Jake Berry
Main Page: Jake Berry (Conservative - Rossendale and Darwen)(10 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint
Absolutely. People were told that technology—doing things online, for example—would always make things better, but that is not the case. The point applies to those who do not have the confidence to challenge and those with busy lives who just do not have the time. I seem to recall a previous Energy Minister admitting that he spent at least half a day trying to sort out his own energy bill. If he cannot do it, what hope is there for others?
Caroline Flint
No, I will not.
Let me get back to the issue of competitive pressures. As I said, competition in the energy market is at best immature and regulation on pricing is non-existent, which means that the normal competitive pressures that we would expect to restrain companies from increasing prices, or to encourage them to pass on falling costs, are weak, while regulation is unable to correct the situation. That is precisely the Catch-22 situation in which the Government have left consumers. The Government tell them that regulation is not needed because we have a competitive market, when all the evidence from the regulator, consumer groups and parts of the sector clearly shows that competition is not working as it should. We should not forget what consumers are saying. Research out from Which? today shows that complaints to the big six have hit a new record high, because the market is just not working for the public.
Today’s motion proposes a new back-stop power for the regulator to force companies to cut their prices when wholesale costs fall if companies do not do it first. I want to be clear about the nature and extent of the power. It is not a return to full-scale price regulation as existed in this country until 2002, including under Margaret Thatcher and John Major, or as it still exists in most member states of the European Union; it is a back-stop measure that empowers the regulator—not the Government, Ministers or anyone else—to ensure that all consumers can enjoy the full benefits of competition to which they are entitled.
If competition works and cost reductions are passed on, the power may never need to be used. Indeed, its very introduction may act as an incentive on companies to do the right thing. However, if in its view anti-competitive practices happen in our energy market that cause harm to consumers, the regulator should have the power not just to write to the companies to ask them politely to explain to their customers why they are being ripped off, but to do something about it.
That is what today’s motion proposes, and it is something that Members from both sides of the House can support. After all, what did the Prime Minister say before the last election? On 8 September 2009, on his Cameron Direct roadshow in Bedford, he said:
“I think we all feel that when the gas prices or the oil prices go up, they rush to pass the costs onto us and yet when we read in the papers that the oil price has collapsed and the gas prices are coming down, we wait for a very long time before we see anything coming through on our bills, and I think the first thing you’ve got to do...is give the regulator the teeth to order that those reductions are made and that is what we would do.”
I agree. Let me be direct: it is just a shame that, four years into this Parliament, that commitment has gone unfulfilled.
I tell the House today that if we are elected, alongside our price freeze and our market reforms, we will give the regulator that power. However, it would be far better for the Government to take action now rather than consumers having to wait another 11 months to see the benefit of falling wholesale prices. If the Government do, I guarantee them our support. Given the Queen’s Speech, if there is the will, time could be found. In that spirit, I commend this motion to the House.
Jake Berry (Rossendale and Darwen) (Con)
It is a pleasure to follow the hon. Member for Glasgow North West (John Robertson). I am sure our constituencies have something in common. We have snow every year in Rossendale and Darwen, and I am sure Glasgow has snow every year too. Energy prices are a concern to residents in my constituency because of the harsh winters. Mercifully, last winter was relatively mild, but we may have a harsh winter ahead of us.
I am pleased to speak in this important debate on energy prices. I want to talk briefly about the action the Government have taken so far to reduce bills and the concerns of my constituents about the difficulty in switching. Finally, if I get a moment at the end, I want to address the issues faced by those on non-conventional fuel, by which I mean liquefied petroleum gas and oil-fired central heating, which is a problem in my constituency for those in rural properties. As I go through my speech, I am sure I will refer to the motion several times.
In 2010, when the Government inherited a broken and dysfunctional energy market, it was imperative that they acted and took steps to restore it. Let us look at some of the problems that existed at that time. Fuel poverty doubled between 2005 and 2010, despite a commitment in the Labour party’s 2005 manifesto to eradicate it. We went from having 15 energy suppliers in the market in 2000 to having the big six, which were given to us in 2010. Bewilderingly, in 2010, there were in excess of 4,000 energy tariffs for people to choose from. Bills climbed by 50% in Labour’s period in office. We had a perfect storm of reduced competition in the market, rising global energy prices, which drove bills up, and green taxes imposed on every household, which put up individual bills. That situation would have been difficult enough for families to deal with if the record of incompetence and dithering had not reached every other part of the Government and gifted families a huge recession to deal with at the same time as they had to deal with rising energy costs.
