Energy Prices and Profits

Chris Heaton-Harris Excerpts

Wednesday 4th September 2013 Commons Chamber

[Chris Heaton-Harris (Daventry) (Con)]

I found myself in an interesting position—and one that I am not used to—as I agreed with just about every word the Secretary of State said, probably because he veered well away from the thorny subject of renewables. That is the point that I shall concentrate on, following on from the speeches made by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) and the hon. Member for East Antrim (Sammy Wilson).

Before I do, let me say one thing about people’s bills. I received a bill from EDF a few weeks ago and it was possibly the most complex document I have ever received through the post—it had day tariffs, night tariffs and prices that were so much per kilowatt-hour for this and for the first 20 of that. If people are to be expected to understand their electricity bills, simplification is required. I would welcome anything that points us in that direction.

Renewables, as my right hon. Friend the Member for Hitchin and Harpenden said, are the part of the debate that we in this House can affect. RWE npower issued a report in July on what will happen to energy prices in the United Kingdom in the coming years. It predicted all sorts of interesting things, but the commodity and production costs that make up 45% of an average bill will reduce by 2020 to 35% of an average bill as rising policy and transportation costs become more significant. Supplier costs—their cut, their profit—will remain about 16%, so where is the big increase? Transportation costs and the costs of updating the UK’s network of infrastructure to accommodate lower carbon and more distributed generation technologies are expected to add an extra £114 to the average domestic bill by 2020—a 124% increase on 2007 prices. That is the money for connecting turbines and other dispersed energy to the grid.

Policy and regulation costs are expected to rise by 78% between 2013 and 2020. That is meant to pay for the low-carbon economy and significantly improve energy efficiency, as we have heard. Those are worthy aims but have huge costs attached. There are also huge costs for the consumer, who will end up paying for all those things. In 2011, National Grid produced a report entitled “Operating the Electricity Transmission Networks in 2020”. It talked about wind turbines and said that during periods of demand renewable generation output is likely not to be enough, but because it is a must-take resource, wind power will need to be constrained in some way.

The Daily Telegraph took a snapshot of energy produced by wind farms on a still day this summer. It showed that a host of payments had been made by National Grid to shut down wind turbines so that they would not overload the electricity supply system.

[Albert Owen]

Will the hon. Gentleman give way?

[Chris Heaton-Harris]

I will not give way; Mr Speaker would scowl at me like Speaker FitzRoy in the 1920s and ’30s. I do not want that to happen.

The constraint payments reached £7.5 million for the first three weeks of August. If people are really concerned about fuel poverty, they should think about this: the increased cost of electricity due to the renewables obligation in 2009 may have pushed about 100,000 households into fuel poverty, and the wind element was responsible for 40,000 to 50,000. That information is from the fuel poverty dataset for 2009 produced by DECC.