Energy Prices

Jim Shannon Excerpts

Wednesday 19th October 2011 Commons Chamber

[Caroline Flint]

I am happy to support the Labour Government’s ambitious plans to be at the forefront of supporting renewable energy—and also, I should add, cracking the whip to make the energy companies play their part. Part of the problem is that the energy companies seemed to be on a mission to make us use more energy and pay more, rather than helping us to reduce our energy consumption and therefore pay less. We have nothing to apologise for on that front. What we are talking about today is what is happening this week, as the frost hits, and this winter, when people will face not only high energy bills but higher food prices, and wage freezes in the public and private sectors, in a country where unemployment is going up and people are feeling the squeeze on all fronts.

The question is: what can this Government do about that now? The answer, from Monday’s energy summit, seems to be: precious little. We do not think that this Government are doing enough. On Monday the Secretary of State could not bring himself to question whether it is right, at a time when millions of families and businesses are struggling with energy bills, that energy companies should be enjoying soaring profit margins, which are up more than eightfold since June. We do not think that it is, which is why we welcome The Sun’s “Keep it Down” campaign, and why we said that the Government should have used Monday’s summit to tell the energy giants to give up some of their profits and cut bills this winter. Was it any surprise that the BBC correspondent reported that the energy companies were “delighted” with the outcome of the summit? Well, they would be, because they were not asked to do anything.

[Jim Shannon (Strangford) (DUP)]

Does the right hon. Lady agree that the energy companies need to be regulated, and that, along with regulation, we need initiatives to reduce the supply of energy that they get, over a 12-month or even a 24-month period? Does she also agree that such arrangements would need to be regulated and guaranteed under legislation? Regulation of the companies and a reduction in the supplies that they give out, guaranteed by legislation, will be the way forward.

[Caroline Flint]

We are clearly on record as saying that we need to reform this distorted market. We need openness and transparency, and we need simpler tariffs. It is not enough just to tell people to navigate themselves around the increasing number of available tariffs that are no good. This is also about breaking up the big six and opening up the energy market to new suppliers. We are clear about that, and today we are forcing the Government to tell the House whether they, too, are clear about it.

--- Later in debate ---

[Sammy Wilson (East Antrim) (DUP)]

I am pleased to take part in what I believe is a timely debate. There is general concern about the size of the energy bills that are hitting people right across the country. This is happening in the context of rising profits for the energy companies, while—despite what the global warmists are saying—we are increasingly having cold winters, which mean an increase in people’s energy bills.

As I have said, the debate is timely because there is a general feeling that the Government may not be giving these matters the priority that they deserve. When a Secretary of State dismisses the problem by saying, “Well, phone around and find out what the alternative costs are”, when energy companies are given a slap on the wrist but there is no real outcome, and when we are told, “Just grin and bear it, because some of this has to be done to save the world”, it is understandable that people should detect a degree of complacency.

This is a particular issue for us in Northern Ireland. First, the profits of Northern Ireland Electricity have risen by 68% over the past year, which is commensurate with the increases in the profits of the big energy companies in Great Britain. Secondly, energy prices in Northern Ireland are about 14% higher than the average in Great Britain. Thirdly, fuel poverty in Northern Ireland is well in excess of the average in the rest of the United Kingdom, affecting 43.7% of households in comparison with the UK average of 21%.

[Jim Shannon]

My constituents spend 10% of their incomes on fuel, and 44% of them are experiencing fuel poverty. Strangford has the second highest level of fuel poverty in Northern Ireland. Does my hon. Friend agree that the Government’s decision to reduce the winter allowance will have an unfair impact on people in Northern Ireland, as against the rest of the United Kingdom?

[Sammy Wilson]

Yes, and I shall say more about that later.

