Energy Policy (Winter Preparations)

Guy Opperman Excerpts

Wednesday 9th October 2013 Westminster Hall

[John Robertson (Glasgow North West) (Lab)]

Mr Caton, it is a pleasure to see you in the Chair during this important, but short, debate.

Every year the Government need to think about how they will prepare for winter and the challenges that lie ahead, including how we can prevent thousands of people from dying from cold each winter. However, we have a greater challenge this year and in the years to come. Energy bills have risen by more than £300 under this Government; Ofgem is warning of blackouts; and the energy market appears to be becoming less and less predictable. We need short-term and long-term action and I want to be confident that the Government are taking that action. I want to be confident about that, so I can pass it on to thousands of my constituents who are elderly, disabled, have young children or who are alone and are worrying about how they will heat their homes this winter. I may get silly answers, as one official told my office staff yesterday, but I am sure the Minister has more sense than that and will give these issues proper consideration.

First, I want to speak about the worrying headlines about blackout Britain. Before anybody tries to intervene—unfortunately, there are no hon. Members here to do that—I am talking about actual blackouts due to lack of energy, not energy companies scaremongering about what they might do if a Labour Government froze energy prices. Ofgem announced in the summer that we are facing a crisis, with our safety margin of spare capacity for electricity about to shrink from a healthy margin of around 15%, to less than 4% within three years. This winter, the estimated de-rated capacity margin is 6.3% and, only this week, National Grid announced that it was keeping a “close watching brief” on supplies. I do not want to be alarmist, because we will probably be all right, but if the chief executive of Ofgem felt it necessary to warn of a “near crisis”, I think we need to take that seriously. Do the Government take it seriously? I know that provisions have been included in the Energy Bill for this, and we support the principle of a capacity mechanism, even if we have not been given many details. As an aside, I would like to know when we can expect details on this. Hopefully, we will have them before 2018.

Crucially, the first capacity market auction for 2014 is for delivery of capacity from 2018-19. What provisions are in place for this winter and those leading up to 2018? Will we be reliant upon the small diesel generators available under the short-term operating reserve in these years? What assessment has the Minister done of the necessity to use those during this period? In such cases, we could become further reliant on gas, particularly liquefied natural gas. Demand for that is increasing from countries such as China, so I have concerns about the price we will have to pay for this commodity. External shocks might dramatically increase the price of gas, just as Fukushima increased Japan’s demand for gas and therefore increased prices across the world. Gas storage in the UK is equivalent to 14 days’ worth of supply, compared with between 59 and 87 days’ worth in Italy, Germany and France.

DECC acknowledges that the UK has returned to levels of import dependency not seen since the 1970s. We must consider the countries from which we are importing gas—Qatar and Russia are key suppliers. According to Peter Hughes, a former vice-president of BP, importing from such countries means we are more vulnerable to short-term price increases, and we are therefore vulnerable to political volatility. I recognise that the Secretary of State for Energy and Climate Change recently published a statement saying that he will press ahead with interventions already in hand, but I do not think we will see the immediate effects here.

I also hope that DECC officials are planning how to use any excess gas. Were we to buy too much gas and have a warmer winter, will energy prices be lowered? I would have thought so, as energy companies blame higher profits on the cold winter, but knowing what I know, I think we will have to work hard to ensure that we see the financial effects of a warm winter. Is Ofgem capable of forcing companies to do that?

In a recent BBC survey, 25% of people said that they are living in an unacceptably cold home. That is unbelievable in the 21st century. The Government have committed to ensuring that half of all households have at least one insulation measure by 2022, but the Minister will be only too aware that we are nowhere near meeting that target. In the middle of last month only 12 households—not 12,000, nor 1,200 but 12—had some sort of measure installed under the green deal, with 372 households waiting. What assessment have the Government made of that? Why is uptake so low?

The green deal is not a good deal for the public; it offers high interest rates of some 8%, which I have been told can be undercut by other sources of finance. The only incentive is the cashback payments, which will soon dry up. Predatory door-to-door and nuisance call selling tactics are also not encouraging concerned people to take up the deal. Perhaps the Minister needs to give some sleeping pills to his colleague the right hon. Member for Bexhill and Battle (Gregory Barker), who said that he would not be sleeping unless 10,000 had signed up to the green deal by the end of the year—he must have had a lot of sleepless nights.

