Energy Prices

George Howarth Excerpts

Thursday 16th March 2017 Commons Chamber

[Mr George Howarth (Knowsley) (Lab)]

The hon. Gentleman is making a very good point, and I agree with it. Does he agree though that it is more problematic for people who live in tower blocks, where the energy supply is collectively controlled by the landlord who might not have any incentive to switch to another supplier?

[John Penrose]

The right hon. Gentleman is exactly right. One of the things that may be improved by the roll-out of smart meters, which we heard about earlier, is those collective bills, which would be broken down. Many energy suppliers and others in the industry are concerned that too many hopes may be being invested in smart meters and they may not necessarily produce a lasting uplift in customer engagement and interest—they will start off as an interesting new gadget in the corner of the room, but after a few weeks or months that interest may die away. We will have to wait and see, but he is right that there is an opportunity, at the very least.

In the spirit of trying to make switching simpler and less scary, firms such as Make It Cheaper, Flipper, OVO and Money Saving Expert provide end-to-end services that do the donkey work for us, handling everything from finding a better deal to organising the switch itself. They appeal to those of us who currently think that even the most convenient price comparison sites take too much of our valuable time.

--- Later in debate ---

[Mr Wright]

Absolutely, and as my right hon. Friend, who has done fantastic work on this, knows all too well, energy efficiency measures are a key plank of ensuring our competitiveness, tackling fuel poverty and addressing our decarbonisation targets. Everybody wins when energy efficiency measures are prioritised.

[Mr George Howarth]

My hon. Friend is making a very good case. Does he agree that the energy efficiency measures introduced in tower blocks, and sometimes in low-rise properties, can be complicated to use, and if they are not used properly, they can be more expensive to the consumer? I have had two examples in my constituency over the past few years in which people have ended up paying more for a lower standard of heating. Does he think that there is a case for the Government looking at issuing guidance to local authorities and registered social landlords about how to install these systems and inform tenants about how they are supposed to be used?

[Mr Wright]

My right hon. Friend makes a really powerful point. I was in the Chamber when he made an intervention about switching suppliers and noted that often people in tower blocks are not able to do that. He makes a powerful case and vividly illustrates that the market is not working in the interests of consumers, who might often be in low-waged and vulnerable households. The Government and regulator need to take steps to make sure that the market works.

Ofgem told us that energy companies have increased their prices largely because they have not been successful in controlling their own costs. Sufficient and efficient companies have been able to reduce and absorb cost increases, and have therefore passed on those benefits to the customers by eliminating any risk of price increases. Others have not done so and, due to the nature of their business model, which I explained earlier, feel that they do not have to consider customers because customers simply will not switch and will continue to stay on the most expensive tariff. Customers are literally paying the price for the failure of energy companies to manage their businesses and control their costs. I said to the hon. Member for Broxbourne (Mr Walker) that I would mention that this is about not just costs, but customer service and a lack of trust in energy companies. There is a huge number of examples. I imagine that every hon. Member has cases regarding this in their inbox.

Citizens Advice told the Committee that companies are getting the very basics wrong with late, missing and inaccurate bills. When they get things wrong, they are failing to provide customers with redress. The market is simply not working. So what is the solution? The current policy response seems to be a dual approach—to encourage companies to engage with their customers more efficiently and to communicate widely the benefits that come from switching. Switching should certainly be encouraged, as customers can make savings of hundreds of pounds if they switch. On the back of the recent price rises from energy companies, I switched the energy supplier for our house and we saved £249. There are big savings to be made. I encourage customers to switch, switch and switch again.

As the hon. Member for Weston-super-Mare said, a small proportion of domestic customers do switch, and they switch very often. They are savvy customers who know the market and want to get the best possible deal, but that remains relatively rare. The vast majority of energy customers do not switch for a wide variety of reasons. For example, people may think, “Can I switch? Aren’t I still with the local electricity board?”, “Will it be too complex? I’m frightened of the hassle factor”, or “I’m frightened that my energy supply might be disrupted.” There is a whole range of things, not least, as the hon. Gentleman said, that people lead busy lives, so they often do not consider an essential utility such as energy. It is not sufficient to state that the energy market will be fixed by encouraging more switching and better engagement. There needs to be a fair deal for all energy customers—for the two thirds who do not switch, and not just for those who do so.

The Government often talk a good game when it comes to tackling energy prices. When it was revealed in the autumn that the energy companies were making higher profits than reported, the Secretary of State hauled those companies into his Department for an explanation, but nothing materialised. When npower raises its prices last month, a spokesman for the Prime Minister said:

“We are concerned by Npower’s planned increases—we are committed to getting the best for households. Suppliers are protected from recent fluctuations in wholesale energy prices which are set two years in advance so we expect them to treat customers fairly and clearly where markets are not working we are prepared to act.”

Only this week, in answer to my question during business, energy and industrial strategy questions, the Secretary of State said that “time is up” for those energy companies. But no action has been taken. Customers will have to endure in the next days, weeks and possibly months high prices rises with no action taken whatever. The regulator says the price rises are not justified, No. 10 says that it is concerned, and the Department has had energy companies hauled in, but nothing has been done. This does not seem to reflect the urgency that should be given to the issue. The key point that I would like to be made in this debate is the Minister saying how the Government are going act—and act now—to ensure that customers get a better deal.

The hon. Member for Weston-super-Mare has an important policy response suggestion when it comes to a restricted price cap, and this could be an important means of providing customers with some respite. He mentioned a number of energy companies that have put forward the idea, and there are some quite striking quotes from the people who run those companies. Stephen Fitzpatrick, chief executive of Ovo Energy, said that the energy market was failing because companies were

“free to charge whatever they think they can get away with, at the expense of disengaged or confused customers.”

He also said:

“The time has come for the Government to step in and take bold action to protect consumers’ interests.”

Greg Jackson, chief executive of Octopus Energy, which has about 80,000 customers, said:

“Energy customers are being robbed in broad daylight, and it’s time for decisive action to end the misery for millions.”

Will the Government look favourably on the hon. Gentleman’s point about a price cap? It is very clear that, at a time of crippling price rises from companies seemingly indifferent to the plight of customers, there needs to be a fundamental change to ensure that the market works for all. In the Minister’s response to the debate, he must set out the detailed steps he will take immediately and in the longer term to act in the interests of customers, and set out the timetable. The time for strong words, for hauling the companies into the Department, and for Green Papers and future legislation is over. If the regulator says that there is no justification for price increases and the Prime Minister is saying that action needs to happen, why can we not have action now? Customers are facing price rises now. We should not have to wait for a Green Paper or legislation in the months to come. We need to act immediately. On that basis, what are the Government going to do now?