Gas and Electricity Costs

Greg Hands Excerpts

Tuesday 18th January 2022 Westminster Hall

[The Minister for Energy, Clean Growth and Climate Change (Greg Hands)]

I congratulate the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) on securing this important debate. We have heard from across the United Kingdom, from all nations, of constituents’ concerns about this issue, and rightly so, because this is of huge concern to all our constituents.

The recent rise in energy prices has been driven by the global increase in the price of wholesale gas, and the demand for gas that has grown as we and other nations recover from the covid-19 pandemic. Consequently, higher wholesale gas prices have been observed internationally throughout 2021 and into this year. In addition, greater liquified natural gas demand in Asia, upstream gas production, maintenance affecting supply and capacity during last summer, increased demand for gas in electricity generation, as we phase out coal, particularly in Europe, have also contributed to rising prices.

The first point I want to make is that that has not had an impact on our energy security, a point raised by my hon. Friend the Member for South Thanet (Craig Mackinlay) and others. The Government continue to work closely with Ofgem, the National Grid and other key industry organisations to monitor energy supply and demand. We remain confident that Great Britain’s energy security will be maintained. National Grid’s gas and electricity winter outlooks, published in October, indicate that there will be sufficient gas and electricity supply in all of its modelled supply and demand scenarios.

The first part is all about delivering renewables—

[Angus Brendan MacNeil]

On the point about domestic security, the Minister will be aware that 5.6 % of the UK’s energy need, according to the GridCarbon app, comes from overseas. Does the Minister not think that, in the next round of CfDs, it should be paramount that the projects that could have happened over the past number of years, particularly in the Scottish islands, actually get under way, so that there is less reliance on the continent and Scandinavia for some of that energy?

[Greg Hands]

That is exactly what we are doing. The new contract for difference auction that was launched in September is as big as the previous three auctions, when it comes to renewables. Our dependence on foreign gas is less than 20%. Our dependence on gas from Russia within that is less than 3% or 4%. That is action that we have already taken.

Our long-term strategy is about finding effective replacements for fossil fuels, which are reliable and do not expose us to the volatility of international commodity markets. We already have the world’s largest capacity in offshore wind, but we are not resting on our laurels, because we are going to quadruple that over the course of the next decade. That is all a major step towards delivering the Government’s increased ambition on renewables.

In answer to the hon. Member for Strangford (Jim Shannon) on new technology, it is both renewables and nuclear, to which I will turn briefly, which is a key plank in the Prime Minister’s 10-point plan in the energy White Paper and the legislation that is passing through the House of Commons. I will return in a moment to the comments from the hon. Member for Kilmarnock and Loudoun (Alan Brown).

In the brief time of six minutes available to me, I will answer some of the points raised. The hon. Member for Caithness, Sutherland and Easter Ross referred to his constituent, the businessman Andrew Mackay. I am happy to engage with the hon. Member on behalf of his constituent. Business bills tend to be set on long-term contracts, which give a certain insulation from volatile prices, at least until the point where the contract comes up for renewal.

On rural support, 15% of the energy company obligation—ECO3—must be delivered to households in rural areas. We consulted in the summer of last year on its successor scheme—ECO4—for delivering energy efficiency heating measures in off-grid homes in Scotland and Wales. We are already extending the warm home discount from about 2 million to 3 million households, from £140 to £150. It is worth pointing out, as the hon. Member for Kilmarnock and Loudoun knows well, that the warm home discount is not a zero-cost option. There are people who have to pay additional money on their bills to support recipients of the warm home discount, so it is not something that we can just take action on with the stroke of a pen, like the Labour motion last week—the trebling—without considering the consequences.

The hon. Member for Newton Abbot (Anne Marie Morris) is absolutely right on cost-of-living issues, but let us look at a lot of what is happening in this country. We have record figures for those in employment. We have the national living wage increase. We have beneficial changes in the universal credit taper rate and so on. All these things are providing support for people facing cost-of-living issues. I totally appreciate and am totally with the hon. Lady on the impact that energy bills may be having and will be having later this year. On levies and on the heat and buildings strategy, we said that we would publish a fairness and affordability call for evidence, which will set out the options to help rebalance electricity and gas prices and to support green choices, with a view to taking decisions in this year—2022.