Our Government set out to reform that dysfunctional market. By deregulating the market, insurgent energy companies such as Ovo have come into it to drive competition. There have been nine new entrants to the market in the past two years—the number of people getting energy from such smaller independent companies has trebled. Recently, the Government knocked £50 on average off a bill by rolling back some of the green taxes on families. We have also simplified tariffs, going from having the bewildering 4,000 tariffs I mentioned to having just over 400.
The shadow Secretary of State mentioned that people are often too busy to look at switching. I have switched my energy supplier on a reasonably regular basis, but when I looked at my bill two days ago and was given a meter reading, I was reminded of the Prime Minister’s personal commitment to everyone in this country to try to help to reduce their energy costs. On my bill was a note saying that I was on the cheapest variable tariff, but there was also another note—in a prominent position, on an EDF bill—saying that if I switched to the online saver, I could save a further £85 a year on a dual fuel bill. I had never seen that on my bill before and, knowing that this debate was coming up, I was grateful for it. [Interruption.] The Secretary of State is claiming credit—I will have to buy him a beer now that he has saved me 85 quid—but there was also a personal commitment from this Government to help to reduce bills, which is something we have already done.
Switching is often the best way to save money, but we must make it faster and simpler. Lots of my constituents contact me to say, “It seems bizarre that I can now move bank accounts in a week or even a few days, but it can take me up to five weeks to switch my energy supplier.” I pay tribute to the Secretary of State for the work he has already done, getting the agreement of energy companies to halve that to two and a half weeks by the end of this year, but I hope and believe that the Government can go further. There is no reason why we cannot have 24-hour switching. It needs to be fast, easy and simple, so that people can do it on a regular basis.
We also need to give more consideration to hard-to-reach switchers. Going on the internet is not for everyone. We have people in rural communities who do not have broadband and older people who do not feel comfortable using a computer. That is why we must look at campaigns such as uSwitch’s “Send us your bill” for ways to support those who have not switched and the hard-to-reach switchers to make that saving. I run a switching campaign in my constituency every year in the winter to try to encourage people to switch. Other services are available, but uSwitch has been a huge support to me in that work and done excellent work on reducing bills.
Despite those efforts and the Government’s work, however, bills have still risen. Global energy prices are now starting to fall. I echo the content of the motion, which says in terms that there is a suspicion that the rocket and feather approach is being applied to the price falls, which are not being passed on to consumers. I would go beyond suspicion: I would say that there is evidence. That is why I support the independent Competition and Markets Authority inquiry. We must ensure that the Government’s action to reduce people’s bills is passed on to consumers. An independent inquiry, with consumers and competition at its heart, is the best way to do that.
Finally, I want to talk about non-conventional heating sources: oil and liquefied petroleum gas, particularly in rural areas. I am disappointed that the motion does not address that issue, because it is a challenge to farmers and people in rural areas, who have seen the cost of oil and, in particular, LPG increase significantly. Lots of those businesses, which are off-grid, are energy-intensive users. I hope and believe that the Secretary of State will look at what can be done to help off-grid consumers and support their businesses.
Mr Weir
I will wait and see how quick “quicker” is.
It is interesting to look at some of the reasons that Ofgem give for the referral. It notes that average dual fuel prices increased by 24% between 2009 and 2013, which is just over 10% higher than general inflation over the same period. At the same time, energy consumption has decreased. In effect, even though consumers are perhaps reacting to the message of saving energy, they are still seeing substantial costs, leading many to question the cost-effectiveness of energy-saving measures. I have made the point before that one of the defects of the green deal scheme is that many consumers simply no longer trust the energy companies and will be reluctant to take part in any scheme—even a good one—that they are promoting. This is borne out by the state of the market assessment, which says:
“We found evidence of low levels of consumer satisfaction. Only 51-52 per cent of customers said they were satisfied with their supplier, and customer complaints have increased by more than 50 per cent since the beginning of 2011. Our survey evidence showed that in 2013, 43 per cent of customers did not trust energy suppliers to be open and transparent in their dealings with consumers, an increase of 4 percentage points from the previous year.”
