Energy Company Licence Revocation

Debate between David Mowat and Jonathan Reynolds

Wednesday 3rd September 2014 Commons Chamber

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Three-hundred and forty-five days. That is not the current average time it takes a new Tory MP to decide that they want to stand down from Parliament; it is how long since the Leader of the Opposition first announced Labour’s radical plans to reform the energy market and freeze energy prices while we do it. Yet 345 days on, this Conservative-led Government still cannot offer a credible response to our plans.

The Government started by telling us that switching was the answer. They have flirted with the idea of taking stronger action. They told us they were against the calls to refer the energy market to the Competition and Markets Authority, before they eventually changed their minds. All the while, the British public have felt the relentless squeeze of higher energy prices, with no apparent end in sight, so here we are again.

It is true that this is one of many debates we have had on the subject of energy prices on the Floor of the House. I for one make no apology for that. Any of us who visits a pub, café or working men’s club or goes to a football match or anywhere else will find that the public out there are more than happy to talk about energy prices too. Quite frankly, when people find out we are MPs, it is actually quite hard to avoid a conversation about energy prices. People will tell us that they are sick and tired of their bills always seeming to go up when wholesale prices rise, but never down again when they fall. They will tell us some awful stories about poor customer service, and they tell us that, when wrongdoing is discovered and bad practice identified, the punishment never seems to deter the offending companies from doing it again. That is what we are here to discuss today.

Alongside our other reforms—the ring-fencing of the generation and retail arms of energy companies, the open pool for electricity trading and the new regulator with real powers to take action—we also believe there must be powers to ensure that regulatory fines are not simply seen as the cost of doing business. Instead, intervention from the regulator should ensure problems are put right and should act as a real deterrent. The figures revealed by my right hon. Friend the Member for Don Valley (Caroline Flint) are damning. Despite at least 31 fines being issued by Ofgem since 2001, totalling at least £90 million, energy firms are facing a further 15 probes into mis-selling, poor customer service and other bad practice. By giving real powers to the regulator, and borrowing from the best practice we can see in other jurisdictions, we can prevent such poor behaviour being repeated. Making clear that we will not tolerate persistent bad practice, by giving the regulator the ultimate power to revoke licences, will be a substantial step towards providing customers with the protection they desperately need and the energy market they deserve.

We have heard some fantastic contributions in today’s debate. Let me start by responding to some of the Secretary of State’s claims. He started out by saying it was all about competition. The Opposition of course recognise the importance of the role of competition, but let me respectfully tell him that his job cannot be simply to make it easier to switch; it should be to ensure that there is someone worth switching to. People do not feel that that is happening at the moment.

The Secretary of State mentioned smart meters, the smart meter roll-out and the role of technology. We have offered bipartisan support for that programme, as we can see the benefits, too. He mentioned the need to improve and compete on customer service. Of course we agree with that, and I hope that he will recognise the benefits of our proposed performance score card for energy companies, so that people can easily see how those companies are performing.

Apart from that, it seemed from the Secretary of State’s speech that the Government were trying to fabricate some excuses to oppose our policy. At the moment, we agree that the regulator can impose a fine or a final order to change specific behaviour—it could be to change the telephone script or billing method. However, providing the energy company pays the fine off and complies with the order, the regulator has no power to revoke its licence. The obvious problem is that, if companies break different rules, or the same rules in a different way, providing they comply with any penalty given, the regulator can never revoke their licence. By contrast, under our proposals, even if a company complied with a fine or a final order, if it carried on breaching the terms of its licence, that licence would be on the line—a significant and welcome difference from what applies at the moment.

A number of Members tried to intervene to raise specific questions about the scope and application of that new power. Of course revoking a licence would apply only in cases of serious malpractice and the utilisation of the power would, of course, be for the regulator to decide. However, it would clearly be a back-stop power, much like the current ability to levy fines at 10% of global revenues. This is about providing a deterrent, which clearly and unfortunately does not exist at present.

Today, we have heard many of the Government’s classic lines in response to Opposition-led energy debates. The Secretary of State and the hon. Member for Crawley (Henry Smith) claimed that the big six were created under Labour, but Government Members should look at the facts a little more closely. It is true that, before the big six, there were once 14 electricity supply companies, but those 14 were regional monopolies—there was no market and no competition taking place. It was, of course, John Major’s Government who first allowed vertical integration to occur. Significantly, consumers could not even switch electricity supplier until after the Labour Government were elected in 1997.

