme of compensation for the indirect costs of the EU emissions trading system are being made. It is true that the proposals for compensation for the carbon price floor are still going through the state aid process. However, we have a scheme that will come out and people will get those payments.
Energy Price Freeze
Debate between Caroline Flint and Ed Davey
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
Can the right hon. Lady tell the House whether anyone has visited her or her right hon. Friend the Leader of the Opposition as an investor or a utility and said that because of the Government’s policies they are less likely to invest? Has anyone said that to her?
Caroline Flint
For the past month we have seen the Secretary of State and members of the Government standing up for the big six—[Hon. Members: “The big seven.”] —the big seven, rather than standing up for the consumers and businesses of this country, which are being ripped off. If we want a secure future in which investment can come forward, we need a little less bickering on the Government Benches about green levies and less fighting against what consumers want.
Caroline Flint
I will make some progress, because I am conscious of the time.
Vital though the price freeze is, it is not the only part of the package before the House today. There is widespread agreement that Britain’s energy market is neither as competitive nor as transparent as it should be. There are two connected reasons for that. The first is the vertically integrated structure of the big six energy companies. The principle underpinning privatisation was that supply companies would compete with each other to drive down generation costs and keep prices efficient, but today all the big six energy companies both generate and retail power. Collectively they supply over 98% of the retail market and account for 70% of electricity generation. The problem is that if suppliers are also generators, what incentive is there to keep wholesale costs down if the effect is to reduce the profits of the company as a whole? While energy companies often claim that their profit margins are only 5%, they omit to mention that their profits on generating electricity are, on average, closer to 20%.
The second connected problem is that if the big six can supply most of their customer base from their own power stations; there is little incentive to trade on the open market. It is not possible to determine what physical volumes of gas and electricity are traded within vertically integrated companies as that information is never disclosed, and the prices they charge themselves are never published, but according to the London Energy Brokers Association just 6% of energy is traded on the open market. That makes it difficult for independent generators to secure long-term deals to sell their output, which in turn inhibits future investment. At the same time, independent suppliers are prevented from expanding and new suppliers are deterred from entering the market because they find it difficult to access forward contracts that provide the volume and shape to meet their customers’ needs.
That is why the motion proposes two fundamental changes to the way in which the market works at the moment. First, it would force the big six energy companies to ring-fence their generation businesses from their supply businesses. This would counter the natural conflict of interest within vertically integrated companies and ensure that the interests of supply businesses are better aligned with those of their customers in enabling them to seek out the best possible prices. It would also prevent self-supply, which, in turn, should increase the volume of energy being traded openly and create a more competitive and transparent market. If the Secretary of State disagrees, will he explain how the public interest is served by allowing energy companies to generate energy and supply it to themselves at a price that is never disclosed, and in a way that makes it almost impossible for other players to get a foothold in the market? How does that help consumers, how does it help competition, and how does it increase transparency? If he does not disagree, why will he not back our proposal, or what is his alternative?
Mr Davey
I am listening very closely to the right hon. Lady, because she is, I think, putting before the House a new proposal on ring-fencing. For the sake of clarity, is that about splitting up the big six companies into new companies—a total break-up—or an accounting separation and self-supply restriction? Which is it? We need to know.
Caroline Flint
I have to say to the Secretary of State that I am very disappointed with that intervention. [Interruption.]
Caroline Flint
It is about recognising the problem and trying to find a solution. That is exactly what Labour has been doing and talking about, as is on the record in this House, for the past two years. The Government are not listening to consumers or to those who want to get access to the market because they are standing up for the big six.
Caroline Flint
I will give way to the Secretary of State again, although he will obviously have a right of reply.
Caroline Flint
We have looked at, and debated in this House, the way in which Ofgem has been working in the past few years. We looked at the way in which it was working under the Labour Government when it did not use the powers we gave it. It is not fit for purpose and it needs a massive change. The sadness about Ofgem is that when it has produced reports on, for example, whether bills are going up when wholesale prices are not, it has done very little about the situation.
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
I have notified you, Mr Speaker, and the right hon. Member for Don Valley (Caroline Flint) that I will not be here for the final part of the debate. I apologise for that. The Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), will be summing up.
I want to make it clear at the start of my speech that the Government worry about rising electricity and gas bills all the time. As part of our economic strategy, we are working to bring down prices, get people into jobs and get the economy going. I will touch on that general point shortly.
I welcome this debate and hope that there will be many more debates like it, because we want to debate which party and which side of the House has the best policies to help people and to improve Britain’s energy market.
I regret the fact that we have lost the consensus on energy and climate change policy that we had until very recently, because consensus is vital. We need tens of billions of pounds of investment in new energy generation and networks. If we are to persuade investors, not just in the UK but around the world, to invest in the UK, they need to see that there is consensus on these issues. I hope that we will get back to that. I thought that we had got back to it when there were just eight votes against the Third Reading of the Energy Bill. All the major parties, including the nationalist parties, voted in favour of the Bill. All the Labour Front Benchers voted in favour of the Bill. I welcomed that at the time. I just wish that the consensus had not broken down so quickly.
Caroline Flint
Will the Secretary of State acknowledge that in supporting the Energy Bill, we made it quite clear that it did not contain measures to tackle the problems in the broken market or the concerns of consumers? We made it clear that we reserved the right to continue to campaign for the measures that we have outlined today, which would fix the market and put consumers at the top of our concerns.
Mr Davey
We rejected the right hon. Lady’s arguments at that time and we reject them again today, as I shall set out. However, I am serious when I say that it is critical that we show investors around the world that there is consensus on these issues. I will try to rebuild that consensus in this debate and time and again afterwards, because I believe that that is in the national interest.
Caroline Flint
Does the Secretary of State believe that the big six companies are overcharging their customers?
Mr Davey
I believe that competition is the way to sort that out, and I thought the right hon. Lady was saying that in her speech. I thought the point of her speech was to say that the markets are not working, and that in order to tackle overcharging she wants the markets to work. Is she saying that that is not her position and that she will bring in profit caps and stop companies overcharging, or is it competition? Competition or regulation—let the right hon. Lady come to the Dispatch Box and tell us. She cannot.
Mr Davey
My hon. Friend is absolutely spot on. As the uSwitch figures show, there are big savings to be made. Interestingly, the right hon. Member for Don Valley says that switching is not enough and talks down switching and the opportunity of millions of people in our country to make big savings. She should be ashamed.
We are pushing switching very, very hard. The evidence is that switching is growing fast, as described by my hon. Friend the Member for Selby and Ainsty (Nigel Adams). Let me give the House one further piece of evidence. First Utility has increased its customer numbers by 57% from the beginning of October. People are switching in larger numbers. They are moving away from Labour’s big six to the coalition’s competition.
Caroline Flint
The amounts that people have saved in the Secretary of State’s examples suggest that they were being overcharged in the first place. Does he agree that getting the best tariff and encouraging switching does not mean that people will get a good deal? The market is rigged.
Mr Davey
I am coming to the rigged market, but the market was rigged by the Labour Government. It is Labour’s big six and Labour’s market. We are changing and reforming it while Labour does nothing.
One thing that worries me about switching is that we need to ensure that it operates for the poorest in our country. The right hon. Lady and another hon. Member made the point that, sometimes, the fuel poor and many elderly people do not get the benefits of the market and are not helped by competition switching—the figures bear that out. We cannot just rely on switching; we need to ensure that it works for those people. That is why the Government have put so much money behind the Cheaper Energy Together scheme and collective switching, and why we are putting money behind the big energy saving network. We want to ensure that Age UK and the Citizens Advice Bureau go out into communities to offer advice to those people. That is how to ensure that the poorest in the land can get the best deals in our land.
Mr Davey
My hon. Friend has been incredibly helpful because he anticipates what I am about to say about the third part of Labour’s policy package. It would abolish Ofgem, which it created and which the Leader of the Opposition reformed. It will replace it with Ofgem 2—a tough, new regulator. It is such a charade we could hardly make it up. We have been reforming Ofgem. We have given it powers that the right hon. Lady’s party failed to do in government. For example, if an energy company is found to have maltreated a customer the fines will go to the customer, not to the Chancellor of the Exchequer. That is one example of the new powers.
We have a new regime in the Energy Bill, with a strategy, policy and statement to make sure that Ofgem is doing the job that this House and the Government want, and we have now got new leadership at Ofgem. I look at the record—we are now tackling competition issues in the retail market and the wholesale market. It is true that under the last Government Ofgem was not as powerful or active as it should have been: we have reformed that.
We have gone further than that by now proposing to consult on criminal sanctions for manipulation of the energy markets. We are increasing the robustness of the regime by having an annual competition test. We have shown that we are not complacent. Although we have taken major measures to improve competition in the markets that we inherited, we want to go further year after year, because we believe in competition even though the Opposition do not.
Caroline Flint
The Secretary of State suggests that the Government have given powers to Ofgem to ensure that any redress goes to customers, but can he explain why recently, when Scottish Power were found guilty of mistreating their customers, of the £8.5 million fine only £1 million was to be shared among the 335,000 customers who were estimated to be victims of the company’s bad practices, while the rest was to be put towards the warm home discount? That does not sound to me like it is going to the customers who were victims of the company’s bad practices.
Mr Davey
I am surprised by that point, because the powers are in the Energy Bill and will take effect when it gets Royal Assent.
We need a big debate on energy and climate change, and I hope that we keep having the debate not just today, and not just in the House, but over the next year and across the country. There are difficult issues in the debate, such as the trilemma of making sure that we decarbonise, keep the lights on and do so in an affordable way. It is not only this country that has to face those challenges: they are being faced across the world and especially in other European countries that face the same rises in gas prices that we are struggling with.
The solutions are not easy. They are often complicated. I have been grateful for the right hon. Lady’s support during the passage of the Energy Bill—it may be qualified support, but it was support—but on this issue we obviously have a different set of policies. We agree that there are problems—not enough competition and people are struggling with bills—and we have to produce a solution for them. What we have heard from the official Opposition is irresponsible, ill-thought-through populist nonsense that will not assist a proper debate. Any analysis of the policies that are being served up soon reveals major flaws. I invite my right hon. and hon. Friends to reject the motion, and I invite the Opposition to think again and to act, for once, in the national interest.
Annual Energy Statement
Debate between Caroline Flint and Ed Davey
Caroline Flint (Don Valley) (Lab)
Oh, dearie me. A coherent energy policy? I must say that I feel for the Secretary of State, because he has to deal with the fact that the Government’s energy policy is increasingly being made at the Dispatch Box by a Prime Minister who has completely lost the plot. I would like to thank him for early notice of his statement and its contents—on Sky, on the BBC’s “Watchdog” last night and on the “Today” programme this morning.
The Secretary of State was meant to be making the annual energy statement, but what we heard today would be better described as the annual excuses statement—excuses for why people’s bills are going up, excuses for why Ministers are doing nothing about it, and excuses for why each and every time they give the companies what they want and leave consumers to foot the bill.
The energy companies blame social and environmental obligations for their price rises, so the Prime Minister promises to roll them back. Threatened by Labour’s price freeze and plans to reset the energy market, suddenly the companies are clamouring for another review to kick the issue into the long grass. On Tuesday the chief executive of E.ON told the Energy and Climate Change Committee:
“I believe that we need to have a thorough Competition Commission investigation, supported by Ofgem, because they are the experts—they have been in the industry for a decade.”
Lo and behold, today the Government have given the energy companies what they want: their review, led by the very same regulator that has let them get away with ripping people off in the past.
Then, today, we heard the big announcement: encouraging people to switch from one company to another. But the truth is that no amount of tinkering with tariffs, telling people to shop around or, as the Prime Minister suggested, wearing another jumper will solve the real problem with Britain’s energy market, because even the cheapest tariff in a rigged market will still not be a good deal.
The proof of how weak and spineless the Government are when it comes to standing up to the energy companies is that only three weeks ago the Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker) told the BBC that the idea that Government levies were responsible for bill rises was “nonsense”, but now, boxed in by a Prime Minister who is not willing to stand up to the energy companies and a Chancellor who is actively courting climate change deniers in his own party, the Government say that the levies are to blame.
It is interesting that the Secretary of State conspicuously did not talk about rolling back the green levies in his statement. The truth, of course, is that any obligation to support clean energy or improve energy efficiency must deliver value for money, but how is it possible that social and environmental obligations that, according to his Department’s own figures, make up only £113 of people’s bills can account for price rises of £400? Will he tell us which of the levies, 60% of which were introduced by his Government, he now wants to scrap? Is it the energy company obligation, at £47, the warm home discount, at £11, or the carbon price floor, at £5? Does he accept that, whether it is bill payers or taxpayers who pay, unless he deals with the way people have been overcharged, he is letting the companies off the hook?
As for the annual competition review, I remind the Secretary of State that there have been 17 investigations into the energy market since 2001. If he is today announcing the launch of a new annual review of competition in the energy market, what on earth has Ofgem been doing all this time, and what does he expect it to find out in the next 10 months that it has not discovered in the past 10 years? The last review by Ofgem, to which he gave his full backing, finished only in June. This is what he said at the time:
“I welcome the continued progress of Ofgem’s reform of the retail energy market…That’s why I am backing Ofgem’s reforms”.
The Minister of State, the right hon. Member for Bexhill and Battle, was even more effusive. He said:
“It’s encouraging that Ofgem is going full-speed ahead with these crucial reforms to the retail energy market.”
Today we hear the Secretary of State saying that the Government will build on the BDO recommendations on reform of the energy market, but the truth is that Ofgem ignored BDO’s recommendations and the Government stood by it.
We do not need another review: we need action. We need action to freeze people’s energy bills and fix this broken market; to break up the big six by ring-fencing their generation from supply; to put an end to secret deals and require all electricity to be bought and sold via an open exchange; and to create a tough new watchdog with the power to force these companies to cut their prices when wholesale costs fall—which, I am pleased to tell the House, is now supported by the hon. Member for Westmorland and Lonsdale (Tim Farron), the president of the Secretary of State’s party. That is what real action looks like.
Today’s annual energy statement could not have come at a more important time. Energy prices are rising three times faster under this Government than the previous one, bills are up by £300, and the latest price rises will add another £100 this winter. For people in fuel poverty, the gap between their bills and what they can afford is at an all-time high, but for the companies, the mark-up between wholesale costs and the prices they charge grows ever wider. Fifty-seven households have had work done under the green deal and 7,000 workers in the insulation industry have lost their jobs. Investment in clean energy has halved, and the Government have legislated to stop any future Administration setting a decarbonisation target until 2016 at the earliest. Last year, the UK’s carbon emissions increased by more than any other country in the EU.
That is the Government’s record. As we learned from Age UK on Monday, what it means in reality is that 3 million elderly people will not be able to stay warm in their homes this winter. They want their bills frozen, not their homes. The question they want answered today is simple: why are this Government too weak to stand up to the energy companies?
Mr Davey
I thank the right hon. Lady for her response, in which there was clearly not a single apology to Britain for the black hole in energy security that the Labour party left from when it was in government.