Not surprisingly, it concluded:
“Levels of customer confidence and trust are not what we would expect to see in an industry that is successful in meeting its customers’ needs and expectations.”
That is a fairly damning indictment of the way consumers view the major energy companies, and should not come as a huge shock to anyone who has dealt with the issue. This is especially true since the assessment also notes that between 2009 and 2012, the earnings before interest and tax, as it puts it, of the energy companies have shown a very substantial rise of around £700 million, standing as of 2012 at £3.7 billion.
It is interesting to note that within non-domestic supply, profits have fallen slightly, while domestic supply profits have increased from £233 million to £1,190 million —a staggering rise over a four-year period. It seems to me that there must be something wrong with that. Clearly, the hard-pressed consumer was bearing the brunt of the massive price rises at a time when wages were, at best, static and other essential costs such as food were also rising sharply. It is no wonder that many of our constituents were feeling under very considerable financial pressure, and many still feel that they are seeing no benefit from a recovering economy, when their family circumstances remain very tight indeed.
It was interesting to hear what the Secretary of State said about the rocket and feather approach. I am not an expert on hedging, but it seems to me that its object is to prevent sudden price spikes or price falls. Whether it comes down like a feather is one side of the equation, but if it is going up by a rocket, the hedging strategy is clearly not working. We must question whether the energy companies are truly taking part in a hedging strategy, or whether this might be just another excuse. The Competition and Markets Authority needs to look at that.
The figures on the costs are only part of the picture. It is all very well talking about the average cost of a dual fuel bill, but that disguises a multitude of other consumers who are on much more expensive deals. I have often cited the costs that those on prepayment meters face. Although it is true that many companies set those tariffs to the rate of their standard domestic tariff, those are still much higher than the tariffs for those who can pay by direct debit or have dual fuel or fixed-term deals, many of which are not available to those on prepayment meters. The situation can be much worse for those who have debts because the meter can be set at a very high recovery rate. Research by Citizens Advice Scotland disclosed cases where some people had £7 out of every £10 they paid taken towards arrears.
Governments have consistently argued—we have heard it again today—that switching is the way for people to save money. The truth is that those who would benefit most from switching are those who find it very difficult, if not impossible, to switch. Those who are most active in switching are those who are already on better deals. As Ofgem put it in its report:
“Customers that are prepared to manage their accounts online, pay by direct debit, and fix the cost of energy for 12-18 months are able to get the best deals.”
It is also true, it seems to me, that the amount that can be saved is relatively small; the differences between the best online deals of the major companies tend not to be great and the benefits of repeated switching are subject to a law of diminishing returns.
It is also the case, however, that the very nature of these deals—managing accounts online, paying by direct debit and so forth—tend to exclude those who are the most fuel poor since they are also the least likely to have bank accounts, or at least bank accounts prepared to accept direct debit payments, and the least likely to have ready access to a computer to enable them to manage their accounts online.
Mr Weir
No, as many others wish to speak.
In many of the rural areas of our constituencies, the banks have been in retreat for many years, so that many even quite large villages no longer have a bank branch, and some of the smaller towns are seeing banks close. The banks are, like so many other businesses, retreating to the internet, which increases the isolation and difficulties for those who do not have ready access to it in the area of energy switching as in so many other areas.
There are other ways in which the energy companies may be—I will not say “fixing the market”, but Ofgem talks of “tacit co-ordination”. It has said:
“Several firms’ business plans stated that they wait until competitors have announced their price changes, not just to avoid the adverse publicity of going first with a price rise, but to assess the extent of their own price adjustment.”
Is that not an example of what we have described all along as a “follow-my-leader” attitude among the companies? None of them will step far out of line. In a true competition, one would expect some companies to be prepared to take a hit on profits in the short term, at least, in order to build up their business, but that does not seem to be happening in this instance.
The Secretary of State attacked Labour policy. I myself remain very sceptical about many aspects of it, especially the price freeze, but I entirely agree that the regulator should have the power to force energy suppliers to pass wholesale price cuts on to consumers if the suppliers themselves fail to do so, and I will therefore be supporting the motion. However, let me issue one plea to both the Opposition and the Government Front Benches. Every time we talk about energy, we talk about the big six and dual fuel: gas and electricity. The poor off-grid customers are being left out again: they pay more than anyone else. Please will someone grasp that nettle?