Nuclear Management Partners (Sellafield)

Debate between Ian Swales and Ed Davey

Tuesday 13th January 2015 Commons Chamber

[Mr Davey]

Yes, I can give the hon. Gentleman that reassurance. Members from both sides of the House have voiced support for the staff and the need to ensure that they get all the training required and that information about the change is properly conveyed to them. I believe that the staff will support the changes.

[Ian Swales (Redcar) (LD)]

I visited Sellafield with the Public Accounts Committee in 2012 and was struck by the difficulty of challenging those who say that the issues involved require vast expenditure over vast time scales. Recently, there have been a significant number of vacancies on the NDA board. Is the Secretary of State satisfied with the experience and management independence of the NDA, and what is he doing to ensure that it delivers the scrutiny and challenge that it should deliver?

[Mr Davey]

The NDA has approached some of its key decisions incredibly professionally, including the renewal of the contract and the review of the model that led to the recommendation to me for the change under discussion. I pay tribute to the NDA for the work it has done. It will, of course, be taking on a bigger role in the new model, so it will need to skill up, hire more expertise and fill the vacancies referred to by my hon. Friend. That was part of the questioning that I and others undertook to ensure that the transition process and the resulting process are successful.

Energy Prices

Debate between Ian Swales and Ed Davey

Wednesday 18th June 2014 Commons Chamber

[The Secretary of State for Energy and Climate Change (Mr Edward Davey)]

I join the right hon. Member for Don Valley (Caroline Flint) in congratulating the hon. Member for Totnes (Dr Wollaston) on her election as Chair of the Health Committee.

The right hon. Member for Don Valley began by wanting to reach consensus and, to be fair, it is not the first time that she has done so. Right hon. and hon. Members might be surprised to learn that she talked warmly in a speech last week about the consensus on energy policy in the UK. They might be even more surprised to learn that I agree that there is consensus on some aspects of energy and climate change policy. The Labour party has accepted the coalition’s major reforms of Britain’s electricity market. Labour voted for the Energy Act 2013 and backed its centrepiece—contracts for difference—which will be crucial in creating the world’s first ever low-carbon electricity market. Labour appeared to be backing our measures that are driving the massive increase in energy investment from which the UK is benefiting, including the more than doubling of renewable electricity. Labour seemed to be backing the measures that we are introducing to keep Britain’s lights on, such as the plans for a capacity market and National Grid’s supplemental balancing reserve.

I am fairly confident that there has been a consensus on energy security and climate change for some time, because the right hon. Member for Don Valley never questions me about our climate change or energy security policies. I am grateful for her support, however tacit. It would be nice to have more opportunities to explain by how much renewable investment has risen in the UK. According to Bloomberg New Energy Finance, the UK had the highest level in Europe in 2013. It would be nice to have a chance to tell the House in detail how we have turned around the legacy of under-investment that we inherited, which was threatening Britain’s energy security.

To be clear, I am more than happy, instead, to be debating energy prices again. I will deal with the right hon. Lady’s core argument head-on, because energy prices are of concern to people and businesses. Even on energy prices, there is some agreement between us. We agree that Britain’s energy markets need to be reformed. If we are to get a better deal for people, whether in terms of prices or customer service, there needs to be change. There needs to be some form of intervention to improve the markets.

The differences between us start to arise over what sort of intervention will work. What is it, exactly, that the Government and the regulator can do that will help the consumer most? The right hon. Lady believes that the change we need is regulation—price regulation. Labour now wants two regulatory interventions on prices. First, it wants legislation so that the Government can fix prices through a temporary 20-month price freeze. In addition, she now wants the energy regulator to intervene when retail prices do not quickly follow changes in wholesale prices. Such price control would be a massive, permanent state intervention.

[Ian Swales (Redcar) (LD)]

Does the Secretary of State share my surprise that the motion talks about the importance of passing on wholesale cost changes as quickly as possible, while also calling for a price freeze?

[Mr Davey]

My hon. Friend has spotted a point to which I will return. There is a bit of inconsistency there.

The historians among us might note that the two proposals for price control regulations are particularly interesting because they reverse the policy that Labour backed in government. In 2002, under Labour, Ofgem abolished all price controls on gas and electricity. Is it not interesting that, even though there is now more competition than in 2002, Labour has done a U-turn and wants price control regulations back?

