Energy Network Charges

Drew Hendry Excerpts

Tuesday 5th July 2016 Westminster Hall

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

I beg to move,

That this House has considered regional differences in energy network charges.

It is a pleasure to serve under your chairmanship, Mrs Main, in this debate about the sharp regional differences in energy network charges that penalise consumers and businesses in certain parts of the United Kingdom. This Government like to talk about being a one nation Government. If the Minister believes that to be the case, I ask her to reflect on why consumers in the highlands and islands have to pay a premium for their electricity. I acknowledge that the previous Labour Government introduced a hydro benefit replacement scheme in 2005 to partially take account of higher distribution costs and that that support is being continued. The Minister, who I look forward to hearing from later, said late last year:

“It is not right that people face higher electricity costs just because of where they live”.

I agree with the hon. Lady, and it was a pretty fundamental statement that she made.

This debate is not just about the highlands and islands; there are 14 regional markets throughout the United Kingdom, with different levels of network charges. Nor is it about price competition. It is about a regulated charge varying from region to region through a price control framework. The reality is that a person living in the highlands and islands will pay for the privilege of doing so, courtesy of the UK Government. Electricity distribution charges for the north of Scotland are an eye-watering 84% higher than the distribution charges for London. One nation? Whose nation? It is not mine, or that of my hon. Friends here today. Westminster calls the tune; highlanders and islanders pay the price.

We pay a high price for transmission charges, and we also have a high rate of energy consumption. The highlands and islands are noted for windy and wet conditions. It is not unusual for folk in the highlands to have their heating on all year round.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

My hon. Friend is making a good point about the travails of people living in the highlands and islands and the fact that they face additional charges and costs. Does he agree that many of those consumers are off the grid and rely on Calor gas or oil for their heating? Ofgem should regulate such things, as well as the normal transmissions.

[Ian Blackford]

I am grateful to my hon. Friend for making that very valid point, which was raised in a recent Ofgem report. Perhaps the Minister will reflect on what we can do to give support to those on off-grid connections.

A recent study by Ofgem noted that households in the north of Scotland that use electricity for heating would benefit from a cost reduction of about £60 a year if there was a universal network charge. That would have a significant impact on the budget of someone on a low income or a pensioner.

Not only are we faced with high transmission charges, but many consumers in the highlands and islands suffer from a lack of choice in energy provision. As my hon. Friend just mentioned, many households cannot access grid connections for gas, among other things, and have to rely on other sources of fuel. It is often a choice between electricity and domestic heating oil. With such limitations, the last thing we need is price discrimination—that is what it is—being foisted on us by a Westminster Government. Where people live should not result in them being penalised through paying higher network charges. Where is the one nation that the Government speak of? It should be about equity and fairness, but that does not exist today.

We have heard a lot since the European referendum about those who are left behind. We often hear that it is a priority for this Government to tackle fuel poverty, but fuel poverty is exacerbated by having higher network charges in the highlands and islands. I will focus on fuel poverty because there is a clear link between higher prices resulting from network charges and fuel poverty.

I am grateful to Changeworks, which has estimated the percentage of households in fuel poverty in the highlands region. It bands each locality in the highlands into groups. On its calculations, no district in my constituency has less than 47.9% of households in fuel poverty; indeed, in a number of districts fuel poverty is evident in at least 73.5% of households. I look across from my constituency to Na h-Eileanan an Iar, where fuel poverty affects 71% of households. That should shame every single Member of this House and every Government Member. Why should we accept that such a percentage of households in a wealthy country such as this should be in fuel poverty? It should be a priority for the Government to tackle the issue and eradicate such high levels of fuel poverty.

--- Later in debate ---

[Ian Blackford]

France has a universal market for transmission charges. I would prefer a national transmission market, as there is in France, to the unequal system that we have in the UK. Why do we not do as France does and treat consumers equitably? We can learn from Europe, and at the same time we should remain part of it and not be dragged out. If the UK Government will not do that, perhaps we need—to paraphrase others—to take back control ourselves.

Research by the national charity Turn2us graphically shows the kind of challenges that those in fuel poverty are facing. One in two low-income households is struggling to afford energy costs, despite being in work. Among the hardest hit are people with disabilities, with more than two in three reporting their struggles, and families, with almost two in three working parents unable to meet these costs. Worryingly, of those households that are struggling with energy costs, nearly half have done so for more than a year. The knock-on effect is severe, with a third forced to skip meals and more than a fifth experiencing stress and other mental health problems. Here are some of the comments made to Turn2us:

“The bills are killing me, sometimes I have to contemplate paying all the rent or heating my home.”

“There are many pensioners like myself who don’t qualify for any help but still have to decide whether to eat or heat.”

“We have stress, debt, arguments and a low mood at home.”

“Starve or freeze? Either way you get ill and can’t work, eat or pay any bills.”

“No lights, only candles, only hoover once a week, only use washing machine once a week, no heating, meals that cook”

slowly.

