Energy Suppliers and Prices

David Mowat Excerpts

Tuesday 28th February 2012 Westminster Hall

[Caroline Lucas]

I thank the hon. Gentleman very much for that intervention, because that example clearly demonstrates the kind of power that the energy companies can wield. The implications of the story that he has just told are absolutely outrageous, so I hope the Minister will take on board that kind of story. As the chief executive of Ofgem concluded in October 2011, and I hope the Minister agrees:

“We do not have a fully competitive market.”

That was the phrase that Ofgem’s chief executive used.

Another option would be for the Government—working in collaboration with Ofgem—to legislate for new price-capping powers, potentially based on a new mechanism. Any price capping could be linked to the wholesale price of energy, to make energy costs fairer. It would be a kind of energy price escalator.

Ofcom, the telecoms regulator, has made clear its intention to cap the cost of BT line rental charges, in response to BT’s over-dominance of the land-line rental market. Why not apply the same logic and principle to the energy market? Perhaps we could suggest that Ofgem pick up the phone and call Ofcom to ask for advice; after all, we are always told that “It’s good to talk.”

Thirdly, the Government should now launch an independent public inquiry into the big six energy companies. In much the same way that we have had an independent commission on banking, led by Sir John Vickers, and an ongoing investigation into the media, led by Lord Leveson, we urgently need a public inquiry into the energy industry, to get to the root causes of the problems. To be crystal-clear, I must point out that I am not calling for a Competition Commission inquiry. Instead, we need an independent public inquiry with a broader remit than just to consider prices and competition, because more fundamental issues are at work here.

Those fundamental issues include trust. It seems clear to me, from talking to the constituents whom I meet when I go around my constituency, that many people do not trust the energy companies. Therefore, it would be in the interests of the energy suppliers themselves to ensure that these issues are fully addressed and that all the facts, figures and arguments are discussed in the light of day.

[David Mowat (Warrington South) (Con)]

I am listening carefully to the hon. Lady’s argument that there is a market failure in the energy sector. If there is a market failure and therefore a de facto cartel is operating, that would be a very serious issue that would need to be fixed. However, what I genuinely do not understand—perhaps she can help me with this point—is why EU figures from November last year showed that UK gas prices for the consumer were 25% lower than those in Italy, France and Germany. Indeed, UK gas prices are the 21st lowest of the 27 countries in the EU. Those statistics do not imply that a cartel is operating in our country; alternatively, they show that, if a cartel is operating here, it is not operating very well.

[Caroline Lucas]

I cannot help the hon. Gentleman directly on the figures that he has just quoted. The bigger issue is the amount of power that those players have in our markets. My constituents in Brighton do not much care about the price of fuel in Italy, but they care passionately about the price of their own fuel here at home. It looks as though the big six are coming together. A public inquiry would find out whether any collusion is going on. Even if there is no collusion, it is certainly the case that excess profits are being made off the backs of constituents who are struggling with very high fuel prices. When they are urged to swap tariffs, the whole process is so deeply complicated that it is not surprising that, essentially, they are mis-sold the energy that they need.

[David Mowat]

I completely agree that we need transparent energy prices, and I hope that the Minister will talk about how we will simplify the tariff structure and all that goes with it. However, my point is the same. I understand that the hon. Lady’s constituents do not care about energy prices in Italy, France, Germany or Sweden. My point is that if there is a cartel operating, it is surprising that our gas prices are so much cheaper than in those countries. I will leave it at that.

[Caroline Lucas]

There are a whole set of complex reasons why energy markets are different in various member states. If everything is completely clean and above board, with no excess profits being made, that can be examined in a public inquiry. That is exactly why we need a public inquiry. I can assure the hon. Gentleman, as I am sure that he knows from his own constituents, that that is not the perception of the vast majority of ordinary people who are faced on the one hand with rising energy bills and on the other hand with stories in the newspapers about rising energy company profits.