The right hon. Lady talked a lot about Ofgem. Who created Ofgem? The Labour party. Who reformed Ofgem to make it stronger? The Leader of the Opposition. In attacking Ofgem, an independent regulator, she is attacking her own party leader’s record. We are reforming Ofgem; we have given it new, stronger powers. We have created a new regime in the Energy Bill, and there is new leadership. I believe that Ofgem can deliver on competition where the previous Government failed to deliver. We are not kicking competition into the long grass. I am determined that this first annual energy assessment on competition should deliver by next spring.
The right hon. Lady talked about levies. The question is whether levies should be on bills or on taxes, and we are looking at that issue. Interestingly, she referred to a figure of “only” £112. I hope that people noticed that, because her energy freeze will deliver only £120—we think. So she is admitting that her energy freeze is actually the con that we have been saying it is all along.
I end by thanking the right hon. Lady for tabling an Opposition day debate on energy bills for next Wednesday. I want to debate energy with her every day of the week, because I want to expose Labour’s appalling record on energy and its appalling policies, which would feed into the big six that it created. Labour’s big six need competition, and we are up for it—Labour is not.
Grangemouth Refinery
Debate between Caroline Flint and Ed DaveyUrgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Caroline Flint (Don Valley) (Lab)
(Urgent Question): To ask the Secretary of State for Energy and Climate Change if he will make a statement on the Government’s contingency planning in the light of the closure of the Grangemouth refinery.
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
I thank the right hon. Lady for her question. Let me inform the House of the latest situation in respect of the disruption at the Grangemouth refinery and petrochemicals complex in Scotland.
I recognise the concern of many Members, and, in particular, the active involvement of the hon. Member for Linlithgow and East Falkirk (Michael Connarty). The Government have been in regular contact with both sides throughout the dispute, and we continue to talk to both sides. We are working very closely with the Scottish Government, and I spoke to John Swinney, the Cabinet Secretary for Finance, Employment and Sustainable Growth, again this morning.
This morning INEOS made a statement confirming the decision of its shareholders to place the Grangemouth petrochemicals plant in liquidation, which puts 800 jobs at risk. The Government are saddened by the move, particularly because of the uncertainty that it will bring for the work force and all those who indirectly owe their livelihoods to the Grangemouth plant. The Government do not underestimate the plant’s importance to both the local community and the Scottish economy.
While respecting INEOS’s right to make this decision, it is regrettable that both parties have not managed to negotiate a fair and equitable settlement that delivers a viable business model for the plant. Even at this late stage, the Government urge them to continue dialogue, and we will offer all possible help and support with that. We want the petrochemicals plant to stay open if at all possible but, should redundancies be made, support will be available from Partnership Action for Continuing Employment, which includes the Scottish Government, Skills Development Scotland, Business Gateway and Jobcentre Plus.
INEOS’s statement this morning made it clear that the situation regarding the refinery is different from that of the petrochemicals plant. The owners of the refinery, INEOS and PetroChina, have announced their intention to keep their refinery open and their wish to restart full operations as soon as possible. The Government stand ready to help with discussions between the management and the union to ensure that that can happen, and I am speaking to both parties again today.
Throughout the disruption, fuel supplies continue to be delivered as usual. Moreover, my Department has been working closely with industry and the Scottish Government to put robust contingency plans in place to ensure that supplies of road fuels, aviation fuels and heating oils will continue to be available to Scottish consumers and to fuel the Scottish economy.
The Secretary of State for Scotland and I will be giving a briefing at 4.15 pm today in Dover house for MPs with Scottish constituencies and any other interested hon. and right hon. Members who wish to discuss the situation in more detail after these exchanges.
Caroline Flint
I appreciate the right hon. Gentleman’s remarks and the support, through Jobcentre Plus or anyone else, for those who have lost their jobs so that we do whatever we can to help the workers and their families at this difficult time.
The closure of the petrochemical plant at Grangemouth means that the 800 people employed there, and more who are employed as subcontractors, will lose their jobs. The INEOS chairman, Jim Ratcliffe, said at the weekend that if the petrochemical plant closed, it was likely that the refinery would go too. John Swinney, the Scottish Finance Minister, claimed yesterday that he was in discussions with potential buyers for Grangemouth. Is the Secretary of State aware of those discussions and what involvement have he or his Ministers had?
The Unite union committed not to strike, with no preconditions, while negotiations over pay and conditions were undertaken. PetroChina, the 50% shareholder in INEOS’s refinery business, made a statement calling for all parties to get back around the table and reach a consensus but today, sadly, rather than coming back to the negotiating table, INEOS has announced that it will close the—profitable—petrochemical plant. Sadly, there were reports on the BBC this morning that management delivered the news with smiles on their faces. Does the Secretary of State agree that INEOS should have got around the table to negotiate, rather than delivering ultimatums?
In its July report “UK oil refining”, the Energy and Climate Change Committee found a mismatch between refinery supply of petroleum and demand, but we are still waiting for the Government to respond. Can the Secretary of State be confident that the Grangemouth refinery will stay open? Will he tell us more about the contingency plans that are in place to secure fuel supplies for Scotland, Northern Ireland and the north of England? Given the current shutdown and uncertainty over the closure of Grangemouth, will he reassure us that he will commit to undertake the review of UK refining capacity that the hon. Member for Wealden (Charles Hendry) promised in June 2012 in response to the closure of the Coryton refinery?
Mr Davey
I thank the right hon. Lady for her questions. Her first was about the recent statement by the Finance Secretary in the Scottish Government that they were looking for potential buyers. I have spoken to Mr Swinney about that, and we in the Westminster Government certainly stand ready to assist. It is a devolved responsibility, but my right hon. Friends the Secretary of State for Scotland and the Secretary of State for Business, Innovation and Skills will be making all efforts, through Departments and UK Trade & Investment, to assist should we need a buyer for the petrochemicals plant.
The right hon. Lady asked whether INEOS should have got around the table. Throughout the dispute, I have personally been asking both sides to get around the table. At one stage, INEOS was not prepared to go to ACAS. I personally spoke to INEOS and persuaded it to go to ACAS, which it then did, and I regret that those ACAS talks were not successful at avoiding the situation that we have arrived at today.
The right hon. Lady asked about the contingency plans that we put in place. We have been working for a significant time to ensure that there were contingency plans, should the disruption become any worse. As she knows, the refinery is currently closed down, but fuel is coming through the refinery—refined fuel is being loaded from ships into the plant and then on to racks to go into tankers. That is a part of our contingency plans, but they are much more detailed and granular than that. They go into minute detail about how we would ensure that fuel—heating oil, road fuel and aviation fuel—is supplied throughout Scotland, which is why I can say confidently that the people of Scotland may be reassured that we will keep fuel going through that economy.
Finally, the right hon. Lady asked about the review of refineries, and we expect to have that—probably—by the end of the year. It is very detailed and has been under way for some time. She will understand that there has been a big switch in the way in which motorists use fuel—away from petrol to diesel—but most refineries in the UK produce petrol rather than diesel. We import a huge amount of diesel, and that is one of a number of issues being considered in that review.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey(11 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
My hon. Friend is absolutely right. When big energy companies make these high price rises, I would urge all their customers to look at the competition available. There is a lot of choice out there. In fact, there is far more choice than there has been for a long time—possibly ever. The last Government killed choice and reduced competition; under this Government, we have seen a big increase.
Caroline Flint (Don Valley) (Lab)
Let me tell the Secretary of State that if Labour is elected, our price freeze will happen, and if companies collude to increase prices beforehand, we will take action. The right hon. Gentleman is the one in government, so if companies try to hike up their prices beyond anything that can be justified before 2015, will he stop them—yes or no?
Mr Davey
We will help customers to get the best deals. The right hon. Lady knows that. She knows that on the current market, customers can get much better deals than those offered by the big six. She knows that the number of small suppliers has increased. She knows that in 2011 there were no independent suppliers with more than 50,000 customers. Thanks to our policies, there are now three with more than 100,000 and a further seven companies have entered the market in the last two years. That is the choice; that is the solution: people can cut their bills significantly by changing supplier.
Caroline Flint
There you have it, Mr Speaker: every single time, this Government put the energy companies before consumers. According to figures from the House of Commons Library, energy prices are rising three times faster under this Government than under the last Labour Government. Our price freeze will save money for 27 million households and 2.4 million businesses while we reset the market. It is the right hon. Gentleman’s policy that is a con; he says everyone will be put on the cheapest tariff, but is it not a fact that 90% of people will see no benefit from his policy at all?
Mr Davey
Millions are seeing benefits from our policy of competition. The right hon. Lady has made a very interesting point today. In response to our charge that Labour’s policy is a con, because energy companies could push up bills beforehand and after, she said that Labour would take action if they do. Does that mean that she is going to introduce full price regulation? Is Labour now promising that, because that is the implication of what she said?
Mr Davey
My hon. Friend knows that we are a champion of low-carbon energy investment. I strongly welcome ShareAction’s campaign to promote responsible investment by pension funds and fund managers. People who operate these pension funds should think long term, and there is no longer-term problem and challenge for the people they are investing for than climate change.
Caroline Flint (Don Valley) (Lab)
During these questions British Gas has announced that from 23 November it will increase its gas prices by 8.4% and its electricity prices by 10.4%. This is the company that, with Centrica, has passed on the highest share of its profits to its shareholders while making the least amount of investment into what we need to ensure our energy security in future. Two years ago the accountancy firm BDO warned that the big six energy companies could be under-reporting their profits and recommended tighter rules, but the Government and Ofgem failed to act. We backed the new rules, and so did a recent Select Committee report, but in their response all the Government could say was, “Government is not in a position to comment.” Why will not the Secretary of State stand up for consumers, support Labour’s price freeze and make the energy companies tell us exactly how much money they are earning?
Mr Davey
First, that is extremely disappointing news for British Gas customers. British Gas will need to justify its decision openly and transparently to bill-payers. British Gas was the only energy company not to meet its targets under the previous obligation to make its customers’ homes more energy-efficient. That left more homes cold and its customers paying over the odds. British Gas has form in failing to meet its targets, the last of which was set by Labour. I hope that the right hon. Lady will join me in making sure that British Gas is more transparent about its costs. We are pushing competition, and I urge British Gas customers who are unhappy to change their supplier.
Energy Prices and Profits
Debate between Caroline Flint and Ed Davey(11 years, 2 months ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint
Actually, I mentioned “social and environmental obligations” in my opening statement, and part of those obligations mean moving to cleaner energy in the future. I think I have the support of Ministers in saying that if we stay stuck in the past in relation to fossil fuels, we will create an even bigger bill for the future. We need to move to cleaner, renewable energy and other low-carbon energy in order to achieve both security and fairer prices in the long term.
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
In the interests of consensus, does the right hon. Lady accept that it is essential and urgent for Britain to increase investment in renewables, low carbon and energy infrastructure generally, and does she accept that we need to invest about £110 billion over the next 10 years?
Caroline Flint
Yes, I do accept that, and in view of the Secretary of State’s comments, let me be absolutely clear about one thing. The opening words of the motion before us today rightly recognise
“the importance of the energy industry to the security and prosperity”
of the British economy. The companies that keep the hospitals warm, factories working and the lights on in 25 million homes are doing a pretty fundamental job for the British economy. They employ hundreds of thousands of people and create skilled apprenticeships right across the country. Over the next 10 years, we need these companies to invest in the UK—in new power stations, pipes and wires.
The idea, however, that the significant uplift in profits is all somehow to do with investment simply does not stack up. For one thing, if we look carefully at the profits and investment trends of the big six energy companies, as Bloomberg did last year, we see a very odd pattern emerge. The companies with the biggest profit margins have the lowest investment profiles, while the companies with the smallest margins are ploughing the most back in.
Moreover, at a time when the industry overall is enjoying unprecedented profits, we are not seeing anything like the investment that we need. Analysis by Bloomberg New Energy Finance shows that investment in clean energy has fallen by more than half since the last general election, and that under this Government just one new gas-fired power station, in Carrington in Manchester, is scheduled to open before the next election. Every other gas-fired power station that is coming on stream was commissioned, received planning permission and began to be constructed under the last Labour Government. In any case, the need for investment cannot mean allowing the energy market to fail consumers.
Caroline Flint
The choice that we face is between moving to the energy market that is best suited to the future and continuing to incur the additional costs of the past. The Energy and Climate Change Committee has produced information about the cost of decarbonising our power sector, but has also drawn attention to the cost of not doing anything. I believe that the cost of staying stuck in the past would far exceed the cost of investing the amount that we need to invest in renewable and low-carbon energy for the future.
Caroline Flint
Of course I agree that those companies should make profits. I do not want to become involved in a back-and-forth question session because I know that other Members wish to speak, but the Secretary of State has not answered my question. Is he not worried about the fact that some of the companies with the largest profit margins are investing the smallest amounts, while those with the smallest profit margins seem to be investing more? The need for investment cannot mean allowing the energy market to fail consumers. Today I shall explain not just how the Government are going wrong, but how the position could be improved.
Caroline Flint
I just want to make a little progress.
The Energy Bill takes broadly based back-stop powers to improve liquidity, but the Government cannot even say in what circumstances or in what way they would use those powers. I am sure that the Secretary of State will pray in aid Ofgem’s work on liquidity. In our previous exchanges, he has defended the regulator against my criticisms, but I hope that he has read the Select Committee’s report, “Energy Prices, Profits and Poverty”, which was published over the summer. Its conclusion is stark. The very first page of the report states:
“Ofgem is failing consumers by not taking all possible steps to improve transparency and openness in the energy market.”
I am afraid Ofgem’s proposals on wholesale market liquidity do not go anywhere near addressing the two main problems with the market.
The first problem is that the market is dominated by six companies that both generate power and retail it to consumers with a market share of 98%. As Which? pointed out in its report over the summer, the obvious problem with the structure is that it provides little incentive for companies to keep wholesale prices efficient if the effect of doing so is to reduce the overall profitability of the company. Why would the supply arm of an energy company try to drive down profits on the generation arm if the outcome was to reduce the amount of money the company as a whole was making? Although the companies are right to say, as they frequently do, that their retail profits are only 5%, which is pretty healthy, their profit margins on generation are much more substantial. Which? suggests in its report that last year they were about 19%.
Caroline Flint
I have given way quite a lot and I want to make a bit of progress. I will see whether I have time later to take another intervention from the Secretary of State.
I have set out the first problem. The second problem is that if energy companies can source most or all of the power that they need for their customers from their power stations, there is much less need to trade in the open market. According to one estimate from the London Energy Brokers Association, average daily market traded volumes were just 6% of total generation. For those reasons, we have proposed the pool to which the motion refers. A pool would be a single mechanism bringing all generators and suppliers together to buy and sell all their power.
To put it simply, in a pool—or an open exchange, or whatever else we might call it—all generators will be required to sell all the power that they generate on to an open market, and all suppliers will have to buy it from there, too. That would do two very important things: it would put a break between generation and supply; and it would result in much greater volumes being traded openly. Indeed, that is one reason why the markets in other countries where there is a more exchange-based trading system, such as Nord Pool, are more liquid, more transparent and have more market participants. I believe that such a market would be more attractive to invest in, particularly for independent generators or companies wishing to enter the supply market.