--- Later in debate ---

[Mr Davey]

I have already said that I believe that there is a problem—Ofgem and the competition authorities told us that in the report I commissioned. I think there is a need for intervention—that is what I have been saying. The question is: what is the right intervention? Is it the price regulations proposed by Labour—the quite big interventions that I shall explain when I describe how they would work—or is it to ask the independent experts from the competition authorities to ensure that our markets work for consumers. The latter is what we are doing, and I think it is the right approach.

The Leader of the Opposition tells the Government all the time that we should stand up to the energy companies. That leads me to the not unreasonable conclusion that he must have stood up to the energy companies—that he must have a proud record of taking on energy firms at some stage. So I did some more research to find out what tough action the leader of the Labour party took. I was convinced that he of all people, faced with much larger falls in wholesale prices than we face today, would have acted. I therefore commissioned the research on what action Labour’s leader, when Energy Secretary, had actually taken on wholesale energy prices—what announcements he had made.

The research has come back, so let me read it:

“You asked for any statements of information provided by the last government on the link between wholesale and retail energy prices”—[Interruption.]

The right hon. Lady should listen to this:

“I’m afraid there was no substantial policy in this area by the previous government and as a result no announcements.”

There was nothing. The Leader of the Opposition simply did not have the same great ideas as the right hon. Lady.

Perhaps I am being too harsh. Perhaps the Leader of the Opposition was not advised to take the various actions we have taken, such as our support for a reference of such problems to the independent competition authorities—in other words, the experts. My research, however, suggests that the Labour party was told to act when he was doing my job. In fact, we have found that he was told to act on at least three occasions.

The Leader of the Opposition was asked three times to refer the issue of energy prices to the Competition Commission, and three times he refused. On 5 March 2009, he said:

“I do not think that at this stage a referral to the Competition Commission is the right way to go”.—[Official Report, 5 March 2009; Vol. 488, c. 983.]

On 7 December 2009, he said:

“It is better to look at policy options…rather than at a lengthy Competition Commission investigation.”—[Official Report, 7 December 2009; Vol. 502, c. 45.]

Of course, he did not actually take any policy options. On 25 February 2010, he was still in denial:

“I am not in favour of referring these matters to the Competition Commission”.—[Official Report, 25 February 2010; Vol. 506, c. 444.]

That is what Labour’s then Energy Secretary said, so my advice to the right hon. Member for Don Valley is this: stop embarrassing your leader.

For the sake of debate, let me accept another Labour U-turn on energy policy. Let me imagine that the Labour leader has thought more about it, listened to the right hon. Lady and changed his mind. Let me examine their proposals for two new price controls and how they would work.

As set out in the motion, Labour now has two competing ideas. The first is a temporary energy price freeze for 20 months, which is a policy to lock in a price, regardless of what happens in the wholesale markets. If wholesale prices go up, the smaller energy suppliers that cannot soak up the losses will go bankrupt. We have never received an answer to that. If wholesale prices go down, companies hedging against the freeze will have to maintain their prices and customers will lose out. The right hon. Lady is shaking her head, but companies that hedge against a freeze will lose money and potentially go bankrupt under her policy. She does not understand how markets work.

[Ian Swales]

Does the Secretary of State share my concern that the chief executive of First Utility, the largest independent supplier, says of the prize-freeze proposal:

“Bluntly, it could put me under”?

[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.

Grangemouth Refinery

Debate between Ian Swales and Ed Davey

Wednesday 23rd October 2013 Commons Chamber

[Mr Davey]

I am grateful to the hon. Gentleman for his question and I recognise his knowledge and expertise in this area. I refer him to my statement at the Dispatch Box that we have engaged with INEOS throughout. I am due to have a phone call with Mr Ratcliffe later today.

[Ian Swales (Redcar) (LD)]

I thank the Secretary of State for his answers so far—in particular, his recognition of the importance of the chemical industry. I ask the Government to give maximum support and have close discussions with the petrochemical industry in my constituency—in particular Sabic, with its ethylene cracker. Furthermore, when does he expect to get state aid clearance for his measures on energy-intensive industry, which the Grangemouth complex clearly represents?

[Mr Davey]

I am grateful to my hon. Friend for his question. Many of his requests fall under the responsibility of the Secretary of State for Business, Innovation and Skills, although we work closely together on all these issues, not least those to do with energy-intensive industries.