My hon. Friend the Member for Southampton, Test (Dr Whitehead) asked us to consider who the Secretary of State really is. I have never considered him to be an international man of mystery until now, but that thought will linger. My hon. Friend was forensic in taking apart the Secretary of State’s case.

I am not quite sure where to begin when it comes to the hon. Member for Monmouth (David T. C. Davies). Let me respectfully say to him on the issues of climate change—without going too far away from the motion—that the 10 warmest years on record are clearly those of recent times. People who express climate scepticism—I am sure the hon. Gentleman would not mind me saying this—are likely to be those who are relatively sceptical about the powers of big government. The hon. Gentleman probably does not believe that making direct state interventions is the way to solve the world’s problems. He mentioned the smart meter roll-out in that context. If we look at the countries involved in the UN Intergovernmental Panel on Climate Change—countries as diverse as Switzerland, China, Australia, Japan, the USA, India, Germany, Russia and Norway—is it possible or conceivable that the scientists from all those countries have got together and decided to hoax us in this grand fashion? I cannot believe that anyone with the hon. Gentleman’s scepticism would accept that position so readily.

On smart meters, any big Government programme risks some problems, but if the hon. Gentleman were to look at the number of complaints to energy companies that result from inaccurate billing, which smart meters will resolve, at the voluntary consumption that the evidence shows comes about when people are more visually aware of their energy use, or at the improvements in social justice, particularly for people who use prepayment as a method, he will find considerable benefits to us all in ensuring that smart meter roll-out goes nationwide in the proposed fashion.

My hon. Friend the Member for Llanelli (Nia Griffith) talked about company behaviour, its consistent tendency not to get better and the need for a strong regulator to clamp down on companies’ actions. I absolutely agree with her.

The hon. Member for Warrington South (David Mowat) raised a number of issues, to some of which I shall return. He specifically mentioned the large combustion plant directive, which, as he knows, regulates emissions of sulphur dioxide, nitrogen dioxide, diesel as well as carbon emissions. The directive was intended to ensure that pollution abatement equipment was fitted; otherwise, the running hours of the large stations would be limited. I know that the hon. Gentleman has one in his constituency, which I imagine is where his interest lies. He will surely recognise that there was a major loophole in the Lords amendments in that certain refurbishments were not covered. It seems to me entirely reasonable to try to provide a consistent level playing field, which is what we tried to do in the debate on the Lords amendments.

I thought my hon. Friend the Member for Bolton West (Julie Hilling) had one of the best lines of the debate when she asked how the Secretary of State could simultaneously say that the proposed power is wrong while admitting that it already exists. I am sure that the hon. Member for South Derbyshire (Heather Wheeler) could have enjoyed the debate. There was considerable merit in the debate and she could have enjoyed it. She specifically mentioned investment risk and the consequences for South Derbyshire. I do not follow her line of argument that stronger regulation of the supply side of businesses will affect investment in the generation side. Surely she would recognise that investment risk as it is normally understood relates to factors that are outside a business’s control. How energy companies perform and treat their customers is surely completely within their control, and they would be at risk of losing their licences only if they repeatedly and deliberately broke the rules in ways that caused serious harm to their customers. If they do not do that, I cannot see that they have anything to fear.

My hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) wonderfully highlighted some of the inconsistencies behind Government policy on quite a few issues. The right hon. Member for Wokingham (Mr Redwood) and, indeed, the hon. Members for Monmouth and for Warrington South repeated what has become the siren call from the Tory right—perhaps soon to become the UKIP left—arguing that the pressure on energy prices is somehow related to the conversion to renewable energy. I am afraid that those claims do not add up. The Government’s figures on policies such as the renewable obligation cannot possibly explain the rise in energy bills that we have seen in recent years. Through such policies, we get safety in energy and obtain much greater energy security. What is more, renewable energy sources have nothing of the price volatility we see in international gas markets. As Dale Vince, the chief executive of Ecotricity, recently remarked,

“the cost of wind energy simply does not go up.”

The so-called green taxes that so many Government Members seem so keen to mention are in the main energy efficiency measures that reduce consumption across the system, which clearly benefit us all in respect of the burden put on generation and safeguard, if they work, some of our most vulnerable people. I think that should be a feature of our energy system.