Caroline Flint
That is absolutely right. I do not believe that the present situation encourages or incentivises efficiency within those companies. Importantly, it does not provide an open and transparent basis on which to judge the true cost of energy, which I think is vital if we are to move the debate on energy in this country forward.
Mr Davey
Today we have learnt that the right hon. Lady believes that we need investment in the energy sector and that investors will need profits. Given what she has just said, can she tell the House what level of profit she thinks is excessive and when she thinks profits become unfair to the consumer?
Caroline Flint
I think that the difficult thing here is for the country to understand why the Secretary of State has set his face against opening up the market and making it more transparent. This is not about companies not making a profit; it is about creating more competition. Every time we discuss the price of energy, we will have various voices, including the Government’s, defending how the companies operate. I want to create a more open and transparent market, so that we can all judge what is a fair price and, alongside that, what are fair profits. It is not fair if people cannot get to the bottom of how energy is bought and sold. It cannot be right for the market to be rigged in such a way that the vast majority of energy is sold within a company and then sold on to us. Other countries do it differently, and I think that we can, too.
Mr Davey
Let me be clear that we have an independent regulator, which the Labour party tends to forget. I should say to my colleagues that under the EU third package on energy, we have to have an independent regulator. The proposals that have been made are Ofgem’s, but I am on the record as supporting them strongly. As I have explained, Ofgem has proposed a market maker system, whereby the six vertically integrated companies will be mandated to sell power in the forward markets in the UK.
What about the third element of Labour’s package? It is a bit vague, talking about tackling the big six. The House should know from what I have said that we are already doing that through competition. What did Labour do in office? In 1998, there were 14 firms in the electricity supply market retailing electricity to customers. By 2010 there were just six, as my hon. Friend the Member for Peterborough (Mr Jackson) said. Rather than promote competition to help consumers, Labour did the reverse, and it now promises to undo what it did. What a shambles the Opposition policy is, and what a shambles the last Labour Government were.
If Labour’s energy policy would really help consumers, will the right hon. Member for Don Valley tell the House by how much the average energy bill would fall under her party? She tells us that she is proposing radical changes, so what would the impact be for consumers? We published detailed analysis of the impact on people’s bills of our energy and climate change policies, and it showed our policies helping people by keeping their bills lower than they would have been. We need to know what the impact of her policies would be.
As I have made clear, we have policies to help hard-pressed consumers and to help improve competition in the retail electricity market, including policies with Ofgem to help consumers. On the supply side, we have deregulated to make it easier for smaller suppliers to enter the market. We now have our “offtake of last resort” mechanism through an amendment that I introduced into the Energy Bill in the other place, and we are supporting Ofgem’s reforms to the retail market to deliver tariff simplification and get a better deal for more consumers. Labour failed to do that even when pushed to do so in the House. The confusing array of tariffs—there were a huge number—got to such a point that it was hindering competition and hurting consumers, not helping them and driving competition. We are right to back Ofgem with more reserve powers so that we can ensure that vulnerable people are not left being fleeced on so-called dead tariffs, and so that people find it easier to choose and switch.
Caroline Flint
The Secretary of State talks about providing Ofgem with more powers. Does it not concern him that we and the Energy and Climate Change Committee have identified that it has not been using the powers that it already has? How the regulator sees its role in relation to the energy market is at the heart of the problem. Following the recent report, which was a forensic examination of how the market works, it disregarded the recommendations of the independent consultant, and the Select Committee says that it should reconsider the matter. A regulator not using the powers that it already has is worrying, and that is at the heart of some of the problems that we face.
Mr Davey
On the Committee’s proposals about whether Ofgem should pursue the BDO recommendations on accounting transparency, the right hon. Lady will have to wait until we publish our response to the Committee. However, I disagree strongly with her that Ofgem is not using its powers. It is certainly using its powers under us, which is why we have the retail market review delivering the tariff simplification that Labour failed to introduce, and why we are seeing reform proposals for the wholesale market, which Labour failed to do.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey
Mr Davey
My hon. Friend makes a good point and we must promote not just the green deal as part of the community energy strategy, but all aspects of community energy. Right hon. and hon. Members may be aware that we published a call for evidence last month for a future community energy strategy, looking at energy efficiency, energy generation and purchasing energy. I urge Members to talk to their constituencies and to contribute to the formation of Britain’s first ever community energy strategy.
Caroline Flint (Don Valley) (Lab)
Two weeks ago Ofgem published its latest estimates for future electricity demand and capacity, and warned of possible shortfalls in the middle of this decade. Commenting on its report, the Secretary of State said:
“Without timely action there would be risks to security of supply”.
Will the Secretary of State explain why Ofgem states that the likelihood of blackouts is roughly one in 12 years, while analysis by his Department suggests that the true figure is closer to one in 3,000 years. Why is there such a big discrepancy?
Mr Davey
I do not recognise the figures that the right hon. Lady has just given to the House; my officials have been working closely with Ofgem and National Grid. I hope she will acknowledge that the Ofgem figures she cites are from before the measures we announced last week, following the announcement by Ofgem and National Grid on the immediate future, and our proposals for a capacity market. I would have thought she would welcome the fact that this Government have taken action where the last Government failed.
Caroline Flint
I am afraid that the figures are from Ofgem and the Department of Energy and Climate Change, so I suggest the Secretary of State has another look. Such wildly varying forecasts of possible blackouts do nothing to help us plan our energy security for the future, so let us consider what the Government are doing about it.
On the “Sunday Politics” show on 30 June, the Minister of State, Department for Business, Innovation and Skills, the right hon. Member for Sevenoaks (Michael Fallon) claimed that six gas-fired power stations had opened under this Government, and tried to blame the problem on the previous Administration. In an answer given to me yesterday to a written parliamentary question, the Minister confirmed that construction of all those six new power stations began under Labour. In five years of this Government, just one new gas-fired power station in Carrington in Manchester will be built. Will the Secretary of State confirm that that is the case? Would not the country’s energy security be better served if the Government and regulator could produce a coherent and consistent estimate of the likelihood of blackouts?
Mr Davey
The right hon. Lady says from a sedentary position that it all started under Labour, but I am afraid that the £29 billion of investment in renewables was announced by this Government. I can give the House some good news that the right hon. Lady might want to hear. For the first stage of electricity market reform, as the Energy Bill goes through the House of Lords, and after the deadline for applications for the final investment decision enabling project closed just a few days ago, we have received 57 applications. I am not sure whether they will all go through, but if they do, that would amount to more than 18 GW of power. That is our record on energy investment and we are putting right the appalling record of the previous Government.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey
Caroline Flint (Don Valley) (Lab)
Apparently, more than 5 million homes could still benefit from cavity wall insulation, so there is still a lot of work that could be done.
The Government have claimed it is too early to set a decarbonisation target for 2030, but next month they will publish their electricity market reform delivery plan, which will determine our energy mix and its carbon intensity. In the absence of a legally binding decarbonisation target, will the Secretary of State at least confirm that his long overdue delivery plan will be in line with our legally binding carbon budgets, or will the Government be rewriting the fourth carbon budget?
Mr Davey
No, the plan will be in line with our legally binding obligations. As I have explained to the House, before we set the decarbonisation target in 2016 we will give National Grid guidance on setting the EMR delivery plan to ensure that it is on path to meet our decarbonisation targets in the least-cost way.
Petrol Prices
Debate between Caroline Flint and Ed Davey
Caroline Flint (Don Valley) (Lab)
With the greatest respect, I say to the Secretary of State that no amount of tariff simplification or sorting out retail at the pump will deal with the problem that we face today, which is allegations about how energy and petrol are bought and sold, and the way in which the market works.
The allegations that have been made about the three oil companies, BP, Royal Dutch Shell and Statoil, as well as the price reporting agency, Platts, are extremely concerning. They suggest that those companies have both colluded in reporting distorted prices and prevented others from participating in the price assessment process, with a view to distorting the published price. If the allegations are true, there has been shocking behaviour in the oil market which should be dealt with strongly. I therefore have three questions for the Secretary of State.
First, the Secretary of State will know that the OFT inquiry concluded at the end of January that the UK fuel market was operating fairly, and that a Competition Commission inquiry was not needed. Given the amendment that has been tabled for debate later today, it will not be lost on hon. Members that it is the European Commission, not any British authority, that is investigating this situation. In light of today’s allegations, will the Secretary of State say whether any British authorities have plans to revisit their own investigations? If the EU investigation uncovers any wrongdoing, it will raise serious questions about the effectiveness of our authorities.
Secondly, last year we tabled amendments calling for commodities such as oil and gas to be part of the Financial Conduct Authority’s regulatory net, but Ministers refused to act. We argued that the regulatory perimeter needed to be explicitly set out in the Financial Services Act 2012, and that it was insufficient just to add references to LIBOR. Does the Secretary of State now accept that the Office of Fair Trading and the FCA should be explicitly equipped to tackle attempts at rigging commodities trading, whether spot trading, forward contracts, futures contracts hedging or benchmark pricing indices?
Thirdly, when the allegations of price fixing in the gas market were made last year, we warned that opaque over-the-counter deals and a reliance on price reporting agencies left the market vulnerable to abuse. The latest allegations of price fixing in the oil market raise similar questions. I tabled a parliamentary question in February asking for an update on the earlier investigations, but the Government were unable to provide any more information. Can the Secretary of State give us any assurance that progress is being made, and that we will not need another EU investigation to get to the bottom of what is happening in the gas market?
As we all know, LIBOR was a massive scandal, but global commodity markets include a vast range of products, including grains, fibre, other food, precious metals and energy, affecting every household. Consumers need to know that the prices they pay for their energy or petrol are fair, transparent and not being manipulated by traders. I hope that the Secretary of State will assure the House that no stone will be left unturned to establish the truth behind the allegations.
Mr Davey
I thank the right hon. Lady for her reply. May I make it absolutely clear to her and the House that we take the allegations extremely seriously? If it turns out that hard-pressed motorists and consumers have been hit in the pocket by the manipulation of markets, the full force of the law should come down upon those responsible. Let there be no doubt about that.
However, I am surprised that the right hon. Lady wishes the Government to interfere directly in competition investigations. It was her Government who rightly moved competition authorities on to an independent basis. We believe it is very important to have independent competition authorities, because that strengthens their ability to act. [Interruption.] She asks from a sedentary position what they are doing, but arguably we could ask what they were doing under the Labour Government. I hope that we can get cross-party consensus that competition authorities should be independent.
It is good news that the European Commission directorate-general for competition has acted, and I would have thought that the right hon. Lady would welcome that. When there are cross-border allegations, it is important that the European Union can act.
The right hon. Lady asked whether we would act on the effectiveness of competition authorities. We have. Indeed, I was the competition Minister who proposed the changes to the competition regime inherited from the previous Government, which are strengthening it. Bringing in the Competition and Markets Authority will make our competition bodies and regime far more robust, so we have a very good record on the issue.
The right hon. Lady asked whether there should be wider powers to deal with commodities trading. An issue to be considered—we have seen it with LIBOR and the gas market manipulation allegations and now we see it today—is how price reporting agencies operate. They are unregulated bodies, as they were under the previous Government. She will know that the International Organisation of Securities Commissions has been looking into both price reporting agencies in general and oil markets specifically. It reported to the G20 last November, stating that it had potential concerns about the operation of the global market. It did not refer to any particular allegations of manipulation, but there is an ongoing debate, globally as well as in this country, about how we deal with price reporting agencies given that there have been instances of market manipulation. We are taking action; the previous Government did not.
The right hon. Lady’s final question was what was the state of play with respect to the Ofgem review of gas market manipulation. She described it as an investigation, but I clarify that it is a review of the allegations. She will also know that Ofgem is independent. We do not expect an independent investigator or regulator to give the Government day-by-day reports as that would go against its independent nature and reduce its power. I would be surprised if the Labour party wanted to reduce the power of our independent regulators. These are serious allegations, and we stand behind our independent competition authorities and believe they will take action on behalf of the consumer, as they should.
Cost of Living
Debate between Caroline Flint and Ed Davey
Caroline Flint
I want to make some progress, because there are only six minutes per speech, and I am sure that many right hon. and hon. Members want to get in.
Let us take a closer look at the real lives of hard-working Britain. On energy bills, the facts speak for themselves. In just three years, bills have risen by more than £300, and, despite falling between 1997 and 2010, fuel poverty is now increasing sharply. There has been a doubling in the number of pensioners dying from hypothermia compared with five years ago. What have the Government done about it? The Secretary of State mentioned the energy company obligation, the ECO. But less than half the budget of that will go to people in fuel poverty. He has tried to claim credit for the warm home discount, but he will not want to talk about the hundreds of thousands of low-income families with children that are missing out on help. He mentions the green deal, which is going so well that the Government still will not tell us how many people have taken out a package.
But one thing I am sure he does want to talk about is the Prime Minister’s now infamous pledge to force the energy companies by law to put everybody on the cheapest tariff. I will not forget Wednesday 17 October 2012 when the Prime Minister said:
“I can announce…that we will be legislating so that energy companies have to give the lowest tariff to their customers.” —[Official Report, 17 October 2012; Vol. 551, c. 316.]
It sounded great; it is a shame his own Ministers did not know about this announcement until it happened. When the Government finally published their proposals in February, it confirmed what we knew all along; that this was an impossible promise from an out-of-touch Prime Minister making it up as he went along.
You do not have to take my word for it, Mr. Speaker. We can look at the Government’s Energy Bill, which categorically does not require the energy companies to put everybody on the cheapest tariff. All it says in clauses 121 to 124 is that the number of tariffs the energy companies are allowed to offer will be limited and that those tariffs may have to be standardised, and that customers will have to be provided with more information about cheaper deals. If the Secretary of State disagrees, I am more than happy to let him intervene to tell us that all energy companies will be required by law—as the Prime Minister promised—to put everyone on the cheapest tariff, the date on which the switchover will happen, how many of 22 million households will be affected and how much money on average they will save.
Caroline Flint
There we have it, Mr Speaker. They cannot explain it because it was a false promise. The Prime Minister told this House 12 times that his Government would legislate to put everyone on the cheapest tariff; that is just not going to happen.
Caroline Flint
I refute that accusation; investment in energy was up, there were more starts in terms of renewables, some of which will be completed under this Government—that is our legacy—and by tackling fuel poverty, the insulation programme through Warm Front and the decent homes programme we helped millions of households.
To answer honestly, I have witnessed things over the past three years that have made me challenge what we need to do for the future in terms of how the energy market works. It is up to all of us to reflect on where we are today and on what has happened in the past three years and try to put it right. That is why we believe that we need to encourage new entrants, increase competition and ease the upward pressure on prices.
