Fuel Poverty

Cathy Jamieson Excerpts

Wednesday 14th September 2011 Commons Chamber

[John Robertson]

My hon. Friend and neighbour makes a very good point. I know that the Minister will say that the Government are not cutting winter fuel payments, but maintaining the level that the Labour party set in government. The fact is that each time the Labour party increased the payments because of the weather, it consolidated them the next year. Had Labour won the election, we would have expected the Government to consolidate the money given last time. That is why I feel that this Government should consolidate that money, particularly at a time when energy prices are rising and when poor people—particularly the elderly—who need the money the most will suffer the most. It is a fact that those who receive the winter fuel allowance will receive less this year than last year. The Labour Government did not do that; the Conservative Government did. They had their opportunity to consolidate the payments, but instead used them as another attack on the poor.

Energy is a major cost to everybody, but especially to people who fall into the trap of fuel poverty. Energy companies constantly remind us of increases in the wholesale costs of oil and gas and increased demand, and add that they are required to invest in modernising their industry to keep climate change commitments; they remind us less often of the Government subsidies that they get to invest in renewables, and still less often of the huge profits that they make, and of the huge profits that they made in the days of cheap oil and gas, none of which have ever been repaid to customers. After all, the profits of the big six energy companies have gone up almost a third since 2008, and payouts to shareholders increased across the board, up an incredible sixfold since 1999 in the case of Centrica, which owns British Gas.

I support renewable energy, but the delivery of clean energy has not matched the price paid by the Government. It is time that we saw a return for our taxpayers’ money. The production—or lack of it—of clean energy is being used to rip off the British people, thus adding to the costs of those who can least afford them. I can compare the scale on which private energy companies have managed to privatise profits but nationalise losses only with the recent bank crisis. The energy customer in the UK—if we were totally honest, we could just call them the British taxpayer, because they are one and the same—is picking up the tab for the excesses, irresponsibility, recklessness and lack of long-term vision of the big six energy companies. Those companies—the energy barons—have managed to turn us into their 21st century serfs. The cheek of some of them knows no bounds. As I pointed out in June, ScottishPower is milking the British consumer: having recently increased energy bills in this country to record levels, it lent £800 million to its foreign sister company, which is based in the US, to keep US energy prices down. That money could have been invested in the UK, or it could have helped to keep UK prices down.

That was not even the first time that that happened. Back in 2008, ScottishPower lent £750 million directly to its Spanish parent, Iberdrola. One can assume only that that was to the benefit of Spanish energy customers. That is not the truly sickening aspect of this problem. This is the first year since 1990 when Iberdrola’s US gas and electricity supply companies have raised their customers’ bills. They have seen increases of 2% and 8%, but the British customer is getting hit by near-20% increases this year, and has been hit by 40% increases since 2007. That same supplier is lending money to the American company.

I believe that that is why the energy companies do not want to be fully transparent. Although extra wholesale market costs increase prices, with full transparency we might discover that market costs are not increasing prices to the extent that the price hikes would suggest. According to Bloomberg, the wholesale price for gas in autumn 2008 went above 70p per therm, compared with 59p per therm today. That shows that wholesale gas prices have actually dropped 15%. Similarly, prices in the wholesale electricity market reached £120 per MWh in autumn 2008; today, they are £51.20 per MWh—less than half the price back then.

This is not a case of energy companies being backed into a corner by market forces; it is an act of collective incompetence and ineptitude, leading to a cartel of companies backing consumers into a corner by raising prices in tandem. I therefore suggest that we break up the big six’s monopoly and allow other providers to enter the energy market. I would like to see a major co-operative energy supplier and/or a big supermarket chain, such as Tesco, giving the big six some competition.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

Does my hon. Friend agree not only that it would be useful if other players entered the market, but that it is important that people can understand the various tariffs? Many people on the lowest incomes find it extremely difficult to work out what is best for them. The energy companies could do more. I hope that new players would operate differently.

[John Robertson]

My hon. Friend makes a good point, and believe me, if I had more time I would go into it. I certainly did so in the Energy and Climate Change Committee, when we talked about tariffs and the fact that there are more than 400 of them. It is a disgrace. How is anyone supposed to understand them all?

It is odd that in 2011, I, a Labour MP, am calling upon a Tory Government to create greater competition in the marketplace, but with more companies and greater competition, I believe that costs would fall, employment would be maintained or increased and the same profits would lead to greater efficiency in the old and new companies. If we do nothing, however, just like the big banks, which were too big to fail, so too, owing to the cartel-like nature of our energy market, will these huge companies feel that there is no sanction for reckless price rises, and only disaster and a big bill will await the taxpayer. I strongly suspect that the true reason for the price rises is the gross failure of the companies to stockpile their energy reserves to hedge adequately against future price rises. Their error is our loss. There might be numerous reasons for the current situation, including ineptitude, but although that is likely, I feel that the answer lies more in the fact that neither the Government nor Ofgem have given them any incentive.

I realise that it is not all the energy companies’ fault. I believe that the regulator, Ofgem, has not helped matters by being idle. I recently publicised the £200,000-a-year salary of Lord Mogg, its chairman. I hope that the Government, who claim to want to crack down on quangos, will have an urgent word with that gentleman, who is paid more than the Prime Minister for a three-day week. He is on footballer-like wages and needs to be reminded to justify his salary. His organisation should be acting to protect hard-pressed British consumers, who on his watch are not getting a fair deal.

I know that I have quoted many facts and figures—I hope that I have not bored too many people, including the Minister—but they are not nameless and faceless to me; they represent individuals whom I have known for many years, not just as their MP, but as their neighbour and friend. That is why I have such passion for this issue. In the nature of cross-party good will, I have a few questions that I would be grateful if the Minister answered.

What does the Minister believe can be done to encourage uptake of means-tested benefits among those in our elderly population who can rightly claim them? Will he consider enforcing transparency upon the big six energy companies or asking the Competition Commission to hold an inquiry into the energy market? What does the Minister think of my suggestion of breaking up the energy companies to stop them acting like a cartel and to allow other providers into the market? What does he believe can be done to tackle fuel poverty, and what measures does he propose to alleviate its harshness this winter? What plans are in place to increase awareness among pensioners and others of the help provided this winter? Would he be interested in a cross-party energy summit, held in Westminster, bringing together energy companies and politicians? Will he ask the Chancellor to revisit the winter fuel allowance and consolidate the £100 reduction?

I thank the many groups, non-governmental organisations and colleagues who have contacted me with help and advice. To mention them all would have taken hours. Let us have the debate we need. I look forward to the Minister’s reply.