My hon. Friend is right to say that we have an application in front of the Commission with respect to state aid clearance on the costs to energy-intensive industries of the carbon price floor. We already have state aid clearance for our proposals to assist energy-intensive industries with the indirect costs of the European Union emissions trading system. As he will know, we are consulting to help energy-intensive industries with the costs of contracts for difference. Like other member states, we have a comprehensive programme to support energy-intensive industries. We continue to press that case.

Oral Answers to Questions

Debate between Ian Swales and Ed Davey

Thursday 6th June 2013 Commons Chamber

[Mr Davey]

I am grateful to my right hon. Friend for his question. He is not right about the German position, and I refer him to the April 2013 report by Pöyry, which we commissioned and which is on our website. It examines the reality of what is happening with new coal-fired power stations in Germany, the Netherlands and Spain. Some 10 new coal and lignite coal projects are under construction in Germany, because the final investment decisions on them were taken in 2005 and 2008, when there was a very different policy environment, but four have been postponed and 22 have now been abandoned, so the situation in Germany is different from the one my right hon. Friend describes.

[Ian Swales (Redcar) (LD)]

Carbon emissions per capita statistics fail to recognise the effect of imports and exports on consumption. Will the Secretary of State confirm that he will not seek to meet UK targets through policies that close down our energy-intensive industries, thereby exporting jobs and importing carbon?

[Mr Davey]

My hon. Friend is right. We do not want to see carbon leakage; that would not help the climate, and it would not help our economy. That is why I agreed with my right hon. Friend the Secretary of State for Business, Innovation and Skills a very generous package, working with the Chancellor, to compensate energy-intensive industries for the indirect costs of the ETS and the carbon price floor, and it is also why we have exempted energy-intensive industries from the costs of contracts for difference. We want to ensure we make progress on climate change, but we also want to ensure we keep successful businesses in the United Kingdom.

Energy Market Reform

Debate between Ian Swales and Ed Davey

Wednesday 24th October 2012 Commons Chamber

[Mr Davey]

I have already. I explained how the number of companies fell under Labour. [Hon. Members: “How many?”] There were two: PowerGen and National Power. Yes, I do know. And there are more generators now, so going back to the pool, when there were fewer generators, would be a bit odd.

[Ian Swales (Redcar) (LD)]

Does the Secretary of State think that the previous Government’s abolition of the public interest test on takeovers was one reason for the consolidation of the energy market?

[Mr Davey]

As a former competition Minister, I know that commenting on such things is extremely tricky, so I will leave that to my right hon. Friend the Secretary of State for Business, Innovation and Skills.

I want to focus on how we can tackle the real problems in the energy market. I think we all agree that there is a problem with competition. When we compare the UK market with overseas markets, a key observation is that our markets are less liquid, especially the forward market. To get a good, competitive energy market, firms should be buying and selling electricity three, six, 12 or more months in advance. If they were, and if we had greater market liquidity, it would be much easier for independent generators to enter the market and invest in generating plant confident that they can buy and sell electricity and manage their risks.

Faced with the might of large, vertically integrated energy companies supplying their own power, independent generators find it difficult to enter the market. I think we agree on that. The question is: how do we deal with that? The problem is with liquidity, not the pool. The right hon. Member for Don Valley, who clearly dislikes Ofgem, has not noticed that by threatening to take action Ofgem has, to some extent, already made progress on liquidity. As we have seen, large volumes are now being traded in the day-ahead market, which has improved price transparency. That is a good start.

Oral Answers to Questions

Debate between Ian Swales and Ed Davey

Thursday 17th May 2012 Commons Chamber

[Ian Swales (Redcar) (LD)]

I welcome the current carbon capture and storage competition. As the Tees Valley has 18 of the top 30 UK carbon emitters, I am sure the Minister will agree that its bid has a lot to commend it. Will he ensure that the needs of heavy industry are given due weight alongside the needs of energy generators?

[Mr Davey]

I am grateful for my hon. Friend’s question. I know he does a huge amount to support industry in his constituency. I can tell him that in the competition that we announced at the beginning of last month, we were very clear that we wanted to encourage clustering, so after listening to the industry we were encouraging change. Bigger pipes are needed, so that more than one power plant can take part in those schemes with other industries that emit a lot of carbon.