One of our other proposals is to deal with Ofgem. Ofgem removed price controls a decade ago, so in the belief that competition had developed sufficiently and that privatisation had delivered a functioning competitive market. I believe it is clear now that that was a mistake. We need to create a tough new regulator that people can trust and ensure that the regulator has the power it needs to protect consumers. That is why we 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 the public pay and the power to force them to cut prices when wholesale costs fall. We believe that that is very important.
Mr Davey
The right hon. Lady has explained to the House the Opposition’s policy to get rid of a regulator and to replace it with another regulator. Given that we need to attract £110 billion of investment in energy to this country, is she aware that one of the things that investors prize about the UK is regulatory stability and certainty? Will her proposal improve that or make it worse?
Caroline Flint
Investment in the renewables sector in this country has gone down; we are a less attractive place to invest. The Secretary of State makes much of the so-called “decarbonisation target” in the Bill. The truth is that there is no such target. Investors say to me that they need certainty, which is why we need to have strength behind a decarbonisation target to make sure that that investment comes forward.
I also believe that we cannot have a regulator that people do not trust. It has not been doing the job it was asked to do; it is not fit for purpose. To get our energy market and sector into a better place, we need consumers to have confidence in the regulator, which is why it needs to change. There is no point in trying to hold up a regulator that does not command confidence. We need a regulator that does just that and can move us to a better place, where energy has the certainty it needs for investment but also has the confidence of consumers.
Hinkley Point
Debate between Caroline Flint and Ed Davey
Caroline Flint (Don Valley) (Lab)
I thank the Secretary of State for early sight of his statement. When we last debated nuclear power on 7 February, I was clear that we strongly support and are absolutely committed to facilitating new nuclear build in Britain at a fair price, and I very much welcome the Secretary of State’s strong support for nuclear power in the House today.
We believe that nuclear power will have an important role to play as part of a more balanced, secure and, importantly, low-carbon energy supply for the future. That is why we have supported the Government’s efforts to attract investment in new nuclear, which began under my noble Friend Lord Hutton and my right hon. Friend the Leader of the Opposition, as well as ensuring the establishment of a statutory Office for Nuclear Regulation. I also commend the role of the local MP, the hon. Member for Bridgwater and West Somerset (Mr Liddell-Grainger), whose ancestor, Queen Victoria, oversaw during her reign an industrial revolution. He is playing a small part in the new, clean, low-carbon industrial revolution for the 21st century.
Today’s announcement granting planning permission for new nuclear reactors at Hinkley builds on the progress in recent months which has seen the ONR approve the reactor design and the Environment Agency granting the necessary environmental permits, all of which we welcome.
On the specific point about planning consent, let me ask the Secretary of State three questions. First, as we know, new nuclear build has the potential to contribute to economic growth and job creation. Hinkley Point C alone could require as many as 500 new construction apprentices and 200 operations apprentices. Last year, the Prime Minister signed an agreement with France on nuclear energy, but what specific steps is the Secretary of State taking to ensure that the UK supply chain and the local work force are able to benefit as much as possible from this development? Many of the people we hope will be building and operating this power station are probably still in school, so we have got to equip them with the skills they need.
We must also be mindful, however, that any development of this magnitude, if not properly dealt with, could have a detrimental impact on the local area. Secondly, therefore, will the Secretary of State tell the House in more detail what measures will be put in place as part of the planning agreement to ensure that any mitigation measures needed to reduce or eliminate this impact are implemented?
Thirdly, nuclear power stations are national assets, but we should also recognise the contribution of the communities that host them on our behalf. Last year, the Government launched consultation on the community benefit of onshore wind. Will the Secretary of State tell us what community benefit package, beyond what he has already mentioned, the Government believe is right for new nuclear developments? Will he also provide a little more detail about how any package would be split between West Somerset council, which covers Hinkley Point, and other local authorities, such as Sedgemoor district council, which will also be affected by the development?
Given that EDF is still in negotiation with the Government to agree a strike price for the power it generates at Hinkley Point, it is difficult to debate today’s announcement on planning consent without some reference—the Secretary of State has already mentioned this—to the financing that will determine whether the development goes ahead. I understand that details of those discussions are commercially sensitive, but there has been much speculation in recent weeks that a deal is imminent.
The Secretary of State will know that the length of the contracts, as well as the price, will face scrutiny whenever a deal is reached, but can he provide an update on those negotiations and on when he hopes to reach agreement? He knows that we believe that the process for agreeing contracts for difference could be improved to make it more robust and transparent and to ensure that it delivers value for money for consumers. Will he tell us what, if any, further consideration he has given to our proposals in respect of the Energy Bill, which include ensuring that agreed investment contracts are laid before Parliament within three days of being entered into, provisions to ensure that any change to the contracts are published and subject to proper scrutiny, and greater protection for bill payers in the event that construction costs are lower than projected?
Today’s announcement is an important milestone in the development of new nuclear build in the UK. There is no doubt about that. On behalf of the Opposition, I am pleased to welcome it and to reiterate our support for nuclear power alongside an expansion of renewable energy and investment in carbon capture and storage as part of a clean, secure and affordable energy supply for the future.
Mr Davey
I pay tribute to the right hon. Lady and the Labour party for their support and welcome today. Their support and indeed the work by the previous Government in their last few years have allowed investors and nuclear operators to see that there is cross-party support, which gives people confidence—[Interruption.] I hear some coughs from my party’s Benches and they remind me that it has hon. Members who do not support the proposal. However, we have coalition agreement that helps that cross-party approach.
The right hon. Lady was right to pay tribute to my hon. Friend the Member for Bridgwater and West Somerset (Mr Liddell-Grainger), and I hope that we will hear from him shortly. He has played a leading role in his community, working with local councils there, and we should also pay tribute to those in all authorities, but particularly local authorities, who have worked so hard on the matter.
The right hon. Lady asked me some questions, including on planning, and I hope to give her the reply she wants. She rightly talked about the importance of the local supply chain. Already, a huge amount of work has been done on that, primarily by local councils and others. Bridgwater college is at the centre of trying to ensure that young people and the wider work force in the area benefit from the work that will be created directly and indirectly. She may be aware that my Department has been working with my right hon. Friend the Secretary of State for Business, Innovation and Skills on an industrial strategy for the nuclear supply chain, and we will publish it in due course. Whether at Hinkley Point C or any future nuclear power stations, we want to ensure significant British content—British firms and British workers—in the nuclear supply chain.
The right hon. Lady asked about work in the local area and conditions in the development consent order to make sure that local people’s lives are not disrupted. My decision letter, which I will place in the Library, includes a whole range of issues, most of which follow on from the independent panel—the examining authority. I have made one or two changes to its proposals, particularly concerning Combwich wharf to try to ensure that more freight can come by sea. Our proposal will further reduce traffic in Cannington. We have made decisions to protect local residents.
On community benefits, which the right hon. Lady rightly raised again, I confirm that there will be a package of such benefits, which will be announced in due course. I cannot say any more about that, but the Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for South Holland and The Deepings (Mr Hayes), is working on that.
The right hon. Lady closed with a request for an update on the negotiations. She will be aware that I have steadfastly refused the temptation to give right hon. and hon. Members a running update because the negotiations are commercial and it would be improper to do so. However, as we have said on several occasions, when the deal has been concluded, we will be completely transparent about its terms, including the strike price, the duration and other key terms and conditions.
The right hon. Lady was right to say that we will need state aid clearance in the usual way, and that will also enhance transparency. Finally, she referred to the issues that the Opposition have raised fairly and reasonably during discussion of the Energy Bill. We will respond to many of those issues on Report.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey(11 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
I congratulate my hon. Friend on his ingenuity, but the analysis that others have done of those figures shows that what has really pushed people into fuel poverty has been gas prices, with global gas prices having increased significantly. We also have to deal with the renewal of the transmission mechanism and distribution networks. Those things have far bigger impacts on prices and bills. The hon. Gentleman ought to have a balanced approach.
Caroline Flint (Don Valley) (Lab)
The single biggest driver of rising energy bills is global gas prices. Last week the Institute for Public Policy Research think tank found that household energy bills would be lower and less volatile if the Government decarbonised the power sector by 2030. Does the Secretary of State agree?
Caroline Flint
Although the Secretary of State says he agrees, the problem is that the Government are not tackling the issue. The truth is that the Energy Bill does not require the Government to set a decarbonisation target. Even if such a target were set, there is nothing under the Bill’s present arrangements to ensure that it would be met. The Committee on Climate Change is absolutely clear: the Government should set a decarbonisation target now, not in 2016, and all the Government are doing is extending the uncertainty for another two years. Was not the former Energy Minister, the hon. Member for Wealden (Charles Hendry), right when he said that this uncertainty will lead to higher capital costs and, ultimately, higher energy bills for the public?
Mr Davey
I have to remind the right hon. Lady and the House that no single party—not the Labour party, the Conservative party, the Liberal Democrats or even the Green party—argued in its 2010 manifesto for a decarbonisation target for the power sector. It was this Government and me as Secretary of State who argued for such a target and got the power to set one in the Energy Bill. When it comes to targets and having the policies to meet them, this Government have done far more than the previous one. The previous Government were right to set targets in the Climate Change Act 2008, but they did not produce the policies to meet them. This Government are doing that.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey(11 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
I am grateful for my hon. Friend’s question; that sounds a very interesting scheme. We are supporting micro-hydro schemes through feed-in tariffs but if she has particular issues that she wants to discuss with me or my colleagues in DECC, I am sure we will find time to meet her and her delegation.
Caroline Flint (Don Valley) (Lab)
Every day it is becoming more evident where the Liberal Democrats do not agree with their Conservative colleagues. However, in response to Labour’s proposal to extend community energy schemes by increasing the feed-in tariff threshold to 10 MW, the Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker), told the Energy Bill Committee that
“it is a matter of public record that I myself supported the expansion of the FITs scheme at the Conservative party conference last year…However, this is a coalition Government”.––[Official Report, Energy Public Bill Committee, 22 January 2013; c. 248-49.]
Will the Secretary of State confirm today that it is the Liberal Democrats who are responsible for the Government’s failure to support extending the feed-in tariff threshold to 10 MW in the Energy Bill and therefore to support and encourage community energy schemes?
Mr Davey
I congratulate the right hon. Lady on a good try, but I am afraid it is going to fail. I work closely with both my Ministers of State and we are a united team on that and many other measures. I am sure the right hon. Lady will be terribly disappointed, but that is why we will introduce later this year the most ambitious community energy strategy this country has ever seen, and we will consult on it before we finalise it. She wants to point out one measure, but that will be considered along with many others. We have a rather more ambitious approach to community energy than the previous Government ever had.
Fuel Poverty and Energy Efficiency
Debate between Caroline Flint and Ed Davey(11 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint
If the hon. Lady would like to listen to some facts she might learn something. Figures published not by Labour but by the Minister’s Department paint a very different picture to the one the Government try to portray. In 1996, the year before Labour entered office, 6.5 million households were in fuel poverty. In 2010, the year we left office, that number had fallen to 4.75 million—nearly 2 million fewer households in fuel poverty. That can be spun however people like, but those are the facts. Under Labour, fuel poverty went down, not up. That happened because of choices we made—choices to introduce winter fuel payments, to invest in energy efficiency through Warm Front and the decent homes programme, and to ensure that all new homes for the future will be energy efficient and zero carbon. We made a choice to invest in our health services, hospitals and communities to protect the ill, the elderly and the poor from the cold—[Interruption.] The hon. Member for St Albans (Mrs Main) asks from the Government Benches what that has to do with it, but as she should know, a good health service helps to prevent cold-related deaths.
Those are policies for which the Labour party fought and argued, often in the face of opposition. They are policies that Conservative Members pretended to support and pledged to protect when they knocked on doors seeking people’s votes, but which they quickly dumped as soon as they agreed to trade with their coalition partners.
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
The right hon. Lady does not raise the standard of debate when she uses statistics in that way and does not engage with the real issue of how we measure fuel poverty. That is why the Government asked Professor John Hills to carry out a review of how we measure fuel poverty. The right hon. Lady knows that fuel poverty has been correlated more with the price of gas, and at one stage, because of the way fuel poverty statistics work, the Queen was deemed to be in fuel poverty. We want to reform those statistics so that we have a better debate and a better way of targeting money on those in fuel poverty. Does she agree with that?
Mr Davey
As the hon. Gentleman will know, the Department for Work and Pensions administers that benefit, and I am sure that he has made that request to the Secretary of State for that Department. My Department has been encouraging people in many parts of the country who are off grid to buy early, because they can get much better deals than if they leave it until later.
Although the extra payments are welcome to those who get them, they are not received by everybody. They do not address the fundamental problem of homes and appliances that waste energy and money. Britain’s draughty homes account for a quarter of the UK’s greenhouse gas emissions. Millions of homes do not have full double glazing. More than half do not have enough insulation or an efficient condensing boiler. Most do not even have proper heating controls. The single most effective means of bringing bills down for people, including for the most vulnerable, is to help people waste less energy. Energy efficiency is about using less energy to provide the same warmth, or more. That means lower bills and lower carbon emissions.
Caroline Flint
I quote the written ministerial statement from today:
“The Warm Front scheme has been an important policy in tackling fuel poverty among private sector households in England though the installation of a range of heating, insulation and other energy efficiency measures”
and since 2000 it
“has helped around 2.3 million households vulnerable to fuel poverty.”
Given that this budget has a £50 million underspend, will the Secretary of State explain why he is not urging his colleagues in Government to extend the Warm Front deadline so that the budget can be spent to help the very people he has just been talking about?
Mr Davey
I am coming to the Warm Front scheme, because the right hon. Member for Don Valley made much of the fact that we are closing it down. Under the previous Government, the Warm Front scheme was the vehicle by which some vulnerable households were helped, but we consider the scale of the fuel poverty challenge to be much greater, and, as she has admitted, there were problems with the scheme. We are far more ambitious, because fuel poverty must be tackled and Britain has some of the oldest and, therefore, draughtiest, housing stock in Europe. If we are serious about climate change and tackling high energy bills, we should not help just those who are at risk of fuel poverty, although they should of course be a priority. We believe that everyone should have the opportunity to green-proof their house and achieve lower energy bills in the process.
Warm Front will be closing, as announced more than two years ago, but applications will continue to be accepted up to 19 January, and the work will be followed through, for all who apply up to 19 January. I have set out to the House today in a written statement how that transition will work. Even before 19 January, we brought in Warm Front’s successor—the affordable warmth scheme, which the right hon. Lady did not mention, and which is part of our new energy company obligation. Affordable warmth is up and operating, and low-income households who previously could get Warm Front can now get affordable warmth. It and the energy company obligation, which are both now in operation, will support our most ambitious policy of all—the green deal.
This is a transformative moment. We shall see the full launch of the green deal this month. From 28 January, all households will be eligible for it. They will be able to make energy-saving improvements that will be paid for, over time, through their energy bills and the savings that they make. This is an affordable way of retrofitting millions of homes, making them cheaper to heat and lowering carbon emissions at the same time.