Part of the problem is a direct result of Government policies that have an impact on households and businesses throughout the United Kingdom. About 50% of those who are in fuel poverty in Northern Ireland are over 60, but just as worrying is the fact that 27% of those who will find it difficult to pay their fuel bills—who will be, as we loosely term it, in fuel poverty—are in work. They are going out every day to do their business, and their wages are so low that they still find it difficult to pay. That is another reason for my belief that the debate is timely and will resonate throughout the United Kingdom.

I will not repeat all the many causes of the problem that have already been mentioned today, but I think it worth drawing attention to the way in which large energy companies have used the prices of raw materials to raise the prices that they charge consumers, and the fact that—as a number of Members have observed—there is not the same flexibility when prices fall. That is one of the reasons for the level of profits that companies are experiencing. As many Members have pointed out, in the short term some of those profits could be used to deal with the problems.

A second cause is lack of investment. Because of that lack of investment and because of the demand that exists, prices are bound to be fairly buoyant anyway, and there is a captive market. A third—I suspect that many people will secretly agree with this, but will not be prepared to say so openly—is the impact of the Government’s climate change policies. When we say that because we want a low-carbon economy we will charge those who use carbon-based fuels in ways that cause carbon dioxide to be released into the atmosphere, and when we say that we will introduce policies to stop that happening, we cannot run away from the fact that such action will have implications for people’s fuel bills throughout the United Kingdom. The facts are clear. This year, simply to deal with the renewables obligations, being forced to purchase electricity from renewable sources has added £1.8 billion to the cost of producing electricity, and by 2020 the cost will be £6 billion a year. According to the Department’s own estimates, domestic consumers will face a 33% increase in the cost of electricity and non-domestic consumers such as industry will face an increase of 43%.

I support the motion, but it makes a rather glib reference to climate change. Many people will feel that they can agree with such sentiments, but behind them is the reality of what will happen to fuel bills: people will pay more for their energy. Denmark, not our country, has the highest costs per unit and the highest fuel bills, and Denmark produces 20% of its electricity from wind power. That is the highest proportion in Europe. The lowest costs are in France, which produces 75% of its energy from nuclear power.

--- Later in debate ---

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

It is always a pleasure to speak in these debates. The usual faces are here—the people who regularly show up when we discuss fuel poverty in Westminster Hall—and it is a pleasure to be debating with them.

I was intrigued by the shadow Secretary of State’s reference to meerkats. I always think of them as cute, cuddly animals that cover the ground quickly, which may be an appropriate description of the Secretary of State. My dog’s favourite toy is a meerkat, as was seen at last week’s Westminster dog of the year show. The right hon. Member for Don Valley (Caroline Flint) later asked what we are going to do about the situation. Given the fantastic adverts—dare I say it?—we are going to stand up for the consumer; anybody who watches “Meerkat Manor” will know that meerkats stand up and look around. I am not going to be overly critical of what the previous Government did, although it is a bit of a cheek to ask what this Government are doing given that no nuclear power stations had started being built under them.

We need to be constructive because this issue is very important for our constituents. That is the key point that we need to unite behind, and I am pleased that there will not be a Division on the motion.

I want to tackle something that came up in my exchanges with the hon. Member for Ynys Môn (Albert Owen), who is no longer in his place. I know that he is an absolutely fantastic champion on behalf of those in fuel poverty—especially for off-gas-grid households. I am not suggesting that the energy companies should be encouraged to make excessive profits; I think we should be critical friends to them, but we do have to be friends to them because this country needs £100 billion to be spent on energy infrastructure over the next 10 years, and it is absolutely right that that will come partly from the profits that those companies will make. I understand that, in effect, consumers are the people who make the profits for the companies, but, like anything else, if it comes in tax, it still comes from consumers—from our constituents. Let us not kid ourselves that we do not ultimately have to pay, together, for the infrastructure that our country desperately needs.

I welcome the contributions that were made by my hon. Friend the Member for Hexham (Guy Opperman), who also is no longer in his place. He, too, has been a doughty champion for off-gas-grid households. Earlier today, the hon. Member for North West Durham (Pat Glass) and I were at a briefing about the Office of Fair Trading report that I have here. It is quite a weighty document, but it is double-sided, so the OFT was trying to be friendly to the environment. Members should read the report because, although the press notice did not make it sound very exciting, when one digs into it, one finds quite a lot that will prove very useful.

