Energy Prices

Geraint Davies Excerpts

Wednesday 18th June 2014 Commons Chamber

[Mr Davey]

My hon. Friend is absolutely right. All the new independent suppliers who are coming into the market and taking on the big six companies created under Labour do not like the policy, because they know it would undermine competition, put them out of business and be bad for consumers. Although we have debated many times the price-freeze intervention proposed by the right hon. Member for Don Valley, she still has not convinced anyone. We have shown time and again that it is just a damaging con.

The second, and latest, price control is proposed legislation to force energy companies to pass on variations in the wholesale markets more rapidly, which is sort of the exact opposite of a price freeze. Rather than keeping prices the same, this price regulation seems to want them to change more frequently and more rapidly, mirroring the wholesale markets.

That is interesting, because if we look at what has happened recently, we will see that wholesale prices can go up and down on a daily basis. A fortnight ago, wholesale prices were falling: day-ahead electricity prices fell by 7% and the natural gas spot price fell by 12%. Last week, however, the day-ahead electricity price went up four days out of five, ending up at almost 6% by the end of the week, and the natural gas spot price was up 10% by the end of the week. In other words, the spot prices on the wholesale markets go up and down—they are very volatile and fluctuate all the time.

The price regulation proposed by the right hon. Lady is a rollercoaster approach to energy price freezes. I call it Labour’s bungee-jumping approach to energy prices, and one would be hard pressed to think of a more incoherent and inconsistent approach. It is a populist, opportunist, soundbite approach to energy policy that would not just hit investment but leave consumers worse off. In other words, yet another con.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Is not the key difference that we are now in a situation where, because of the flatlining of the economy for the past three or four years—[Laughter.] It is all very well laughing, but real wages have fallen through the floor as prices have rocketed. People are being thrust into abject poverty, particularly those at the bottom for whom energy makes up a bigger proportion of their expenditure. People are in desperation, which is why we need action now. That desperation was not the case in the past.

[Mr Davey]

I am grateful for that intervention because it shows that Labour has not even looked at what is happening to the economy. Employment is going up and unemployment is going down; inflation and the deficit are going down, and growth is up. The hon. Gentleman ought to notice that.

Let me ask a few questions about Labour’s latest policy. How would Labour’s bungee-jumping energy price regulation work? Let us try to get our heads round what is proposed—Labour wants to be in government in under a year, so I am sure it has thought through the detail. Would Labour legislate to force companies to pass on each and every cut in wholesale prices? Would it give Ofgem that power? How frequently would the link between wholesale and retail prices be made, and which wholesale price would Labour choose for Ofgem to intervene with? The day-ahead or the month-ahead price, or perhaps something else in the futures market? I think we should know. Which all-seeing, all-knowing official in Labour’s new energy Gosplan regulator would work that all out?

--- Later in debate ---

[Geraint Davies (Swansea West) (Lab/Co-op)]

Hon. Members from across the House should congratulate the Leader of the Opposition on bringing the issue of energy prices to the forefront of public attention and on placing it at the top of the political agenda. Despite what has been said, he has done so because we face a cost of living crisis. At the centre of that crisis is the inability of millions of people to pay their energy bills because their wages have gone down and they have fewer opportunities—1 million people are on zero-hours contracts—and because prices have gone up.

It is time to bring the big six to account. We can talk about the different ways of doing so, but the Opposition have shown clarity of purpose in saying that we want a freeze and then regulation, and in saying that we are pro-competition. Obviously, since we made our proposals, the Government have scampered around and scratched their head to think of an alternative, but they have just given a rendition of what we are saying.

In any case, we need to take action, and there are more radical approaches with which we could threaten the marketplace. The reality is that we are worried about the difference between the wholesale price and the retail price. Some Labour party members in my area are talking about the case for nationalisation of the retail side, or at least some form of intervention. For example, one of the retailers could become publicly owned in order to enforce price competition on other retailers so that at the end of the day we can have proper, competitive retail prices. I am not advocating that, but hon. Members from across the House should think constructively about ways of getting prices down.

Basically, the Labour party has got the whole debate going. Part of that debate relates to the need for security, as the hon. Member for Warrington South (David Mowat) mentioned, and another part is the need for diversity, as my hon. Friend the Member for Llanelli (Nia Griffith) said.

I want to comment on the Swansea lagoon initiative, which is being pushed as a way to provide wave energy. I have asked questions on the record about how we can balance what is best for our environment locally and nationally, and what is best for our economy locally and nationally. I have raised concerns about sewage outfall into the lagoon, the impact on the Gower beaches, the possibility of toxic waste being dug up, and the impact on tourism and the iconic view. Tidal Lagoon has come back with changes in its plans. Welsh Water has said that it wants the sewage to go outside the lagoon, and that may now happen. The company has come back on the concerns that I had about the concrete rock armour. It has now sourced denser granite to ensure that there will be natural rock armour, which will look better.

It started off as a green power station six times the size of Cardiff bay, stuck in Swansea bay, that had no benefits for Swansea in terms of energy costs and that might have undermined the tourism industry. The company has come back and provided a visitor centre and suggested berthing for cruise liners, which might help us to take advantage of the momentum from the Dylan Thomas centenary and our ambitions from the city of culture bid. In that way, the green offer might be combined with a tourism offer and an economic offer, and, hopefully, with sustainable energy prices, which is what this debate is all about.

I have been concerned, as colleagues will know, about sand movements and the muddying of the golden beaches of Swansea and Gower. A lot more work needs to be done by the Planning Inspectorate on contamination, waste and the carbon impact of the project. I am glad that it has taken the matter on and I will support whatever decision the jury reaches.

I make that point because we need to think about diversity of supply. There are issues with fracking, which some people are very concerned about. The Welsh Affairs Committee recently produced a report on fracking. Although we were cautiously optimistic, it is important that we focus on issues such as how contaminated water will be treated and disposed of, and the environmental risks in areas of outstanding natural beauty.

It is difficult to balance the environmental and economic issues. Although we all like to see robust exchanges across the Chamber, it is important that we have a greener, more secure and increasingly cost-effective solution to meeting our energy needs. That is why I welcome this debate. I hope that we see progress and action sooner rather than later on getting the cost of people’s bills down.