The right hon. Member for Don Valley rightly wanted to talk about Warm Front and the details of its budget. I shall deal with that now, although she herself admitted that there will problems with Warm Front. As she said, we have spent £38.4 million of the £100 million budget, and £15.5 is committed. We expect to spend about £70 million by the end of the year. We will not return the remaining £30 million to the Treasury, as the right hon. Lady implied, because we want to do all that we can to address fuel poverty, and we have worked hard to ensure that the money is spent on tackling it, organising a local authority competition for cash from a special fuel poverty fund. I told the House yesterday that about £30 million was being provided for local authorities across the country to spend on local energy efficiency projects for low-income and vulnerable households. There will be no waste. As it comes to the end of its life, Warm Front is being recycled, and what is replacing it is infinitely better.
Opposition Members seem to think that Warm Front was a fantastic scheme, but people had to apply for it, whereas under affordable warmth the energy companies will have to go out and find people in order to help them. I should have expected Opposition Members to support that.
Caroline Flint
When—in, I believe, October 2012—the Secretary of State announced the competition for local authorities seeking to win money to help energy efficiency locally, did he make it clear that it would be Warm Front money? He has said that £30 million will go towards the scheme. What is happening to the other £20 million of Warm Front underspend?
Mr Davey
The right hon. Lady was clearly not listening when I said that we expected that amount to be spent by the end of the year. [Interruption.] It would help if the right hon. Lady listened now. She will know that uncertainties are involved in schemes such as this—even Labour could not macro-manage everything—but we expect to spend about £70 million.
The right hon. Lady asked whether we had announced that the money would come from the Warm Front scheme. We did not do so, because we were not absolutely sure what we would be spending on Warm Front by the end of the year. I wanted to ensure that we were making fuel poverty a priority, and that any underspend from Warm Front or anywhere else was targeted at it. Now the right hon. Lady is criticising me—
Caroline Flint
I am happy to withdraw it, but I will look into the facts to establish whether it was made clear in that announcement that the money would come from Warm Front.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey(11 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Mr Davey
The whole House listens to the hon. Gentleman closely on these issues because he is an expert on drilling and all aspects of the coal industry. I do not know the case to which he refers, but if he wishes to write to me, I am sure my officials can look into it. He makes an important contribution to this debate, because he highlights the fact that this country has had to tackle methane emissions in the coal and the oil and gas industries, so we have a lot of knowledge, experience and expertise to draw on to make sure we can control emissions from shale gas.
Caroline Flint (Don Valley) (Lab)
I can see how excited Members on the Government Benches are about the potential for shale gas, but I wonder whether they will be equally excited if drilling starts in Wiltshire, Lincolnshire or other parts of the country. As the Secretary of State knows, we have always said fracking should go ahead only if it is safe and environmentally sound. We set out six conditions, and we will be looking to see if they are met in the Government’s written statement today.
On prices, last week the Chancellor said he did not want the British public to miss out if gas prices tumbled as a result of discoveries of shale gas, but does the Secretary of State agree with the former Energy Minister, the hon. Member for Wealden (Charles Hendry), as well as most experts, that
“betting the farm on shale brings serious risks of future price rises”?
Mr Davey
First, I thank the right hon. Lady for saying she will look at our statement carefully. I know that her colleague, the hon. Member for Rutherglen and Hamilton West (Tom Greatrex), wrote to my hon. Friend the Member for Wealden when he was a Minister to set out the Opposition’s conditions. I believe that when the Opposition study the written ministerial statement—we gave a copy to the right hon. Lady before this Question Time, but she should have a chance to examine it—they will see that we have met all the conditions.
The right hon. Lady’s main question was on prices. I agree with my hon. Friend the Member for Wealden that we should not bet the farm on shale gas. I am absolutely clear that the most responsible and sensible way forward for energy policy is to have a diverse set of resources and sources for our energy. Some of the press and commentariat have got very excited about the possibility of gas prices falling, but the independent analysis and the International Energy Agency findings do not necessarily support that.
Energy Policy
Debate between Caroline Flint and Ed Davey(11 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint (Don Valley) (Lab)
I thank the Secretary of State for early notice of his statement. I was going to say that I felt deprived at not getting two statements—one from the Secretary of State and one from the Minister of State, Department of Energy and Climate Change, the hon. Member for South Holland and The Deepings (Mr Hayes)—because that seems to be the usual manner of doing things this afternoon, but I think we were lucky just to get one. The Secretary of State can catch his breath now.
I have always made it clear that where we can work with the Government in the national interest, we will do so. In that vein, the Secretary of State will know that we have supported the Government’s efforts to attract investment in new nuclear, and we welcome Hitachi’s decision to buy the Horizon nuclear project. We also welcome the progress made in Durban last year and wish our negotiators in Doha well. It is with genuine regret, however, that over the past year we have seen the Government lurch from one crisis to another on many aspects of energy policy, from the disastrous handling of the cuts to the feed-in tariff for solar power, to the recent outburst on wind power from the Minister of State, the hon. Member for South Holland and The Deepings, and, I am afraid, the Prime Minister’s broken promises on energy bills. The Department has done more than its fair share to get the word “omnishambles” in the “Oxford English Dictionary”.
Today, alongside the statement, the Secretary of State is also publishing the Government’s long-awaited Energy Bill. His Department’s press notice helpfully reminds us that the Bill has faced repeated delays, which I believe has undermined confidence and left much investment in limbo. We will of course look carefully at the Bill and the other proposals the Government have published today on demand reduction, energy security and energy-intensive industries, and I look forward to debating them more fully with the Secretary of State in due course.
I want to pick up on two aspects of the Secretary of State’s announcement and ask him some specific questions: first, on the state of competition in the energy market and, secondly, on the Government’s failure to set a clear target to decarbonise the power sector. This time last year, when the Secretary of State’s predecessor delivered the annual energy statement, he said that people’s bills would be lower during this Parliament. Families and businesses up and down the country that have seen their bills rise by more than £250 know that that is just not true. In response, the Government launched their “click, switch and insulate to save” campaign, but the number of people switching suppliers fell to record lows.
The Secretary of State talked about energy efficiency, but next year this Administration will become the first since the 1970s not to have a Government-funded energy efficiency scheme. The Prime Minister told the House that he would force the energy companies by law to put everyone on the lowest tariff, but it turned out that all the Government are really doing is limiting the number of tariffs those companies can offer. The simple truth is that even the lowest tariff in an uncompetitive market will not be a good deal.
The Secretary of State says that the burden of investment will not fall on taxpayers, but it will fall on bill payers, and, at a time when we are asking them to pay for as much as £200 billion of investment in our energy infrastructure, it is more important than ever that we have an energy market that delivers fair prices and works in the public interest. For too long, the big energy companies have been able to get away with what they want at the expense of everyone else. Those big companies dominate 98% of the market and, decades after privatisation, still have a virtual monopoly in their former electricity regions. They tell us that electricity and gas prices in the UK are among the lowest in Europe, but when tax is taken out of the equation, they are among the highest. Most damning of all, whenever these companies announce their price hikes, they tell us they are only passing on their costs, so why is it that when those costs come down, consumers rarely see the savings?
Whether or not the allegations of price fixing in the gas market turn out to be true, they clearly show that the market is not transparent enough. Let me, then, ask the Secretary of State three very straightforward questions: first, does he believe that there is effective competition in either the wholesale or the retail energy market? Secondly, whether consumers get a fair deal will largely depend on the strike price the Government set for contracts for difference and the reference price in the market at the time, but if the market is structured in such a way that no one knows what the true cost of energy actually is, how will the Government even be able to set a robust strike price? Thirdly, given that the proposals were originally called “electricity market reform”, why does the new Bill fail to make proposals on how energy is bought and sold in order to make it more open, more transparent and more competitive?
This morning, I looked through the “Electricity market reform: policy overview” document. In paragraph 101, there is an indication that the Government are perhaps beginning to recognise that greater competition is necessary, in its reference to
“Powers for the Secretary of State to make changes to electricity generation and supply licences conditions”.
That is quite interesting. Does it indicate that the Secretary of State is moving closer to some of the more radical suggestions for reforming the market which Labour has been putting forward for the past two years and which were referred to in our 2010 manifesto?
The Secretary of State said that investment was running at a 20-year high, but independent figures produced by Bloomberg New Energy Finance show that since this Government came to power, investment in renewable energy has fallen by more than half. He also said that the UK led the world in offshore wind, but figures out just today from Ernst and Young on renewable energy attractiveness show that, for the first time ever, the UK has been knocked off the top spot for offshore wind attractiveness and is now behind Germany. The reason that has happened is the uncertainty the Government have created. That is why firms have put investment on hold or scrapped it altogether.
In June, Vestas abandoned its plans to create a new manufacturing plant in Kent, which would have created 2,000 jobs. What did the local Member of Parliament, the hon. Member for South Thanet (Laura Sandys), who is now Parliamentary Private Secretary to the Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker), say at the time? She said that Vestas’ decision
“suggests a lack of confidence within the industry over the government’s commitment to the green economy and crucially, offshore wind. The market needs certainty from government if it is to deliver the thousands of jobs and billions of pounds of investment that could secure our economic recovery.”
Whether onshore or offshore, the business of firms such as Vestas is wind. What they wanted more than anything else in the Bill was a clear commitment to decarbonise the power sector by 2030. Just this morning, its chief executive told The Guardian:
“The failure to establish a firm 2030 power sector carbon cap prolongs uncertainty.”
In his words,
“This is a significant missed opportunity,”
and he is not alone in thinking that.
It is not just businesses in the renewables sector but those elsewhere that are concerned about the Government’s lack of vision. I make no bones about it: we support a clear decarbonisation target in the Bill—and from what I read in this morning’s papers, so do many hon. Members on the Government Benches, including the Chair of the Select Committee on Energy and Climate Change. When the time comes, we will work with colleagues across the House to put a decarbonisation target in the Bill.
Mr Davey
I am grateful for the right hon. Lady’s initial remarks. I am delighted that she wants to work with the Government to attract investment and that she wishes us well in the Doha talks next week. I hope we can reach a cross-party consensus on some of these important measures to tackle climate change, which is incredibly important. Both coalition parties gave that support to the last Government, for their Climate Change Act 2008, and I hope we can continue that consensus.
The right hon. Lady said that the Bill had been delayed. Ever since I have been Secretary of State for Energy and Climate Change, I have said it would be published in November and it has been. We are on time and on track. She asked a number of questions, but gave no recognition to the fact that two parties that have had their disagreements have come together with an energy policy. She also failed to mention how that has been received by industry and the investor community. The director general of the CBI, John Cridland, gave a ringing endorsement to the policies that we have announced, after the discussions I had with the Chancellor of the Exchequer. That political certainty, backed with the policy certainty of today’s announcement, will bring the billions of pounds of investment into the UK that our economy and our energy infrastructure needs.
The right hon. Lady asked me about competition. One almost thinks that she is suffering from amnesia, because it was the previous Government who failed to tackle competition. We are determined to tackle it, but we will not be using ideas from the Labour party’s manifesto, because we have our own ideas on how to ensure competition in the retail sector, with our arguments about switching, and in the wholesale sector, with our arguments about greater liquidity and transparency in that market. Of course we have competitive markets, but they could be more competitive. We are determined to drive them further and faster, and our policies will do far more than the ones she is offering the country.
The right hon. Lady questioned our new policies on tariffs, which will simplify them in a way that I believe will drive competition. Time and again, my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) asked the previous Government to simplify tariffs, to drive competition in the consumer’s interest, and what did they do? Absolutely nothing. We will take no lessons from her on that matter.
The right hon. Lady asked about strike prices. She does not seem to understand how they will be set, so let me explain, although we will no doubt do this on Second Reading of the Bill. They will be set administratively until 2017; then they will be set through auctions. Auctions are the way to get the real transparency and competition that the previous Government failed to deliver.
The right hon. Lady asked about the decarbonisation target. That has been a matter of some debate within the Government, and there will no doubt be a debate on it between Members on both sides during the passage of the Bill. I looked at the 2010 manifestos of all the parties—the Green party, the Labour party, the Liberal Democrats and the Conservatives—to see what promises they had made on a decarbonisation target for the power sector. None of us had made any. There were no such promises in the coalition agreement either, but since becoming Secretary of State, I have gone into the discussions determined to make that argument. I have done so, and we will table amendments to the Bill to give the Secretary of State power to set a decarbonisation target. I am proud of that.
The right hon. Lady said that without a decarbonisation target, we would see no investment in the supply chain. I simply refer her to Arriva’s announcement last week on a turbine factory. The weeks and months ahead will show whether we will see that supply chain investment. I believe that we will, because this coalition Government have put the right policies in place.
Mr Davey
If the hon. Lady has read Ofgem’s proposals, she will have seen that it proposes four core tariffs. People can then express preferences in respect of both their payment method and whether they want dual discounts. Our consultation paper’s proposals are very similar to Ofgem’s.
Mr Davey
They are not identical; the right hon. Lady probably needs to read them in a little more detail. However, we believe that Ofgem’s are very good proposals. They were based on two years of study and will see that people, once they have expressed their preferences on how they wish to pay and so on, will be on the lowest tariff. The last Government failed to deliver on that.
Gas Market Fraud
Debate between Caroline Flint and Ed Davey
Caroline Flint (Don Valley) (Lab)
I thank the Secretary of State for advance sight of his statement.
The wholesale gas price makes up about half of the average consumer’s bill, and as we know, energy companies are quick to blame wholesale costs when they put up people’s bills. Therefore, any suggestion that the wholesale gas market has been manipulated is a serious allegation that needs a full and rapid investigation. As the Secretary of State has said, the Financial Services Authority and Ofgem are looking into those allegations.
On the investigation being undertaken by the FSA, let me ask him three clear questions. First, when did the FSA initiate its investigation, and if he was informed about the allegations on Friday, why did he not come to the House yesterday, instead of leaving the public to learn about them in the press? Secondly, can he provide the House with any more information about the investigation’s remit and terms of reference? Thirdly, when does he expect the FSA to report its findings?
Separately, I understand that Ofgem is also looking into allegations made by a price reporting agency about unusual trading behaviour on 28 September, which is the end of the gas financial year and a key benchmark for future prices. Can the Secretary of State confirm today whether Ofgem has launched a formal investigation into those allegations, and if so, how its investigation will be different from the one being conducted by the FSA? Can he also tell the House when Ofgem was first notified about the allegations and whether it informed his Department? Can he also say a little more about the role of the Office of Fair Trading ?
Whatever the outcome of the investigations, the truth is that the energy companies have been allowed to run their businesses in such a complicated way that it is almost impossible to know the true cost of energy. The allegations that have been made in the past 24 hours suggest deep structural problems with the way in which our market works and is regulated. That is why over the past year I have argued for radical reform of the energy market to make it more transparent and more competitive, as well as for the creation of a tough new regulator.
On the first point, does the Secretary of State agree that the main reason it is so difficult to work out the true cost of energy is that most energy is bought and sold through secret, back-room deals and that energy companies are allowed to generate power, buy it from themselves and sell it on to the public? Does he agree that, with the energy Bill due imminently, now is the time to force the energy companies to sell all the power they generate into an open pool, which anyone could bid to retail to the public? That would improve transparency, increase competition and put downward pressure on bills.
