Energy and Climate Change Committee Report

John Robertson Excerpts

Thursday 20th December 2012 Commons Chamber

[Mr Tim Yeo (South Suffolk) (Con)]

I beg to move,

That this House has considered the matter of the publication of the Fifth Report from the Energy and Climate Change Committee, on Consumer Engagement with Energy Markets, HC 554-I, and the launch of inquiries into Energy prices, profits and poverty, and Smart meter roll-out.

I am grateful to you, Mr Speaker, and to the Backbench Business Committee for the chance to launch my Committee’s report on consumer engagement with energy markets, which was published today. My Committee has been paperless since the summer recess so my notes are on an iPad, rather than hard copy. I draw attention to my entry in the Register of Members’ Financial Interests.

This inquiry was prompted by our concerns that many consumers do not have a clear idea of how energy prices will be affected by investment in energy infrastructure—investment that is needed to provide a clean, secure and affordable energy supply for the future. Our report concludes that consumer engagement with the energy market is low and that this is linked to low levels of competition and consumer trust in the energy industry. Many consumers seemed unable or unwilling to take action to reduce their energy bills by switching provider. We are particularly concerned that some customers who have not engaged in switching may be among the more vulnerable, and that they are paying considerably more for their energy.

There is little incentive for larger energy suppliers to offer those consumers a better deal. Confusion felt by consumers faced with too many different tariffs has been a barrier to switching. Other barriers include apathy, which I fear I may be guilty of myself as a non-switcher; fear of ending up with a worse deal; feeling that switching is too much hassle; disinterest in energy issues; distrust of suppliers; and feeling that all suppliers are the same.

Ofgem plans to increase both switching and competition under its retail market review proposals by reducing and simplifying tariffs and making it easier for consumers to switch. The Prime Minister, during Prime Minister’s questions, recently pledged to ensure that

“energy companies have to give the lowest tariff to their customers”.—[Official Report, 17 October 2012; Vol. 551, c. 316.]

The Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), who is in his place,confirmed to us that the Department of Energy and Climate Change would be doing that in the Energy Bill. However, the Government’s proposals are very similar to those put forward by Ofgem. We question the wisdom of legislating to implement measures that are so similar to those Ofgem proposes to implement more quickly without legislation. Whether the Government’s and Ofgem’s measures on tariffs will improve the situation for consumers remains to be seen. It is crucial that, if they do not make improvements soon, stronger action is taken to ensure that consumers get a fair deal from energy providers. Our report concludes that the effect of the proposed reforms should be monitored and it proposes several indicators for tracking the effect on competition and on getting a better deal for consumers.

As I outlined earlier, the rising cost of investing in our energy infrastructure and of paying for DECC’s environmental and social policies will be reflected in consumer bills over coming decades. Currently, there is some confusion about the impact of this investment on consumer bills, and it is important that there is more clarity, because consumers are being expected to take action to offset these costs and avoid large rises in their bills. A very good way of doing that is by increasing energy efficiency, but we are concerned that this message is not getting across to consumers and that plans for informing consumers about energy efficiency lack detail.

Our inquiry heard from members of the public at events held in Southampton, East Bergholt, in my constituency, and Banchory. People told us that they did not know whom to trust for information about energy issues or where to go for advice. Given the importance of increasing consumer knowledge of these issues, we conclude that there is a case for streamlining the sources of information available to consumers to provide a single, independent, reliable and trustworthy source of information about these issues. Most of all, however, we need a full and frank conversation with the public about the contribution that consumers are being expected to make to ensuring that we have safe, secure and affordable energy supplies in the future. DECC should lead that conversation. Consumers need to be aware that bills may continue to rise unless they increase energy efficiency or otherwise reduce their energy consumption.

During our inquiry, energy price rises were reported by all major suppliers, and prices look set to continue rising. We are concerned about the effect on consumers, particularly those in fuel poverty.

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

I thank the Chair of the Committee, of which I have the honour of being a member, and my colleagues for being so forward thinking as to visit Anniesland college in my constituency in February to talk to real people about real problems. Does my hon. Friend—I believe he is my friend in this case—agree that it is important not only that we reach out to people and talk to them, but that we talk to people who have real problems? The Minister might think of trying that for a change, rather than staying within the walls of this palace.

[Mr Yeo]

I am grateful to the hon. Gentleman, who is a valued colleague on my Committee, for that intervention. I am looking forward to my visit to Glasgow in February. It is truly said that there is more fun to be had at a funeral in the west of Scotland than at a wedding in the east of Scotland.

My Committee is concerned about the effect on consumers, particularly those in fuel poverty. Price rises from energy companies this autumn mean that average annual energy bills have already risen by about 7%, and DECC’s own advisory group on fuel poverty has estimated that 300,000 more homes will be in fuel poverty by Christmas. Millions more may be affected unless radical action is taken. If consumers are to protect themselves against the rising cost of energy, they will need to act to reduce their bills. The success of the green deal and smart meter roll-out depends on public buy-in. Unfortunately, at present, public confidence is low.

Our report found evidence of a lack of consumer trust in energy suppliers, which may in part derive from a lack of transparency in energy company profits and prices. Some consumers blame energy company profits for the rise in prices. A poll undertaken by my Committee showed that one in two people believed that energy company profits contributed most to the 75% increase in the average household dual fuel bill between 2004 and 2010.

Greater transparency is needed in respect of energy company profits and energy prices, including across the whole portfolio of the vertically integrated companies. Our report makes recommendations for increasing transparency, but the issue warrants further investigation. Regaining confidence and trust will require both the Government and energy companies to demonstrate that consumers are getting a fair deal and, importantly, that vulnerable fuel-poor households are being reached and protected.