Domestic Gas and Electricity (Tariff Cap) Bill

Debate between Gareth Thomas and Albert Owen

2nd reading: House of Commons
Tuesday 6th March 2018 Commons Chamber

[Gareth Thomas (Harrow West) (Lab/Co-op)]

I agree with the right hon. Member for West Dorset (Sir Oliver Letwin) that we collectively owe praise to the hon. Member for Weston-super-Mare (John Penrose) and my right hon. Friend the Member for Don Valley (Caroline Flint) for bullying the Government into bringing the Bill before the House. Nor do I completely reject the right hon. Gentleman’s final assertion about the importance of having an effective regulator to regulate the market. What he missed, however, was the need to shake up significantly the way in which the market operates at the moment, to fundamentally challenge the power of the big six and the way in which regulation works between the transmission provider—National Grid—and the various distributor companies, given the impact that that has on bills.

As other hon. Members have said, while the Bill is good in that it will finally introduce an energy cap, it does not address the full scale of concerns across the House about how the energy market operates. E.ON put up prices last week on the coldest day of the year. Experts are increasingly concerned that the lights will go off at some point in the future. Gas capacity is another fear, and the energy ombudsman is unable or unwilling to enforce rulings in favour of consumers. Those are just some of the concerns about how the energy market works. It would have been good to have a far more comprehensive energy market reform Bill, of which the energy price cap was only part.

I fear that Ministers’ reluctant acceptance that a wider price cap is needed confirms the failure of regulation as it stands, and specifically confirms concerns about the powers and practices of Ofgem and its ability to keep the big six energy companies honest, along with National Grid and the distribution companies.

The Competition and Markets Authority, in its landmark investigation of the industry some four years ago, said that customers had essentially been ripped off to the tune of £1.4 billion—and that was since 2012. The only reason the Government referred the energy market to the CMA for investigation was the pressure from shadow Ministers and the then Leader of the Opposition. In the circumstances, and given the scale of overpayment by consumers, an energy price cap is hardly going to fundamentally change the dynamics of the energy market. Therein lies the problem with the Bill. It does not address the issues of ownership and the lack of accountability of those who currently own and distribute our energy. I therefore suspect that it will be of limited benefit to customers.

When the energy market was privatised, the country was promised the chance to have a stake in the new market. There was the famous “Tell Sid” campaign, which offered everybody a chance to own a stake in the energy market. Many mergers and acquisitions later, all we have seen in practice is that centralised unaccountable decision making has shifted from a series of Government Departments to six privately owned companies that control pretty much the whole chain from power station to customer. At the time, we were promised that unleashing competition would bring considerable benefits: prices would be driven down alongside an increase in innovation and efficiency. It is difficult to see exactly where those benefits are. Dissatisfaction with the energy market is so great that it is ranked bottom of all UK industries by the Institute of Customer Service. Part of the reason why people do not switch from one supplier to another is that they do not think they will get much benefit from switching, given the time and hassle it takes.

Six years ago, a very impressive ten-minute rule Bill was brought forward by the hon. Member for Harrow West, which I commend to the House, proposing that customers should be given the right to own the grid in their area, and that more people should be given the right to help control who benefits from the energy market. In effect, it proposed the sort of democratic public ownership that at the time was less fashionable on the Labour Benches, but which has become a bit more fashionable of late. I very much welcome that.

[Albert Owen]

I am sure the author of the Bill would agree with me that one model is the not-for-profit Welsh Water, which runs the utility and competes against others where necessary, but has competition in its tendering process so that it meets European competition rules for utility companies. It also invests in its customers, which is what is missing from the private monopolies that run distribution and transmission.

[Gareth Thomas]

My hon. Friend makes a very good point. If I may, I commend to him and the whole House the Co-operative party report on the reform of the energy market, which contains several proposals. One suggestion is that Welsh Water and the energy distribution model of similar mutuals in New Zealand might be the model for future of energy distribution in this country.

I do not hold the dogmatic view that public ownership through nationalisation might be a sensible way forward. I can see that there might be a case for some of the transmission network to be publicly owned, and I can see the argument for some public ownership of crucial, strategically important power stations to keep the lights on while a broader transition process is taking place. Fundamentally, however, I would like to make the argument for more co-operative, community-owned not-for-profit energy companies. They would own and supply energy, help to decarbonise our existing energy supply, be properly regulated, and, crucially, help to keep in the local community some of the wealth that is generated by energy, which I gently suggest should be strongly encouraged and allowed to emerge. Robin Hood Energy in Nottingham is a great example of that, as are Bristol Energy and Westmill Solar Co-operative.

I finish by gently saying to Government Members that I understand why they are tempted, for political reasons, to attack Opposition Members for looking again at public ownership, but when so many of the energy businesses in this country are owned, or part-owned, by state-owned companies from other countries, it prompts the question why public ownership by the British Government, or by the people of this country, could not be given a bit more encouragement by Ministers.