On the second point, if the existing regulation of the energy market was working properly, why has it taken a whistleblower to bring the allegations to light? When we last debated the energy market just two weeks ago, the Secretary of State defended the existing regulator, Ofgem, and said that my proposal to create a tough new regulator with a statutory duty to monitor the relationship between wholesale and retail prices would be
“very damaging to the interests of energy consumers”.—[Official Report, 1 November 2012; Vol. 552, c. 364.]
In light of these allegations, can he tell me today whether he still has confidence in Ofgem?
Energy bills have risen by more than £200 in the past two years and the latest round of price hikes will add another £100 this winter. Business as usual is not an option. Today’s allegations of price fixing in the gas market show that it is more important than ever that we reform Britain’s energy market to make it fairer and simpler, and create an energy market that the public can trust.
Mr Davey
I am grateful for the right hon. Lady’s response. Let me try to deal with all her questions.
I understand that the FSA was approached by The Guardian and heard the information from the whistleblower last week. My understanding is that the FSA will follow the normal remit for any such investigation, considering whether an offence has been committed once it has looked at the allegations and reviewed the evidence. Of course, we cannot give detailed timing for that, and I am surprised that the right hon. Lady expects me to do so. That is a matter for the independent regulatory bodies, as they go about their process in the proper way.
The right hon. Lady asked why I did not come to the House yesterday. The reason is that we have rules to protect whistleblowers. It would have been quite wrong for me to come to the House before the whistleblower had made their statement. I hope she accepts that. We were ready to come to the House, but we were waiting for the information to enter the public domain in the proper way, and I have come to the House in the first instance after that.
The right hon. Lady asked about Ofgem’s role. Ofgem is working jointly with the FSA and it is important that it does so, because we do not yet know, as it looks at the allegations, whether there has been a problem in the energy markets—the physical markets—or the financial markets. We do not know whether financial services regulations or other regulations will have to be used, so Ofgem is engaged, just as it should be, in working with its fellow regulators.
The right hon. Lady asked whether the OFT would be involved. Again, that will depend on the nature of the allegations as they are analysed, and whether there has been an abuse—a breach—of competition powers in some way. Ofgem has concurrent powers with the OFT, as the right hon. Lady knows, but the OFT has more experience in some areas, particularly in prosecuting cartel offences. However, these are early days and this is speculation. We do not yet know whether the OFT would be involved, but clearly it stands ready.
The right hon. Lady then talked about the pool. She has concerns about the lack of transparency in energy prices, particularly electricity prices, which she and I debated in the last Opposition day debate on the issue. I explained that her proposals for a pool would not sort out the problem of liquidity. It is our proposal to bring forward reserve powers in the energy Bill, in case Ofgem’s proposals on managing auctions—or whatever it ends up deciding on improving liquidity—do not work. However, we on the Government Benches are absolutely committed to extra liquidity and more transparency of pricing, because that will drive competition, which is clearly the best way forward.
The right hon. Lady continues to suggest that the pool is the answer. These are early days, so it is certainly not clear that a pool would have helped with these offences. However, I remind her that it was the previous Government who abolished the electricity pool, partly because Labour Ministers considered it to be open to market manipulation and therefore detrimental to consumers—so her proposals for a pool are even less appealing as a result of these allegations.
The right hon. Lady now invites me to support her proposal on Ofgem, but from my experience of working with Ofgem and the FSA over the weekend and this week, and of having my officials work with them and seeing them in action, I take completely the reverse point of view. She ought to withdraw her proposal and support the role of an independent regulator. Ofgem has extensive powers; we are adding to them. Ofgem has used those powers where it has felt it necessary. Disbanding Ofgem at the moment would not speed up the investigation or help consumers with their bills now, so I am afraid I am not tempted to take up that proposal from the right hon. Lady. It would be totally unacceptable if people were profiting from manipulating energy prices, so I believe the whole House should back these investigations.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey
Mr Davey
My hon. Friend is right that the Ofgem package contains many attractive proposals. I am not going to say today that we agree with every one of them, but we are studying them. It is right for my Department and my Ministers to study the proposals carefully, because this is a crucial area. I reassure him that we are attracted to many of those ideas, and we will be putting forward our options for consultation and for the Bill.
Caroline Flint (Don Valley) (Lab)
Two weeks ago, the Prime Minister announced that the Government would be legislating so that energy companies have to give the lowest tariff to their customers. In our debate last week, the Secretary of State tried to clarify what the Prime Minister meant, saying that we are going to use the
“Energy Bill to ensure that the energy companies have to inform people of the best deal.”—[Official Report, 24 October 2012; Vol. 551, c. 939.]
But is he not aware that, as I pointed out last week, sections 76 and 77 of the Energy Act 2011 already give him the power to force energy companies to tell their customers about the lowest tariff? So can he explain why he is planning to introduce new legislation to bring in powers he already has?
Mr Davey
The right hon. Lady will know that I have already acted on this issue. Two months into office, I negotiated a voluntary agreement with the big six so that they would provide details of the best available tariff on people’s bills already—so I am afraid that she is behind the times again. I note that she has not commented on Ofgem’s proposals, not least because she wants to abolish Ofgem. That would be very damaging to the interests of energy consumers, both households and businesses. So I have to say to her that she needs to engage with the real debate, which is Ofgem’s proposals and our thinking.
Mr Davey
My hon. Friend the energy Minister suggests that I use the word “intimately”, but I can say that we are working very closely. My hon. Friend and I—as you, Mr Speaker, requested I will face the House—may occasionally disagree on issues of substance, and I certainly did not agree with his remarks the other day, but I have to say that I really admire his style.
Caroline Flint
The Secretary of State said to the media yesterday that there has been no change to Government policy, but as we have already heard during questions, investors themselves are saying that this latest shambles is very damaging and is putting investment in new jobs and new industries at risk. The energy Minister says that wind farms are imposed on local communities, but nearly half of all planning applications get turned down. He says that wind farms affect house prices, but there is no evidence in the UK showing that that is so. He says that wind farms are too noisy, but the existing planning guidance already sets noise limits. How does the Secretary of State feel about being tricked into agreeing a review that is nothing more than a hatchet job on the British wind industry?
Mr Davey
What the right hon. Lady did not say is that in the renewables banding review that we announced in July, which was warmly welcomed across the industry, we set the support levels until 2017 and sent a very strong signal to investors in the sector. She also did not tell the House what the Prime Minister said yesterday in supporting my position that the renewables policy has not changed. The Prime Minister and the Secretary of State are at one on this. We will continue with our renewables policy; it has not been changed.
Mr Davey
I could not agree more with my right hon. Friend, who has championed community energy for many years. As Secretary of State, I am determined that we promote even more ambitious polices. We will introduce a community energy strategy in the spring. We have already made a number of announcements to encourage community groups and democratic local authorities to support these types of schemes.
Caroline Flint (Don Valley) (Lab)
A year ago today, the Government announced their first round of cuts to the feed-in tariff for solar power. As instillations flatline, Ministers have clung to the line that their plans will allow 4 million homes to be solar powered, with 22 GW of solar to be installed by 2020. Will the plan for 22 GW, which was announced in April, still be the Government’s policy when they publish their renewable road map, or does he now accept that, because of his cuts, Britain will not reach that target for at least another 30 years?
Energy Market Reform
Debate between Caroline Flint and Ed Davey
Caroline Flint
I will come to Ofgem a little later in my speech, and I will give way to the Secretary of State.
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
The right hon. Lady has said quite a few times that the energy market has changed. Will she confirm that in 1998 there were 14 of the original 15 incumbent energy suppliers, but that by the time Labour had finished, that had gone down to six? That is a consolidation in the energy market, does she not agree?
Caroline Flint
That is exactly why this needs to be tackled. [Laughter.] No, this is being grown-up. I will repeat what I said earlier. I hope that the Secretary of State heard me. I do not know what commitments the Liberal Democrats made in their manifesto, but the manifesto that was written by the current leader of the Labour party before the last election said that we needed to reform the energy market more radically. That is why we have said that we need to have a pool into which all the energy would be put to open up the market. We were very clear about that.
When Ofgem, as the independent authority, took away some of the price caps, it was meant to be on the basis that the market was mature and competitive enough to be able to deliver the consumer choice and competition that were needed. That did not happen and the number of companies reduced. As I said earlier, when we look at the situation regionally, rather than just nationally, we see that it is not only about the big six—in some areas, there is just the big one.
As I said, it was our manifesto commitment radically to reform the market and we have been saying every single day since that we need to do more. Unfortunately, the Government have not been open to that discussion. I hope that that will change when we debate the Energy Bill in a few weeks’ time. We have propositions in today’s motion that, having listened to the comments today, I hope will get support from a number of quarters, and not only from our own Back Benchers.
Caroline Flint
I have allowed a lot of interventions. The Secretary of State is asking me to give way, and I think that I should give way to him.
Mr Davey
The right hon. Lady is right to say that there has not been enough competition in the generating side of the market. I will speak at length about competition in both the retail and wholesale markets. The real issue between us is whether we should get extra competition in the generating side of the market through pooling, as she proposes, or by addressing the lack of liquidity in forward markets, which we believe to be the real problem. Does she want to compare and contrast her approach with ours?
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.
Mr Davey
The hon. Gentleman may or may not be aware that two or three months into my time as Secretary of State, I secured a voluntary agreement with the big six. I negotiated it and the Deputy Prime Minister announced it in April. The agreement was clear, and the big six are delivering on the promise that they made to us, namely that they will inform people of the lowest tariff available to them. That was part of a range of policies that we have agreed with them. For example, there is the warm home discount, which is often forgotten in this debate. We legislated for that discount to ensure that £130 will go straight off the bills of the poorest pensioners and the poorest people in our society next year. That will get money to the people who really need it and help them with their energy bills.
Caroline Flint
The Secretary of State may not be aware of this, but I understand that research by Which? indicated that there was some confusion about whether energy companies were informing customers of the cheapest deal when they wrote to them.
The point about the over-75s is that a lot of them are not online. If they ring up their energy company and say, “I would like to go on to that online deal”, the company will say that they cannot do it in that way. We say that not being online should not be a barrier to that group of people getting access to the cheapest deal.
Mr Davey
I could not agree more. We want to ensure that all people can access the best deal, whether or not they are online. That is why we have made the voluntary agreement and why we will take powers in the forthcoming Energy Bill to ensure that the energy companies have to inform people of the best deal. As I will set out in my speech, we want to enable the poorest people in our society to get the help they need, whether about switching, competition or energy insulation.
Mr Davey
No, I will make some progress and give way later.
When we consider competition in energy markets we must first separate the retail side from the wholesale side—or, in English, competition between firms that sell us energy and firms that generate it. There are, of course, many firms that are on both sides of that equation, just as there are policies to help on both sides.
Let me start with the suppliers, the retailers, the people to whom we pay our bills. We can drive competition in that area in two ways: by making the existing bigger players compete harder to keep their customers, and by enabling more firms to enter the market and grow—something on which the right hon. for Don Valley is rightly keen. Switching has, of course, been the principal way to do both those things, which is what happened by letting customers choose their supplier and forcing energy firms to offer better deals to hold on to customers. As the right hon. Lady rightly said, however, that system has not been working well, and switching has not helped the vast majority of people. In fact, it seems that switching rates have been falling just as prices have been rising. That bizarre finding seems to be the result of the virtual end of door-to-door selling which, as many of us know from our constituencies, was fraught with problems. Switching rates appear to have fallen in recent years, and those who continue to switch tend to be the internet savvy and often the more well-heeled, leaving the less well-heeled and less internet savvy out in the cold when it comes to getting the best deals. In essence, it is a very unsatisfactory situation.
The policy question is about whether we can promote competition through switching in other ways, or whether switching is simply not the way to go. I am delighted because it seems from the right hon. Lady’s speech that the Opposition have not given up on switching, and in fact they seem to be copying some of the policies that I first articulated. Since imitation is the sincerest form of flattery, I take that as a vote of confidence. For Members who may have missed that neat trick from the Labour Front Benches let me explain. The right hon. Lady talked about her commitment to collective switching, and she mentioned Labour’s “Switch Together” scheme. The Government support collective switching because we talked about it first. The right hon. Lady knows that the Labour party could have pushed that idea when in government, but it did not, and it was this coalition Government who got it.
When I was the Minister responsible for consumer affairs in the Department for Business, Innovation and Skills, I pushed the general notion of rekindling the spirit of co-operatives into different retail markets, and, in league with Co-operatives UK, I set up a competition to stimulate new ways for communities to buy things together. From that work, energy co-operatives emerged as among the most promising. That is because gas and electricity are pretty similar commodities, wherever and however people buy them, and because people are increasingly worried about their bills. However—this is crucial—many people find it too difficult to switch by themselves, and I have been addressing that problem. I have talked to a range of people about the barriers to collective switching, and I have got people—including Ofgem, the large energy companies or firms, and organisations capable of managing a collective switch—round the table where we have made real progress.
Regulatory barriers are coming down. Last week, we announced a nationwide competition, in which the winners, whether councils, community groups or others, will get seedcorn cash to help them get going. That national competition—not a Labour party competition—is called Cheaper Energy Together and should provide a boost to awareness and learning that could transform switching in the UK, not least because winning bids must show how they would involve the fuel poor in their schemes. If we are to see a revolution in switching, with collective switching, I will insist that the most vulnerable are part of that.
It must be slightly embarrassing for Labour Members to know that when they were in government, they did not use the collective principle to help people. It must be embarrassing because, although the current Government are using the collective principle to tackle fuel poverty, the Labour party did not. I am, however, genuinely delighted that the Opposition have overcome their embarrassment, and taken up our idea.
Caroline Flint
The Labour party was the first political party in British history to organise a collective switch, and we are proud of that. I am not sure what the Liberal Democrats might do—it might be switch apart rather than switch together.
Switching is important, but in truth, even if people are on the cheapest deal, it does not mean they are getting value for money and a fair price. That is why we must reform the way the energy market works, and tackle the dominance by certain companies that both generate and retail energy, and do not let others get a look in.
Mr Davey
I will come to that point, but I remind the right hon. Lady of what I said earlier. Under her party’s watch, the number of companies went down from 14 to six, so we will not listen to her too much.
Let me finish my point about switching and say why it is so important. Collective switching got going in Belgium just a few years ago, and we have now seen live, successful switches in the UK. The Consumers Association, Which?, led the way with its big switch earlier this year. It helped around 37,000 people to switch and get an average saving of £223. We have also seen smaller collective switches. Last month, South Lakeland district council was the first local authority to run a switch. Nearly 1,700 residents signed up, and early indications suggest savings that range between £60 and more than £200.
Yesterday, Oldham borough council launched its collective switch, which I attended. I did not see the right hon. Lady; perhaps she was there at a different time. That collective switch is called “Power to the people”—Citizen Smith would be proud. A wide variety of schemes are coming forward. I am already aware of eight, perhaps the most ambitious of which is Cornwall Together, in which the council, the NHS, the trade union Unison, the third sector, and St Austell brewery have come together to organise a collective switch.