That is based on those households that can even apply for insulation. I have a good number of tenement blocks in my constituency that are home to some of the people who we really need to be helping in the winter months: the elderly and the poor. The green deal is not a bad deal for them; it is an impossible deal. Glasgow city council has been trying to upgrade some of its stock through retrofit schemes, but there are so many types of building that are unfit for insulation measures and are leaking heat at an alarming rate. What are the Government’s plans for them? For those people who are waiting on the green deal to bear fruit, January 2014 is not good enough. People need warm houses at the start of the winter, not at the end.

Many people do not turn on their heating because of the cost. In fact, almost seven in 10 households did not do so at some point last winter. The revised figures in the Hills report show that 7,800 people die in winter because they cannot afford to heat their home properly. Of course, rising energy bills are not helping. Energy barons are simply profiteering from their customers, with profits going up each year from what are already eye-watering figures. The big six doubled their profit margins in the last year alone. The Government have totally failed to act on this, claiming that the market is competitive, which it simply is not.

[Guy Opperman (Hexham) (Con)]

I congratulate the hon. Gentleman on securing this debate. Does he accept that fuel bills may be rising, but there are things that individual constituents can do? In my area of Northumberland, for example, 13 groups have formed oil-buying clubs, which have seen reductions of between 10% and 20% in heating oil prices for thousands of people across the region.

[John Robertson]

There are a lot of people doing a lot of good things, and they know how to manipulate the market. They can take up contracts, use the internet and work things out, but I am talking about people who cannot do those things. I am talking about the poorest in society, who do not get the help they need. Unfortunately, my constituency is one of the poorest in the country. There are many such constituencies in my area and in other areas, and I am talking about those people, not the others.

[Guy Opperman]

I totally accept that we should be looking after those people who are least able to look after themselves. There are areas of tremendous social deprivation in the north-east, but those groups, supported by local churches, credit unions, parish councils and community action groups, are the ones being helped in such circumstances.

[John Robertson]

I accept what the hon. Gentleman says to a certain extent, but they cannot do enough. The Government have to take a lead. Perhaps he will agree with my final points, because I am a great believer in giving solutions as well as criticism.

As I have said, many people do not turn on the heating because of the cost. The Government’s report shows that 7,800 people die because of the winter cold. The energy barons are profiteering as far as I am concerned. The big six doubled their profit margins last year alone, and the Government have totally failed to act, claiming that the market is competitive, which it simply is not. I am pleased to say that in 2015, if Labour is elected, as I am sure we will be, energy bills will be frozen.

The energy companies are scaremongering, saying that they will turn the lights off and that investment will stop. They could manipulate a black-out, so a real hard-nosed regulator is needed now, just in case. A family in my constituency will save £112 a year under Labour’s idea, but that is not enough on its own. Energy prices have been rising far too much for far too long, but it would be a start. The fact that Co-operative Energy backs the move shows that bills do not need to rise. All the companies could give contracts lasting for two years. Saying there would be a black-out due to the price freeze is absolutely spurious. There is no way they can justify saying that.

Despite having 98% of the market, the big six provide only 47% of investment. So where exactly is the money from successive price rises going? The Government, as the previous Conservative Government did with BT, need to support new companies in the sector and ensure that at least 25% of provision is in the hands of companies other than the big six. That was a Conservative policy in the 1980s. I spoke against it back then, but I can see the need for it now, particularly for the energy companies.

The big question today is: what are the Government going to do this winter and next? Will my constituents be left helpless for another year, watching their bills go up by an expected 10% this year and probably twice again before the general election? We want people to have a better life, and this Tory-led Government want big business to make the difference. That is not happening in the energy sector. The Government are unwilling to sort out energy prices. We will have to wait until 2015 for a Labour Government to do that, but perhaps the Minister could consider cold weather payments. I was shocked to find that nobody in my constituency received a cold weather payment last year or the year before. The Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), has acknowledged that that might be due to unclaimed pension credit, although saying that is different from acting on it. More can be done to get pensioners on to that benefit. What is actually being done?

The key reason is that the conditions on these payments are much too strict. The £25 is automatically allocated if the weather has been, or is forecast to be, an average of 0° C over a seven-day period. That is extremely cold and for an extremely long time. Last winter was bitter. In the weeks leading up to other parts of the country being given the payment in March this year, there was a seven-day period in my constituency when the average temperature was 1.57° C. During that time, the thermometer recorded much lower temperatures—minus 3° C, minus 4° C and even minus 8° C one day. I am talking about record low temperatures, but no payment was made.