The hon. Member for North West Durham had an exchange with my hon. Friend the Member for Hexham about another issue that has been raised today—the OFT and how people were quoted one price and then expected to pay another. I am pleased to report that Carmarthenshire county council has successfully prosecuted a supplier for that practice. If we believe that that is happening in our areas, we must make sure that our county councils or city councils take full advantage of that ruling and ensure that they go after the suppliers that behave inappropriately towards our constituents at their most difficult time of need.

Let me mention some of the other contributions that have been made, including that of the right hon. Member for Wentworth and Dearne (John Healey) and the interventions from my hon. Friends the Members for Truro and Falmouth (Sarah Newton) and for Halesowen and Rowley Regis (James Morris). It is important that we make sure that our constituents are fully aware of the opportunities to seek advice on these matters. I thought that the criticism made of the Prime Minister and the Secretary of State was a bit of a shame because I feel that there has been a genuine attempt to say to people, “There is information out there and there is an opportunity to switch, and we are going to try to make it easier to do so.” They will encourage people to do that. People do not need to pay a standing charge if they wish to receive gas from companies. If one is a low user, it makes sense not to want to pay that.

I was at a dinner last night with the hon. Member for Ellesmere Port and Neston (Andrew Miller) and we were talking about energy challenges for the next 30 years. People from the royal academies were saying that it was ridiculous that the pricing and tariff systems seem to incentivise greater use rather than less.

To return to being a critical friend of the energy companies, there is one practice that I know that my hon. Friend the Member for Battersea (Jane Ellison) would have intervened on me to make a point about if she were here, so I shall do it for her. I am talking about the practice whereby people pay so much a month by standing order or direct debit. I happen to know about this because I end up dealing with this situation for my mother—this might embarrass her. I work out that she somehow seems to be £400 in credit even though there is no way she is ever going to consume that much, but the company keeps taking the same sum each month if not increasing it. So I have to make the phone call once or twice a year and a big cheque comes back.

I experienced similar behaviour when I spoke on the phone with a very pleasant customer service adviser who was trying to persuade me that, for no particular reason, I would double the amount of gas that I would use in the next year. However, I was able to convince her that if she did not leave my standing order as it was, I would change supplier. We all know that that argument encourages companies to listen a bit more. I put out a call today to energy companies to be friendly to their consumers and to work on these issues. I say to them, “Do not use your consumers’ direct debits or standing orders as cheap ways of borrowing, but help people to make sure that they are paying what they need to.” I am not saying that people should be given false prices so that they end up with a huge bill at the end of the year. Energy companies need to make sure that the scheme works as it should, so that MPs do not have to keep writing to the companies to ensure that such practices are not tolerated.

[Jim Shannon]

In my constituency, and I suspect in many constituencies across the whole United Kingdom, elderly people come to me and ask, “Should it be oil? Should it be electric? Should it be coal?” Does the hon. Lady share my concern that there should be no penalty for those who want to transfer from one energy source to another? If after a year, or perhaps 18 months or two years, they want to transfer back, there should also not be a penalty from the energy company.

[Dr Coffey]

I thank the hon. Gentleman for that intervention. The reason I am hesitating is that I probably need to think about it a bit more. There is undoubtedly a significant capital cost for switching between fuel sources. If one has a coal boiler and switches to a gas or oil boiler, there is a significant capital cost to that. I am not clear what is being done at present, but energy modelling should make it possible to model the prices and understand the impact.

[Jim Shannon]

I thank the hon. Lady for her generosity in allowing me to intervene again. An example would be gas from different companies—we have two gas companies in Northern Ireland, and there are different electricity companies. The change should not be so costly. Sometimes unnecessary penalties are included.