Collective switching is not a silver bullet or panacea, but people are seeing how it can be part of the answer and reform the way switching works. Switching does not just force existing firms to compete more vigorously to keep customers, it enables smaller suppliers to grow their customer base faster. We know that customer inertia can be a barrier to competition, preventing new companies from getting market share, and collective switching reduces that barrier for small companies. Co-operative Energy won the big switch organised by Which?, and doubled its customer base overnight. Collective switching has the potential to be part of the way that we reshape the market.
Mr Davey
I am disappointed that the companies did not respond more positively when the right hon. Gentleman wrote to them. I do not know whether he wrote to them under the Labour Government. The voluntary agreement that we managed to secure after two months in office included a commitment from the energy companies to take part in collective switching proposals. A number of the big six took part in the Which? big switch, so we have moved them and we are changing things.
A key barrier to collective switching and ordinary switching is individual bill payers getting their details to the third party organising the switch, the switching website or the new supplier. In principle, that should not be too difficult, but the evidence we have found is that it is. We have therefore started to tackle the problem. In the voluntary agreement I negotiated, the companies agreed to put quick response codes on their bills. “What,” hon. Members may ask, “is a QR code?” It is a bit like a bar code, but smarter. The QR code should make it much easier for people to provide the energy bill details needed for switching, reducing the effort people must make. I can announce to the House that we will be consulting on that and a number of other measures when we introduce our consultation on consumer bills.
The Government have gone further to reduce the hassle of switching. In another consumer project I worked on at the Department for Business, Innovation and Skills—it was called midata—we looked at other ways in which an energy company could provide the customer with the customer’s data, for example, in easy-to-use or easy-to-pass-on electronic formats. BIS is now consulting on making the midata ideas a statutory requirement. Coupled with the work of Ofgem on simpler bills, that could be a huge catalyst for helping many more people to switch.
Caroline Flint
An Energy Bill is imminent. We have had pre-legislative scrutiny, white papers and impact assessment. Has it only just occurred to Department of Energy and Climate Change Ministers, including the Secretary of State, who took over at the beginning of this year, that they should consult in the run-up to a Bill that will be before the House in the next few weeks? Labour did a lot in government: 1.7 million fewer people were in fuel poverty when it left government.
Mr Davey
Unlike the right hon. Lady, this Government respect an independent regulator. Ofgem has been conducting its retail market review. It would have been completely inappropriate for the Government to publish a consultation before the independent regulator completed its work. She ought to know that. We have been waiting for the report and got it just last week. As a result of receiving that work, we will take forward our consultation, which will enable us to introduce new legislation in the Energy Bill.
Mr Davey
My right hon. Friend is absolutely right, and the Government will do just that.
I pay tribute to Ofgem’s work on simpler bills—the retail market review it published last week is an excellent piece of work. I was disappointed that the right hon. Lady did not welcome it. That might be something to do with her policy of abolishing Ofgem, which I should like briefly to turn to as my right hon. Friend has raised the matter. We want to understand why the right hon. Lady believes that abolishing one regulator and replacing it with another will make any difference whatever. That is a recipe for delay and chaos and for letting the energy companies get away with it while the Opposition mess around moving the deckchairs on the Titanic.
The right hon. Lady said that the previous Government looked at whether reforming the regulator would be better than creating a new one. She gave no good reason why we could not reform Ofgem, which is what this Government will do. It is interesting that she wants to spend time rebranding public bodies. I do not know whether she believes that is a good use of taxpayers’ money, but, interestingly, her proposal is rather disloyal to the Leader of the Opposition. I am sure she is aware that he legislated on Ofgem when he was Secretary of State for Energy and Climate Change. Just two and a half years ago, he told the House that the purpose of his Energy Act 2010 was
“precisely to strengthen Ofgem's powers in a number of respects and to make it a more proactive regulator”—[Official Report, 7 January 2010; Vol. 503, c. 254.]
Will the right hon. Lady come to the Dispatch Box to suggest that the Leader of the Opposition got it wrong just two and a half years ago?
Caroline Flint
The truth is that despite the powers extended to Ofgem, it is just not delivering. Four years ago, it found that some customers were charged different prices for using the same amount of energy, but energy companies are still using predatory pricing tactics. In 2008, Ofgem launched reforms aimed at supporting consumers, but according to its own evaluation in 2011, the reforms failed. In August 2011, Ofgem commissioned BDO to undertake a forensic investigation of how to improve transparency in the market, but by May 2012, Ofgem had quietly dropped six of the eight BDO recommendations and varied the remaining two. It is not delivering; it is not doing its job.
Mr Davey
I am extremely disappointed that that is the position the right hon. Lady has arrived at. The retail market review last week proposed to reduce and limit the number of tariffs from the massive number that exist at the moment to just four core tariffs. As my right hon. Friend reminded us, he asked the Labour Government to do that just a few years ago, but they did not. Ofgem has acted where the Labour Government did not. It will help to tackle the complexity of multiple tariffs, which have not helped transparency or competition. I am delighted that its plans allow collective switch tariffs to emerge in addition to the core tariffs. I am surprised that she wants to abolish a body that, under this Government, is taking the action that the previous Government failed to take.
Mr Davey
As a former competition Minister, I know that commenting on such things is extremely tricky, so I will leave that to my right hon. Friend the Secretary of State for Business, Innovation and Skills.
I want to focus on how we can tackle the real problems in the energy market. I think we all agree that there is a problem with competition. When we compare the UK market with overseas markets, a key observation is that our markets are less liquid, especially the forward market. To get a good, competitive energy market, firms should be buying and selling electricity three, six, 12 or more months in advance. If they were, and if we had greater market liquidity, it would be much easier for independent generators to enter the market and invest in generating plant confident that they can buy and sell electricity and manage their risks.
Faced with the might of large, vertically integrated energy companies supplying their own power, independent generators find it difficult to enter the market. I think we agree on that. The question is: how do we deal with that? The problem is with liquidity, not the pool. The right hon. Member for Don Valley, who clearly dislikes Ofgem, has not noticed that by threatening to take action Ofgem has, to some extent, already made progress on liquidity. As we have seen, large volumes are now being traded in the day-ahead market, which has improved price transparency. That is a good start.
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.
Mr Davey
That is one reason why I welcome the retail market review, and we will be consulting on measures and introducing them in the Energy Bill to address those and other matters.
I want to talk briefly about energy efficiency, although I am conscious of the time. On the social tariffs that the hon. Member for Luton South (Gavin Shuker) talked about, and on energy policy across the board, it is important to see both sides of the equation and understand what we are trying to do with clean energy. By 2020, all the energy and renewable subsidies combined will add £95 to bills, yet those same bills will fall by about £220, thanks to the energy efficiency improvements that our policies are bringing forward. Our green policies are about lower bills, not higher, and we are delivering on that.
As part of our policy, energy efficiency is a top priority for me, because reducing demand saves consumers money now and reduces future pressure on supply. I will give just two examples, although I am sure that Members across the House could give many more. Installing solid wall insulation saves about £270 a year on the average energy bill, while upgrading an old, G-rated boiler to a modern, A-rated one can save £200 a year. Our flagship green deal scheme will make it easier for home owners and tenants to improve the energy efficiency of their homes, paying for those improvements through savings on their fuel bills. I hope that we will continue to have the Opposition’s support, but I am not always clear where they stand on the green deal.
Caroline Flint
The Deputy Prime Minister suggested in a speech last year that he would tackle the concern about the high interest rate associated with the green deal. It will be about 7%. What progress has been made on bringing it down?
Mr Davey
The right hon. Lady ought to know that the interest rate will be set by the market, and that this—I say this as a former consumer credit Minister—is actually a great deal. People would not get an unsecured loan of this nature at the interest rates in the green deal. This will be a good deal for people on low incomes, in particular.
Through the energy company obligation, which will be introduced with the green deal, we will be requiring energy companies to provide an estimated £1.3 billion a year of support for energy efficiency in our homes, including £540 million to fund energy saving improvements to around 230,000 low-income, vulnerable households every year. Whether through reform of the energy market, our proposals on competition or our proposals on energy efficiency, the Government are taking action that will help people with their bills. The right hon. Lady’s motion would do the reverse—her proposals are fundamentally flawed—so I invite my colleagues to join me in the Division Lobby and defeat her motion.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey
Mr Davey
I have to disappoint my hon. Friend. The fact that we are supporting the industry is one reason why investment has come forward in large numbers. The 6GW that have been consented and the 6.5GW in the planning system would not necessarily go ahead if there were dramatic cuts in subsidies.
Caroline Flint (Don Valley) (Lab)
In the year in which the solar industry was undermined, there are fears that the Government are turning their fire on the cheapest form of clean energy—onshore wind power—by proposing a cut of 25%. In the words of one industry expert, that would “kill dead” new wind developments. Perhaps some Government Members would like that. The Secretary of State has briefed the press that he does not support such a cut—neither do the Opposition—so why does he not stand up to his Conservative colleagues who want to kill off the British wind industry?
Mr Davey
I have to disappoint the right hon. Lady, because my Conservative colleagues and I are working very closely on this matter. Both Government parties support decarbonisation and understand the critical role that renewables can play, whereas under Labour renewable investment did not occur and we had one of the worst records in Europe. She will have to be patient, but we will make the announcement, and it will be a very good announcement.
Caroline Flint
The mixed messages coming from Government Members have blighted policy in this area. Investors, who want to bring new jobs and industries to this country, are crying out for certainty and confidence, but I am afraid the Secretary of State just does not get that. The message from the Government seems to be that Britain is closed for green business, which is why Vestas has scrapped its plans for a factory in Kent and Siemens is warning that its plans for a new factory and port complex could be put at risk too. Before any more firms axe jobs in Britain, will he tell us today, before the House rises, that the Government will scrap the 25% cut and get behind British low-carbon jobs once and for all?
Mr Davey
Once again, the facts do not support the right hon. Lady’s case. There has been a large increase in investment in renewables in the past year, which has created more than 20,000 jobs, and confidence in the sector is actually extremely high. When we make our announcement, I believe we will see billions of pounds of investment coming forward.
Mr Davey
My hon. Friend will know that, ultimately, this is a commercial decision for the owners of Horizon Nuclear Power—RWE and E.ON—but we have been working with them to facilitate investors coming forward to talk to them. We are very optimistic that we will see the Horizon project sold to another consortium and that new nuclear build will continue.
Caroline Flint (Don Valley) (Lab)
Since this Government came to power, we have seen: the chaotic mismanagement of cuts to solar power; delays to the green deal; delays to the borrowing powers of the green investment bank; cuts to the Warm Front scheme, with far fewer people getting a chance to avail themselves of that support, as my hon. Friends have said; and an Energy Bill that was laughed out of the room by the Select Committee. We have also heard in questions today that the assessments for that Bill are going to have to be further revised. This week, we also learned that the Department has underspent its budget by nearly £400 million. Nobody is against the efficient management of office budgets, but this is a ministerial team who fudge decisions, make the wrong choices, cannot keep to timetables and are incapable of managing the budget. Is this not another example of the omnishambles that is spreading through this Government like a virus?
Mr Davey
She says £400 million, but I am afraid that she needs to look at the facts, because the real figure for underspend is £266 million. That is still a large underspend, but I have to tell her that £177 million of that comes from higher energy trading income from the Nuclear Decommissioning Authority’s programme. So better performance by one of our non-departmental bodies is producing more money for the Treasury—I would have thought that she welcomed that.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey
Mr Davey
I am sure local authorities will look at that proposal, but the key thing is to ensure that our new, more stable and predictable regime supports the solar industry, as we believe it will. We need to ensure that the message goes out that the solar industry is back in business and on a sound footing. There will be many more solar installations compared with what happened under the solar installation regime we inherited from the Labour party.
Caroline Flint (Don Valley) (Lab)
Last week, just 900 installations took place and two thirds of businesses had empty order books, but my question is about the Government’s next round of cuts to solar, which is due on 1 July. Last night, the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle (Gregory Barker), tweeted:
“Having listened carefully to industry, we are looking at scope for pushing back a little the next proposed reduction in the #solar tariffs”.
The truth is that the Government have missed the deadline legally required to provide notice to Parliament for the next round of cuts to come into force. Is not the Government’s incompetence the real reason why they are backtracking?
Mr Davey
The right hon. Lady seems to think that we should not listen to the industry, but I do. We are considering tweaking the start date for the next tariff reduction—if we change it, it will be a tweak, not a massive change. She needs to understand that the changes that we have consulted on and are introducing will bring stability and mean that we have solar power for the many, not the few.
Caroline Flint
There will be laughs echoing outside the Chamber at the Secretary of State’s suggestion that the Government have been listening to the industry, but my question was about parliamentary procedure. Parliamentary procedure requires that due notice must be given in advance of the cuts being brought into force on 1 July. My understanding is that the Department has missed—legally—the deadline required. Will the Secretary of State therefore confirm whether the Department has missed the deadline required to give notice to Parliament? If it has, it is absolutely the truth that the Government cannot legally impose the cuts on 1 July. Why does the Secretary of State not just own up, end the uncertainty and commit to scrapping the next round of cuts on 1 July?
Mr Davey
The right hon. Lady started by saying that the industry will be laughing, but Paul Barwell, the chief executive of the Solar Trade Association, said in The Independent on 9 May 2012:
“The current 21p subsidy can actually give a return up to 10 per cent, tax-free, index-linked, for 25 years, making it one of the most attractive investments around.”
That is what the industry is saying. The Government will abide by all the procedures required by the House and lay the regulations when required.
Mr Davey
We are doing a huge amount, from the warm home discount to the push on collective switching. My hon. Friend will know that today’s figures on fuel poverty show a fall of 0.75 million, but we should not celebrate that because those figures are based on the current measure of fuel poverty. If they were recalculated using the methodology proposed by John Hills, the fuel poverty figures would stand still. There can be no room for complacency; we have to redouble our efforts to tackle fuel poverty.
Caroline Flint (Don Valley) (Lab)
This week, we learned that the Foreign Secretary—for whom I understand the Minister of State, Department of Energy and Climate Change, the hon. Member for Wealden (Charles Hendry) was once the chief of staff between elections, just to add to his biography which we are learning about today—does not think the Government are doing enough to support the low-carbon economy. I absolutely agree with him. We also learned that the Energy Secretary and the Business Secretary wrote back urging caution. It was bad enough when the Chancellor was talking down the green economy, but for him to be joined by the Energy Secretary absolutely beggars belief. Is not the Foreign Secretary right that unless Britain shows strong leadership on the green economy, there is no hope of securing international agreement on climate change?
Mr Davey
Unlike the right hon. Lady, I have read the letter from the Foreign Secretary and I wrote the letter to the Prime Minister. They are very positive about what we want to do on low carbon technologies and climate change in this country and abroad. We are leading the way.