The hon. Member for Bath (Wera Hobhouse) said that we are scrapping the ECO scheme. No—as I have already pointed out, we are moving from the ECO3 scheme to the ECO4 scheme. I guess, Sir Edward, technically you may describe that as scrapping it, but we see it as improving it and building on it. The hon. Lady called for a windfall tax. She praised German energy company E.ON for doing a great job, and it does do a great job, but she and other Members have to be careful when they call for a windfall tax while also praising those investing in the energy sector. She has to be mindful of what impact any windfall tax would have on those investment rates.

The hon. Member for Makerfield (Yvonne Fovargue) made a very moving speech about the situation for low-income households and prepayment customers. There are 4 million prepayment customers. Ofgem obviously put in place licensing conditions to protect prepayment customers at risk—particularly of self-disconnection—including dedicated helplines for prepayment meter customers. There is a lot of support in place, but the issue of PPM customers is something that we keep a very, very close eye on in the Department for Business, Energy and Industrial Strategy, and I know Ofgem does as well.

The hon. Member for Strangford (Jim Shannon) wanted an indication of what the Government are doing to help. We are doing a lot. We have in place winter fuel payments of between £100 and £300. I have already discussed the warm home discount. There are the cold weather payments. There is the £421 million household support fund. There is a lot of support. I say that while recognising Northern Ireland’s particular status as regards electricity. Obviously, a lot of that is devolved to the Northern Ireland Executive.

The hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) called for a VAT reduction. That is obviously, as she rightly pointed out, a matter for Her Majesty’s Treasury. It is not a very targeted way of supporting vulnerable customers. We heard from the hon. Member for North Ayrshire and Arran (Patricia Gibson). I do not think this is really the right place for a Brexit debate, but she said that leaving the EU allows us to cut VAT on domestic fuel. Her policy of rejoining the EU would surely negate that policy.

[Patricia Gibson]

Will the Minister give way?

[Greg Hands]

No. I have only two minutes left. The hon. Lady asked a question about storage, and I repeat that the current issue is not a question of supply. Storage helps if there are supply issues, but we have an issue relating to price. Storage does not protect, generally, from price shocks if the supply is secure, and I have already said that our supply is secure.

The hon. Member for Oxford West and Abingdon (Layla Moran) made an extraordinary speech, in which she said, I think, a windfall tax would be a powerful message to Moscow. I thought the intervention by the hon. Member for Kilmarnock and Loudoun slightly exposed that. If the hon. Member for Oxford West and Abingdon can show me how to design a windfall tax that would clobber Gazprom, I am all ears. Bearing in mind that our imports of gas from Russia are almost entirely liquefied natural gas and only less than a handful of percentage points, if the hon. Lady can show me how her Robin Hood tax would have an impact on Gazprom, I am all ears. We are not dependent on—she said “rogue states”. More than half of our gas imports come from Norway. I do not think anything she is proposing is going to protect us from rogue states.

The hon. Member for Kilmarnock and Loudoun made a number of familiar points on supplier of last resort costs. SoLR is there to protect customers when their energy supplier ceases to trade, so that they can transfer their account.

[Sir Edward Leigh (in the Chair)]

Order. Minister, do you want to give Jamie a few seconds?

[Greg Hands]

Okay, I will give him a few seconds, Sir Edward. On oil and gas and nuclear, I am constantly baffled by the SNP’s policy. It is anti-oil and gas. It is anti-nuclear. It is hard to know what it is actually in favour of in Scotland when it comes to supporting Scotland’s energy customers and energy suppliers. Finally, I note that we have not heard anything about Labour energy policy in the week since the party’s disastrous four-page, convoluted student union motion in the main Chamber last Tuesday. I thank everyone for participating in the debate, and I look forward to further engagement.

[Sir Edward Leigh (in the Chair)]

Order. We have to move to the next debate, I am afraid. There is a strict time limit.

Motion lapsed (Standing Order No. 10(6)).