In Scotland I am proud that our Scottish Government have used their powers to intervene to mitigate some of the effects of rising energy costs. It has been the failure of Westminster and the regulator to properly protect consumers that has led to a marked deterioration in the level of fuel poverty. Transmission charges are an important factor in the high levels of fuel poverty. The Scottish Government are committed to tackling fuel poverty head-on and ensuring that everyone in Scotland lives in a warm home that is affordable to heat, but the measures we are taking in Scotland are undermined by the austerity measures of the Westminster Government. That is why the responsibility for fuel poverty lies wholly, solely and squarely at the feet of Westminster and not at the Scottish Government’s, as the Minister implied earlier.

[Drew Hendry]

It is important that the root causes of fuel poverty are taken into account. Some 4.5 million people across the UK suffer from fuel poverty, and the cost of transmission grid charges in Scotland add to the cost for highlands and islands consumers. Does my hon. Friend agree that it is about time the issue of ducking responsibility for fuel poverty was taken squarely on the chin by the Minister?

[Ian Blackford]

Again, I am grateful to my hon. Friend for intervening to make a very important point. Today, in this debate, the Minister could bring this matter to a conclusion. She could follow through on the warm words that she used at Christmastime, when she said that no one should be penalised. If she believes that, I implore her to do the right thing. Let us have a universal market—a transmission market that treats everybody fairly in Northern Ireland, in Scotland and in England. Why do we still charge people based on the location they live in? It is wrong and needs to be dealt with.

When we talk about fuel poverty, there is not just a moral and ethical impact but a cost to society in increased health costs as a consequence of the mental health issues that arise; or in children being sent to school in less than ideal circumstances as a consequence of family pressures, adding to the difficulties of our young people flourishing to the extent that they should and making closing the attainment gap increasingly burdensome. That is the social cost of fuel poverty and it is an issue for which the Government in Westminster have to accept responsibility. Ending the discrimination of higher distribution charges would be a good start. I hope the Minister will respond in an appropriate manner this afternoon.

--- Later in debate ---

[Callum McCaig (Aberdeen South) (SNP)]

It is a pleasure to serve under your chairmanship, Mrs Main.

My hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford) has said most of what is required and he said it in his usual passionate way. It is right that he should feel passionate about this, because there is a clear sense of injustice—one that, as he rightly pointed out, the Minister has acknowledged in the past. To quote her again for the record:

“It is not right that people face higher electricity costs just because of where they live”.

We have heard that that applies not just to the north of Scotland but to Northern Ireland and other regions of the UK. Nobody is asking for special treatment. We are asking for a level playing field, and I do not understand how that cannot be justified. Perhaps it is possible to hide behind what Ofgem has said, but this is a Government who purport to be a one nation Government. How can you be a one nation Government when, just because you live in a different part of the country, you have to pay more for your electricity? That cannot follow from the Government’s rhetoric.

The Ofgem report states:

“There does not appear to be any clear justification for a national charge in terms of the regional concentration of vulnerability. Distribution regions represent large areas and the socio-demographics of the population in each region tend towards the Great Britain average.”

The justification is fairness. Just because you may have average distributions of poverty and wealth in the north of Scotland and the south of Scotland—which, to be fair, is highly debatable—does not mean that if you are rich or poor in the north of Scotland, you should pay more than anyone in the south of Scotland. If you are disadvantaged in the north of Scotland, it is no consolation to you that you are part of a national average and you fit neatly into a demographic box, so that Ofgem can dismiss your legitimate concerns about additional costs plunging you further into fuel poverty.

[Drew Hendry]

On the point about additional costs, there are many off-grid users in the highlands and islands, for whom costs are 100% more than they are for on-grid consumers. That adds to the problem.

[Mrs Anne Main (in the Chair)]

Order. Mr McCaig, may I ask you to speak through the Chair? You are using the word “you” rather a lot, and of course I have nothing to do with it.

--- Later in debate ---

[Barry Gardiner]

I absolutely agree with the hon. Gentleman that it is a question of fairness. I agree that there should be a unitary basis on which this is calculated, and indeed I think the Minister is on record as having made statements that indicate that she agrees. As I have mentioned, there are issues relating to the way in which we are permitted to do that under European law that may now be freed up. They need to be investigated and, if we can do that, we should.

I simply wanted to put in perspective what I felt was the over-ebullience of the hon. Gentleman when he spoke. In the grand scheme of things, these are small injustices, not great ones, and they apply more widely throughout the regions of the United Kingdom than just in Scotland.

[Drew Hendry]

rose—

[Callum McCaig]

rose—

--- Later in debate ---

[Barry Gardiner]

I am happy to give way to the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry).

[Drew Hendry]

I am grateful to the hon. Gentleman for giving way and for getting my constituency correct. You talk about—

[Barry Gardiner]

He!

[Drew Hendry]

I will not use the word “you”. He talks about this being a small amount, but when you are faced with the costs of paying for off-grid fuel—oil and gas—the additional costs because you live in a sparse area and low wages in a low-wage economy, this is a devastating cocktail. Do you not agree that it is not as unimportant as you are making out?

[Mrs Anne Main (in the Chair)]

Order. I am not making out anything, but I shall call Barry Gardiner, who may answer on his own behalf.