It is estimated that there are about 8,000 extra deaths for every 1° C drop in the average temperature. We need to have a good look at how the system works. How many people have to die before anything is done? Perhaps we could look at raising the temperature threshold or, as the Institution of Gas Engineers and Managers suggests, basing it on heating degree days. In my constituency, winters are long. The weather was particularly cold in April last year, but cold weather payments go up only to 31 March. Why? Will the Minister do an impact assessment on the effects of those cut-off points?

What is the Minister actually doing to save lives? The Government’s Hills report told us of the thousands of people dying due to fuel poverty. How long will it be until Ministers take notice? How many lives will be lost? These payments are important because, as a recent study showed, poorer households reduce their food expenditure by 7.2% in cold weather shocks. I commend the Prime Minister for making the £25 payment permanent, but I believe it should be higher. The website energyhelpline.com estimates that, on cold days, families could be spending as much as £20 a day on energy. With energy bills rising, that is certain to increase. We have been told the payment will be set at £25 for the whole Parliament. Clearly, that is not enough.

My last point assumes that people will turn on their heating in cold weather. Elderly people, in particular, worry about turning on their heating, because of the cost. However, the winter fuel payment not only provides the financial support pensioners need to turn the heating on, but gives them confidence that they can afford to keep it on for as long as they need to.

--- Later in debate ---

[Guy Opperman]

Will the hon. Gentleman give way?

[John Robertson]

I will carry on, if that is all right with the hon. Gentleman. I want to give the Minister a lot of time to answer a lot of questions.

I am proud that the Labour Government brought these payments in and consistently looked to increase them. I am pleased the coalition Government honoured our 2010 Budget for that winter, making one-off £100 or £50 payments to various people, but that was not continued. Those payments were crucial to helping pensioners afford to keep warm. Expenditure on them is likely to decrease from £2.2 billion to £2 billion by 2017-18. I am confident we could ensure that those who receive the payments get enough to cover the prices we are likely to see in the years ahead.

How are the Government publicising these and other support measures? I fear the emphasis in terms of spending may be misplaced. Considering that the firm used to advertise the green deal was fined £45,000 for nuisance calls, the advertising budget could surely be spent better. Perhaps it could be spent on advertising offline to reach all vulnerable people and to highlight the different support measures available: winter fuel payments, cold weather payments, the warm home discount, Warm Front, Nest, the energy assistance package and the priority services register—the list goes on. I worry that those who really need help do not know what options are available to them, whether they are eligible or how to apply for them.

I realise that some of those support measures fall outside the Minister’s Department, but that is part of the problem. Do Departments actually talk to each other? Do the Government talk to the Scottish Government, the Welsh Government, the Northern Ireland Assembly or even Glasgow city council, which looks after my area, because some of these measures are their responsibility? Perhaps there is not enough joined-up work. We need real leadership, but I fear we will not get it from this incompetent Department.

We have seen this new Energy Minister saying different things from the Department, such as on Ofgem’s warning about power cuts. Our Energy Secretary also does not get on with his staff, making huge severance payments as a result. We really need someone to take the lead on this issue—a Government poverty champion. They could bring together the different issues from all Departments that go towards tackling poverty, and they could make sure those issues got the attention they deserve. If the Minister is unable to find anybody in the Government, let me put myself forward for the job, because I am sure I could do better than some of his colleagues.

I hope this winter is not a cold one, but we prepare for the worst and hope for the best. I am here today to make sure our energy supply is secure over this winter and the next. I am here to make sure my constituents and others have all the access they can get to financial help. Sadly, we cannot rely on the energy companies helping their vulnerable customers, who are struggling more and more with the cost of living. We also cannot rely on this incompetent Government to stand up to these bullies. I look forward to the Minister’s answers.

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[John Robertson]

rose—

[Guy Opperman]

rose—

[Michael Fallon]

I think I had better make some progress, because the hon. Member for Glasgow North West raised several points that he wants answered.

I will deal first with the green deal, the energy efficiency programme. I will not comment on the sleeping patterns of the Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), although I note what he said. We encourage people to think not just about keeping warm this winter, but about winter-proofing their homes for the future through a range of policies—not simply the green deal, but also the energy companies obligation.