Cost of Living
Debate between Caroline Flint and Ed Davey(12 years, 6 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Caroline Flint
I am always pleased to talk about Labour’s record in government, but let us now talk about the other side of the debate about energy prices—that is, saving energy. As Ministers are fond of telling us, the cheapest energy is the energy that we do not use. I am very proud that over 2 million households were helped with energy efficiency and insulation under the previous Labour Government. Through Warm Front, we helped over 200,000 households each and every year. This year, only 40,000 people are getting help.
The last time we debated this matter, the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle (Gregory Barker), said:
“Warm Front does not deliver insulation”.—[Official Report, 11 January 2012; Vol. 538, c. 256.]
He obviously had not browsed his Department’s website, which states clearly:
“The Warm Front scheme offers a package of heating and insulation measures”.
With such insight into his Department’s policies, we can only hope that the job of deciding who was eligible for a Warm Front grant did not fall to him. However, that might help to explain why nearly 30,000 people who applied for help last year were turned down.
Let us reflect on the figures. Under Labour, in each and every year more than 200,000 households were helped by Warm Front. This year, under this Government, only 40,000 households received help and 30,000 were turned down. They were turned down even though there was an underspend in the Warm Front budget of more than £50 million. That is right: hundreds of thousands of families face higher bills next winter and every winter because of cuts to Warm Front, and tens of thousands of families and pensioners who applied for help last year were left in the cold because of the incompetence of the Secretary of State and his Department, while £50 million that is in the Government’s coffers is going back to the Treasury. We asked whether the underspend could be used to provide further help through the programme. The answer, which I received very recently, was that it is going back to the Treasury.
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
I will try to help the right hon. Lady, because her own Front Benchers are laughing at her. May I take her back to the comments that she made about the Leader of the Opposition? When he was doing my job, he was pressed on what the Labour Government were going to do about energy prices. In 2009, Andrew Marr asked him:
“When it comes to the price of energy…are we or are we not going to have to pay more?”
He responded:
“There are upward pressures on prices, yes”.
I am afraid that the right hon. Gentleman did very little on consumer prices. Labour had a record of failure.
Caroline Flint
We have not seen much of the Secretary of State since he took up his post. If that is the best he can offer after a number of absences from the Chamber, I worry about this Government and their handling of one of the most important areas for consumers and for jobs.
It is absolutely true that in reshaping the energy market to provide a low-carbon future, there are pressures. We have never denied that. However, today we are talking about the efforts to make the energy market more competitive; how we can ensure that a trail of energy companies is not investigated for mis-selling and dodgy dealing; and the increasing number of families who, under this Government, are paying more than they need to. The Government are stepping away from any responsibility to help the most vulnerable people in this country to tackle their fuel bills and keep their energy consumption down. It is possible to have policies on that, while recognising that there are pressures in the bigger scheme of things. It is a given that there are pressures—it is what a Government do about them that counts. This Government are doing nothing at all.
In government, we put tough obligations on all the big energy companies to use some of their profits to help poorer customers in deprived areas make their homes more energy-efficient. The community energy saving programme was meant to help 90,000 households. Two and a half years into the scheme—most of it under this Government—and with only a matter of months left, just 30,000 households have been helped. What are the Government doing about that? As far as we know, they are doing absolutely nothing.
We do know that the Minister of State, Department of Energy and Climate Change, the hon. Member for Bexhill and Battle, had a meeting with all the big energy companies on 1 February this year. We also know that the energy companies are lobbying the Government to relax the obligations on them or to push back the deadline. The Minister refuses to tell us what exactly was discussed at the meeting, what was agreed and whether he has caved in to the companies’ demands. Why will he not tell us that? He will not share with us—
Caroline Flint
The Labour Government left office with 1 million fewer people in fuel poverty than we inherited in ’97. No doubt this is a complex area, but the truth is that in the last two years, according to Consumer Focus, there has been a sharp increase in the number of homes in fuel poverty in England and Wales—it has increased from one in five to one in four. What are the Government doing about that?
Mr Davey
The right hon. Lady ought to know that we saw a massive V-curve because of how fuel poverty was measured under the previous Government—fuel poverty came down earlier in their period of office and shot up dramatically as global gas prices increased. She is not living in the real world if she thinks that is the correct way to measure fuel poverty. That is why this Government are getting to grips with the problem. We are ensuring we measure the problem properly so we have the right policies, which the previous Government never did.
To return to feed-in tariffs, I remind the right hon. Lady that we have had to reform the scheme designed by the Leader of the Opposition so that huge windfalls do not go to a few people. Our reforms will ensure that many people benefit from solar PV. We are the party of the solar many; they are the party of the solar few.
On Warm Front, the right hon. Lady offered no recognition of the progress we have made to spend our budget; of the reality that a warmer winter last year reduced demand; or of the fact that the shameful scaremongering by Labour Members on Warm Front, who said the scheme was closing more than a year before it will, might just have put some people off applying.
When it comes to Governments being responsible for putting people’s bills up, the right hon. Lady ought to talk to the leader of her party. Let me refer her to the UK’s low carbon transition plan, published by the Leader of the Opposition when he was in my job. Let me further refer her to the analytical annex, page 66, table 9, and the estimate of the cost of the renewable heat incentive on people’s gas bills, as proposed by Labour. The estimated increase in gas bills by 2020 was £179, but this Government stopped that approach, because we were not going to put £179 on people’s gas bills. That is 179 reasons for not taking Labour seriously on energy bills.
Mr Davey
Actually, the hon. Lady’s constituent will be a big beneficiary of the coalition’s policy to increase the personal income tax allowance. She will benefit from that big income tax cut—bigger than anything that Labour did. In fact, I remember Labour taking the 10p rate away from people such as her constituent, costing them £236 a year. So I am afraid she has shot herself in the foot.
Caroline Flint
I thank the right hon. Gentleman for providing the House with more information about what the Government are attempting to do. The chief outcome of last autumn’s summit, however, was that the companies agreed to write to people to let them know that they should switch and save. Labour argued that the energy companies should be much more specific and make it clear to people what cheaper tariff they should be on. I take it from what he has just said, therefore, that we have a Labour policy gain today.
Mr Davey
The Government have taken many measures to try to keep down the cost of fuel, but the hon. Gentleman will know that we do not control the price of oil globally. I am delighted, however, that we are not suffering from a tanker fuel dispute. The resolution of that dispute is extremely important. [Hon. Members: “No thanks to you!”] That shows how little Opposition Members follow these things.
I will shortly be holding a round-table discussion at my Department to continue the momentum building behind collective purchasing schemes. Together with our policies to make markets work better and to help consumers to get the best deal, we are also making it easier for people to save energy. As the right hon. Member for Don Valley reminded us, one of our mantras is that the most affordable energy of all is the energy we do not have to pay for—she is quite right about that—yet too many of our homes and businesses are leaking heat and wasting energy. Making them more efficient will help consumers and small businesses to cope with costs. We can cut those bills and keep people warmer for less.
Later this year, we will introduce the green deal, bringing energy saving within reach for millions of homes across the country. A new Government-backed scheme will enable householders to make energy efficiency improvements at no upfront cost. Trusted local and national brands will pay for the work with the costs recouped from energy bills, and the green deal will help householders to stay warm for less. We estimate, for example, that a three-bed semi could save £120 a year by installing wall cavity insulation.
When costs rise, the poorest are often hardest hit, so we are committed to helping the most vulnerable heat their homes more affordably. I mentioned the warm home discount in response to the hon. Member for Ynys Môn (Albert Owen). It will continue to assist about 2 million low-income households with the cost of heating their homes in 2012-13. Alongside the green deal, parts of the new energy company obligation will deliver heating and insulation measures to low-income vulnerable households, including those in some of the most deprived communities.
Caroline Flint
Will the right hon. Gentleman provide clarification on the energy company obligation? I understand that about 50% of the money will go to the most vulnerable families and the other 50% to those with hard-to-treat homes—we are talking about solid walls. Within the second group, is he prepared to consider prioritising the most fuel poor, rather than subsidising people on large incomes? We recognise that hard-to-treat homes are a problem, but we must ensure that that side of the budget prioritises the fuel poor and the vulnerable living in such homes and gets the subsidies to them.
Mr Davey
Since becoming Secretary of State, I have spoken to Professor John Hills, given all the work he did analysing fuel poverty, and I have made changes to the energy company obligations as originally designed. The Deputy Prime Minister talked about this issue recently. We will be laying regulations before the House for debate this summer which will contain all the details that the right hon. Lady seeks. I say to her in the nicest possible way that she needs to wait a little bit, but those regulations will be laid before this House.
Oral Answers to Questions
Debate between Caroline Flint and Ed Davey
Mr Davey
My hon. Friend is right that this country is blessed with huge potential for renewable industries. We can therefore seek a transition to the low-carbon economy, support energy security and build a green economy, which will benefit businesses, create jobs and increase our exports to the world.
Caroline Flint (Don Valley) (Lab)
The Labour Government committed £60 million to supporting manufacturing for offshore wind in this country. In October 2010, the Government promised to continue our scheme. Eighteen months on, when there are reports that manufacturers are holding off on investing in offshore wind in Britain because of uncertainty about Government policy, why has only one grant been awarded and why does 98% of the budget remain unspent?
Mr Davey
The Government are supporting the wind turbine industry in this country. It was under the last Government that a factory closed, the Vestas factory in the Isle of Wight. The right hon. Lady needs to examine our record, which is very strong. We are seeing more and more investment in the industry.
Caroline Flint
I asked a pretty straightforward question. The Government have signed up to a £60 million budget, and so far only one grant has been provided. Why is that the case, and why does 98% of the budget remain unspent?
Twice this week I have asked the Government why they are failing to back British businesses, and twice they have had no answer. After his leaked memo, we now know that even the Business Secretary agrees with me. On Monday, I said:
“We have to do more to develop our supply chain and to support manufacturing in this country”.—[Official Report, 5 March 2012; Vol. 541, c. 597.]
On Tuesday, the Business Secretary said that
“there is as yet little attention given to supply chain issues.”
That is a straight quotation from his memo. Is not the truth that the Government’s mixed messages and failure to get behind British businesses mean that jobs and investment in industries that could come to this country are now going overseas?
Mr Davey
The right hon. Lady is wrong on this point. Many companies from around the world are looking to the UK as the premier place to invest in the offshore wind industry. She is talking down great places such as Hartlepool that want to attract investment in the industry. We are looking at the supply chain, and we have set up the offshore wind developers forum, which has pledged that 50% or more of the work in the supply chain will be in Britain.
Jobs and Growth in a Low-carbon Economy
Debate between Caroline Flint and Ed Davey
The Secretary of State for Energy and Climate Change (Mr Edward Davey)
I am grateful to the right hon. Member for Don Valley (Caroline Flint) for securing the debate, as it gives me the opportunity to come to the House for the first time as Secretary of State for Energy and Climate Change. I thank her for her welcome at the start of her remarks. I look forward to our debates, and I hope that despite some of the remarks at the end of her speech, we can have a constructive dialogue that shows the country and the world that there is significant consensus in the UK about the urgent need to tackle climate change. In that way, we can both attract the investment that is needed and continue to lead the international debate that it is crucial to keep winning.
I wish to take this first parliamentary opportunity to reaffirm the coalition’s commitment to being the greenest Government ever. My predecessor had a fantastic record of delivering policies that will protect the environment and consumers while making our energy infrastructure competitive.
Much of what the right hon. Lady said about our record was simply unrecognisable and unrelated to the facts. I was also disappointed to see no mention of consumers or bill payers in the Opposition’s motion. Under the previous Government, the link between energy and climate change and end users was often overlooked, and the link between the economy and our efforts to tackle climate change was not nearly strong enough. The coalition, on the other hand, has been successful in recognising that within our economic priority to foster growth, create jobs and make Britain competitive, we must pay heed to our obligation to tackle climate change while at the same time empowering and supporting consumers.
I want to make it absolutely clear that the energy bills of consumers and businesses will be a priority in my thinking. At the Department for Business, Innovation and Skills, I was the Minister responsible for consumer affairs, and I am worried about the impact of high bills on consumers. In a consumer empowerment strategy that I published last April, I talked about empowering consumers through collective purchase and collective switching. One would have thought that the Labour party would have been concerned about those matters in its 13 years in government, but it was not. I say to the right hon. Lady that in our work, including since I have taken office, we are pushing collective purchasing and collective switching, which will empower consumers, make energy markets more competitive and get a better deal for consumers.
Caroline Flint
Have not the Opposition held two debates about energy prices? One was during the energy summit, and unfortunately the Secretary of State’s predecessor did not take the opportunity to talk about collective switching. The Labour party supports collective switching, but also reforming the energy market to make the energy generators put their energy into a pool and open it up to being sold in a transparent way. Will he support us on that?
Mr Davey
I am very grateful when the Labour party raises the matter of energy bills, because my constituents are concerned about their bills. The problem is that the Labour party did not do anything about the matter when it was in government. We are pushing collective switching, which Labour had 13 years to do. Some countries in continental Europe have been experimenting with the idea, but I am afraid her party did nothing.
Mr Davey
I shall make progress and take interventions later.
Since coming to office, the Government have already seen significant new investment in clean energy. Our policies have stimulated new growth, supported new jobs and delivered new capacity. The UK is becoming more attractive to investors. Billions of pounds are being poured into our low-carbon economy, and more and more clean energy is coming on stream. The average annual growth in our low-carbon and environmental goods and services sector is estimated at more than 5% right through to the end of this Parliament, and low-carbon goods and services account for 8.2% of the UK’s GDP—a higher proportion than in Germany.
Since last April, companies have announced plans for £3.8 billion of investment in the UK renewable energy industry, and £600 million has been invested in onshore wind alone. A recent report by Ernst and Young showed that the UK is now the fifth most attractive place to invest in renewable energy—up from sixth last year—and we remain the most attractive place in the world for investment in offshore wind. The Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Wealden (Charles Hendry) was telling me that 95% of offshore wind installations occurred off our shores last year.
Caroline Flint
On the Ernst and Young report, is it not the case that the attractiveness of investment in the UK has only returned to the position it was in November 2010? Is not the truth that, since the right hon. Gentleman became a member of the Government, we have gone from third to 13th place worldwide in terms of actual investment in renewables in the UK?
Mr Davey
I think that the right hon. Lady is quoting from the Pew report, but those data were provisional. According to the new data recorded by Bloomberg, investment is twice as much. I am afraid that she needs to do her homework before she comes to the House.
Unlike the right hon. Lady, we have made good progress on the green investment bank. The recruitment of the bank’s chair and senior independent director is under way. [Hon. Members: “Where’s the progress?”] The right hon. Lady and the hon. Member for Liverpool, Wavertree (Luciana Berger) need to calm down. If they do, they will hear that 32 bids were submitted to host the bank, which suggests an awful lot of interest and attraction. Those bids have come from right across the country. It is because of such interest that we have allowed extra time to ensure that we make the right decision on the location of the bank. Right hon. and hon. Members seeking to have the bank in their constituency ought to give credit to the Government for taking their representations seriously.