We have had another good debate on the energy market today, but once again only Opposition Members seem to be offering any solutions. We believe that the Government must take stronger action to restore trust and help mend our broken energy market. That would help to tip the balance back in favour of the consumer, which is exactly where it should be. Energy suppliers, with the tacit support of the Government, are the ones in the driving seat at the moment. They are the ones doing well out of the status quo, while their customers are not. Judging by their number and the ones likely to come, it is clear that financial penalties are simply not currently enough of a deterrent to bad practice. We have to start putting that right. Inaction and bluster are not enough.

This is a serious and considered proposal—one that already exists in other parts of the world—and it is not enough for the Government to reject it just because Labour is proposing it. Every time there is regulatory action and every time a fine is levied or Ofgem makes an intervention, we all get asked to respond on the media programmes, and we all get asked why this keeps happening. If the Government vote against this proposal to create a real deterrent today, we will point out on those programmes, on every occasion where that happens again, that this Government failed to provide the measures properly to hold those companies to account.

[David Mowat]

The hon. Gentleman has mentioned me twice, and I have been reflecting on whether I actually said what he said that I said. At no point did I say that the green levies constituted a big part of energy bills. I merely said that whenever the House had an opportunity to vote on whether to increase energy prices, the Opposition wanted to go further—for example, in the case of the accelerated removal of solar subsidies, or on the occasion of that terrible vote on 4 December on a Lords amendment proposing the accelerated closure of coal-fired power stations.

Perhaps the hon. Gentleman will respond to a specific point that I made in my speech. We have lower than median gas prices in the European Union. If the market is so “broken”, how has that happened?

[Jonathan Reynolds]

There is not a tension between the pursuit of affordability and the pursuit of decarbonised energy supplies—or, at least, there is not a problem that we cannot resolve. Yes, renewable energy is more expensive than, for instance, coal, on which the hon. Gentleman may be particularly keen, but surely that makes the transparency of our energy market more rather than less important. The need for us to ensure that there is a downward pressure on energy prices becomes more of an imperative when we are making that transition.

I am sorry that I did not respond to the hon. Gentleman’s point about solar tariffs. No one opposes the digression in tariffs and subsidy structures, but surely he recognises—

[Jonathan Reynolds]

I will give way to the right hon. Gentleman in a moment.

Surely the hon. Gentleman recognises that the way in which Governments do that is important—and this Government have been notorious for chopping and changing policy on so many occasions. A business that is trying to invest and to provide jobs in this sector simply cannot continue unless the Government make the position clear.

[David Mowat]

rose—

Energy Company Obligation

Debate between David Mowat and Jonathan Reynolds

Tuesday 11th March 2014 Westminster Hall

[Jonathan Reynolds]

I absolutely agree with my hon. Friend. I know that when the Minister responds he will say that the minimum target set for solid-wall insulation is just a minimum and could be exceeded, but, quite frankly, if we look at the cumulative impact of the changes, no more than that statutory minimum of solid-wall jobs will be done. I raised that point with him when we considered the Lords amendments to the Energy Bill and also at the most recent Energy questions. The impact of the changes means that the number of solid-wall jobs that are done will not be anywhere near what is needed.

As many Members have said today, that is a major problem for the UK, and no one will solve it for us. The Minister modestly suggested that he was responsible for the boom in the solar industry, and I agree that what has happened on domestic solar installations is absolutely brilliant—I am trying to get some solar photovoltaic panels on my own roof. He would surely admit, however, that part of that success has been the drop in unit costs that has come from other countries getting involved in manufacture, particularly China. That will not happen with solid-wall insulation or any hard-to-treat insulation. That is a problem for which we have to find a solution in the UK.

If the Committee on Climate Change wants us to do 200,000 solid-wall jobs a year, 25,000 a year is simply not good enough. My hon. Friend the Member for Southampton, Test hit the nail on the head when he said that if we look at the objectives, the key issue is that ECO was created to do that hard-to-treat work. The policy is constructed around starting to meet that challenge, yet mid-programme the Government have now changed the objectives, leaving us with a bit of a mess.