The green deal is the Government’s most ambitious energy efficiency programme, and is designed to deliver improvements to homes and businesses throughout the country on an unprecedented scale and over a much longer time frame than a particular Parliament or public spending period. It is an ambitious 20 to 30-year programme. So far, there are more than 100 green deal providers and more than 2,000 individuals authorised to carry out assessments. Some 70,000 assessments have been done. The hon. Member for Glasgow North West asked specifically whether the interest rate was too high. Only 8% of households that have decided not to install green deal measures have said that it was because the finance package was unattractive.

[Guy Opperman]

Does the Minister agree that the energy policy is being affected by green deal funding and the domestic renewable heat incentive programme, which, certainly in Northumberland, has had tremendous take-up? Businesses such as the Centre for Green Energy in my constituency are expanding because of that policy.

[Michael Fallon]

I am glad to hear the good news from Hexham, because it is important to understand that those programmes are now up and running, and helping homes and businesses.

Alongside the green deal, there is the energy companies obligation, which has the twin objectives of reducing carbon emissions and tackling fuel poverty. Nearly 200,000 measures under the ECO have already been installed, with more than 60% delivered in low-income households in England, Scotland, and Wales. Alongside the green deal, the ECO carbon saving obligation supports the installation of measures for hard-to-treat situations—cavity or solid walls, and so on—which would otherwise be difficult to finance, but which are long-term energy efficient solutions. That is worth some £700 million a year.

The affordable warmth obligation—another part of the ECO—which provides targeted assistance to low-income, vulnerable people in private tenure households, through investment incentives to landlords, is worth about £350 million a year. That has already resulted in about 40,000 boilers being installed. In July we were already delivering 70% more heating measures through the affordable warmth obligation than were being delivered under the average rate of delivery for Warm Front, its predecessor policy. Finally, the carbon-saving community obligation, worth about £190 million a year, is supporting low-income communities, with at least 15% of funding delivering energy efficiency, particularly in rural areas. As of the end of July, we had already delivered more than 60,000 energy efficiency measures.

In addition, energy suppliers are supporting low-income and vulnerable households through our warm home discount scheme, which is worth £1.1 billion up to 2015 and is expected to support about 2 million households a year up to 2016. It is composed of four elements. The first is a core group, whose members automatically receive a £135 discount on their bills. Consumers who are either under 75 and not receiving the savings credit part of pension credit, or over 75 on the qualifying date and in receipt of a pension credit, are eligible. The discount rises to £140 in 2014-15. For older consumers who have less access to technology, that automatic payment is a big advantage. We expect this year’s automatic payments to be made by Christmas. Indeed, hundreds of thousands of payments will be made this month, giving people confidence that they can afford to turn their heating up when the cold weather sets in. The broader group also targets low-income and vulnerable consumers, but provides energy suppliers with the opportunity to set the eligibility criteria, which must be approved by Ofgem. The third element is a legacy spend group for suppliers to continue to provide support for customers who had previously been on discounted tariffs and rebates.

The hon. Member for Glasgow North West raised the matter of winter fuel and cold weather payments. We are committed to supporting pensioners through the winter months, and we continue to provide winter fuel payments; £300 will be offered automatically this winter to Britons aged 80 and over, and £200 will be offered to households with a resident above the current state pension age for a woman. Last winter, more than 12.5 million pensioners received winter fuel payments, which delivered £2.15 billion in support. If the average temperature for a region is recorded or forecast to be 0° C or below for more than a week, pensioners and those receiving income-related benefits will receive a cold weather payment of £25 for each period. Payments are made on recorded and forecast temperatures, ensuring that those on prepayment meters are proactively supported. Last winter, 5.8 million cold weather payments were made, delivering more than £140 million in support.

Beyond basic financial concerns, cold weather is a major public health challenge. Any extra death because of cold weather is to be regretted. We believe that local authorities are best placed to address local public health issues, and £5.4 billion in funding has been made available from 2013 to 2015 in England. Public Health England will publish the third annual cold weather plan in the coming weeks, and will work in collaboration with other Departments, as the hon. Gentleman suggested. It will set out several levels of response, which will encourage year-round planning.

I have not had time to answer all the hon. Gentleman’s detailed questions. I hope that he will allow me to respond to those in writing. However, I assure him that the Government are committed to keeping the lights on. There is an investment programme, encouraging investment in new sources of home-grown energy, and a framework in place to ensure that those in the most need are protected during the colder months.