[David Mowat]

I cannot let the hon. Gentleman go much further after his comments on solar. We have heard so much today from the Opposition about fuel poverty yet every time there is a Division in the House on whether we should take an option to reduce or increase energy bills, Opposition Members always vote for higher bills. Solar PV was a great example of that: when the Minister tried to reduce the solar tariff from six times grid parity to four times grid parity—something we did two years ago—to a man and woman the Opposition voted against the measure. Yet now they stand up and talk about fuel poverty. It is not rational and it will not do.

[Jonathan Reynolds]

If we got into an extensive debate about the solar industry I am sure you would rule me out of order, Ms Dorries. If the hon. Gentleman is concerned about affordability of energy bills, one way that we can guarantee that bills will come down is if people use less energy. That objective is delivered through energy efficiency measures, insulation and the kind of work that was going on in Clifton until the Government made the changes. To withdraw from that work in order to deliver cheaper bills is surely illogical.

[David Mowat]

I completely agree that greater energy efficiency is the best way of reducing energy bills. We are an outlier in terms of the efficiency of our housing stock—although not in terms of our energy costs, which makes the Opposition’s freeze proposal even more opportunistic. The point I was making is that whenever we vote on energy costs the Opposition vote for them to be higher and as a result are not credible.

[Jonathan Reynolds]

I completely disagree. We could and should have a lengthy debate about energy companies overcharging as that issue is obviously there—people can see that and our policy is designed to rectify it. That makes the changes to ECO even more illogical. The Government have reacted to our policy, which is sensible and which a lot of people like a great deal, by trying to cut back on energy efficiency, to try to claim that energy bills will be cheaper. If the Government are serious about lowering bills, surely the obvious way to do that is to continue with energy efficiency measures. It is illogical for them to cut back on efficiency to claim that they are saving people money on their energy bills.

In the time available I will address two further points. My next point is about the impact the changes to ECO will have on jobs. The impact assessment predicts that there will be between 7,000 and 14,000 fewer jobs as a result of the changes. That has already begun to happen and a lot of companies have already contacted me about the measures they have had to take. In particular, apprenticeships have suffered a great deal—that is certainly the case in Nottingham. When I visited a scheme there, the apprentice I saw was working on his own property—a marvellous bit of PR from the scheme, but it was brilliant to see such work taking place. Those people should have lengthy careers ahead of them, given the amount of work we need done by the industry they have gone into. For them to miss out or lose their jobs because of Government changes to policy is extremely unfair. So far, the Government have not acknowledged the impact on jobs at all, despite the fact that the impact assessment does. I hope the Minister will comment on that.

The changes severely reduce the Government’s commitment to tackling fuel poverty. When CERO was predominantly concerned with delivering solid-wall and other hard-to-treat measures, the funding would naturally have gone to low-income areas, in particular social housing estates built at a certain time to certain construction standards. However, now that low-cost measures are to be included, will the Minister say what safeguards will be put in place to make sure that the funding does not go to households that could afford to pay? That would be incredibly disappointing, given that one of the already disappointing features of ECO was its modest ambitions for reducing fuel poverty.

The Government are simply not ambitious enough about energy efficiency. The energy companies know that the Government will not hold them to account for failing to meet their obligations. I note in particular that whereas before the changes a fine could be levied on energy companies for failing to meet their targets, they will now no longer face a fine, but simply a rule-based system for increasing targets. It seems that the energy companies will be let off the hook again.

The changes to ECO are poorly judged and fatally undermine much of the original purpose of the policy. I do not accept or understand the Government’s claim that they will lead to a bill reduction of £35. The changes will have severe ramifications for the green deal. The failure of the green deal and ECO to dovetail as they were intended to—their “limited blending”, as the impact assessment puts it—serves only to highlight that further. The Government have again caved in to the energy companies when instead they should be rectifying the serious problems in our energy market, and ensuring that we meet the challenge of improving the UK’s dreadfully insulated housing stock.

The people losing out from this decision by the Government, whether in Nottingham or Southampton, or the other examples given by hon. Members today, are often those who need help the most, and who have been told they were going to receive it, only to learn that the Government have let them down again. The figures are stark: 14,000 lost jobs, 440,000 fewer homes insulated and 2.2 million tonnes in carbon savings forgone. The ECO is this Government’s policy, the changes are this Government’s changes, and the consequences, be they in lost jobs, work that now will not take place or the decimation of the solid-wall supply chain, are also the responsibility of this Government. Ministers have got it badly wrong. They need to accept that and think again.