Energy Prices

Jonathan Edwards Excerpts

Wednesday 14th January 2015 Commons Chamber

[Caroline Flint]

I agree. I constantly hear complaints about roll-overs as well, when people suddenly find their tariffs have increased. There is a huge amount that still needs to be done, and in a number of areas I only wish we had had more of a consensus in this House.

So, what is happening? Why are our energy companies not passing on the benefits of falling wholesale costs? I think the answer is pretty simple. They are not passing on the savings for the same reason that they have never passed them on: they do not believe they will be made to. In part, that is because the normal competitive pressures we would expect to see in a functioning market do not exist in our energy market. If they did, we would all see bills falling, because in a competitive market there is no reason—none whatsoever—why falls in wholesale costs should not be passed on as quickly or fully as increases. However, it is also because they know that this Government will never make them—will never challenge them, never stand up to them, and never put ordinary families first. That is the single most important thing that the Chancellor’s letter and the Minister’s so-called summit tell us. Yes, of course, they are empty gestures. We know that, and the public know it, too, and if today’s Financial Times is right, the Secretary of State knows it as well—in his defence he did not even know about this so-called investigation until after it had been announced, which speaks volumes about his grip on energy policy in government. That is probably why the Minister for Business and Enterprise is not taking part in this debate. He does not need to, because all he has to do is pop over to the Treasury for a quick chat with his old boss to determine the Government’s energy policy.

None the less, this does reveal something fundamental about this Government’s refusal to tackle energy bills. We now have Government Ministers saying that wholesale costs are falling and pointing out that these have not been passed on to consumers, but nevertheless still saying that to actually force energy companies to cut their prices would spell disaster. What clearer message could there be to energy companies that they are free to do whatever they like, charge whatever they like, and treat their customers however they like? If the Government will not step in now, when Ministers themselves are admitting that customers are being ripped off—and that is what is happening if wholesale costs are falling and household bills are not—then they never will. That is what the Minister’s letter really is: it is a get-out-of-jail-free card—“Pass go, don’t pay £100 and don’t pass on savings to your customers.” [Interruption.] Don’t pay £200 then. So wholesale costs have fallen but consumers have not seen the benefit, and the reason is that competition is weak and the companies know that this Government will never do anything about it.

That brings me on to my fourth and final question for the House to consider: what should we do about it? We have had a few suggestions from the Government, and I want to deal with each of them in turn. The first idea we have had is another investigation. To be fair, it is not just an investigation: there is a strongly—strongly—worded letter too, and an invitation to a summit, which brings to mind that notoriously successful summit the Government held with the energy companies soon after I entered this job in 2011! I think it was dubbed “Click, switch and insulate to save”. Unfortunately, the energy companies put their prices up anyway. Indeed, such is the utter confusion within Government on energy policy that it looks as though we have come full circle and are back to the policies that they themselves know failed in the past.

And what could there possibly be to investigate? We know what the problem is. We have known about it since 2011 when Ofgem first identified it, and we can all see for ourselves that wholesale costs have fallen and consumers’ bills have not. What more is there to it than that? Why do we need another investigation, in addition to the one that the CMA is running? And what good will it do? How will it help a single family with their energy bills now?

The second idea is that we just have to wait. The argument goes that at some point some time in the future some of the companies might eventually cut their prices—or should we wait until the CMA reports in December? But why should we wait? Why should households wait a single day longer? Wholesale costs have been falling for more than a year; how much longer must people wait before their bills fall too? [Interruption.] The Secretary of State might be interested to hear that, as figures I published today show, the average family’s energy bill is £260 a year higher than it was in 2010. Behind those figures, however, is the fact that it is the poorest households who have been hit hardest. With electricity up by nearly 40%, gas bills having risen by more than 50% in the last three years alone, and for the first time on record more than 1 million families with children in England in fuel poverty, they cannot afford to wait.

The third idea we have been offered is to make the energy market more competitive—I am sure that is what the Secretary of State will argue in his speech today. No one would disagree that consumers would be better served if companies were hungrier and competed more to win, and retain, their customers by cutting prices and improving customer service. Indeed, we have set out and debated a number of our proposals which are designed to do exactly that. However, the fact remains that competition is not working; if it were, bills would have fallen and we would not be having this debate. Indeed, it is not merely not working, but the situation is getting worse. That is not just my view but that of the regulator, Ofgem, in last year’s state of the market assessment:

“There are indications that things are getting worse for consumers.”

On the question of companies not passing on falling costs, it said:

“We found that suppliers pass on cost increases more fully and more quickly than cost decreases. The asymmetry we found was greater than when Ofgem performed a similar exercise in 2011.”

So the idea that we should simply leave it to the market to correct itself perhaps some years down the road, when things have been getting worse, is not one we should seriously entertain.

If that is not the answer, that leaves us with one option. The Government must ensure that if consumers do not enjoy the benefits of competition, they are afforded the protection of regulation, and that is what today’s motion proposes.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The shadow Secretary of State is outlining some serious statistics and I agree with the points she is making. However, does she not agree one of the most effective ways of addressing fuel poverty is to sharply increase infrastructure investment in home energy efficiency? That would create green jobs, boost economic growth, cut carbon emissions and address pressures on the NHS such as respiratory diseases. Why is the Labour party not making the case for sharply increasing infrastructure investment in Wales?

[Caroline Flint]

We are making the case, and I refer the hon. Gentleman to the Green Paper we published just before Christmas, in which we made three points in that regard. First, we would make sure that the money levied from the energy companies to help with insulation went to the fuel-poor, taking a bottom-up rather than top-down approach to delivering energy efficiency in our communities. We have said that we should have higher ambitions for the private rented sector in order to make such homes fit for purpose, and that we should get a better deal for those who can afford to pay something, by providing 1 million zero-interest loans during the next Parliament. We have also said that energy efficiency should be a national infrastructure priority. I hope that that clarifies the position for the hon. Gentleman.

This is about ensuring that we have a policy that is fit for purpose: not just a new power for the regulator, but a new duty to ensure that bills are fair and that reductions in wholesale costs are passed on to consumers. There should also be a price freeze until 2017, so that energy companies cannot simply whack their prices back up after being forced to cut them. We know that wholesale costs have fallen, and that energy companies will not pass on the full saving to all consumers unless they are forced to, so let us give the regulator that power. Let it do the job that people expect it to do, and let us put in place a framework that can begin the process of restoring trust in the broken energy market.

That is the choice before the House today. Do we carry on with business as usual, with more families with children than ever before unable to afford to heat their homes, and just let the energy companies get away with their usual tactics; or do we call time on the sharp practices and rip-off prices? Do we draw a line in the sand and say “No more”? That is the decision Members will have to make, and account for to their constituents.

Government Members have had the chance before to take action on energy bills—and have refused to do so. They will not be able to vote against action to make energy companies cut their bills today, and then complain tomorrow that falls in wholesale costs are not being passed on. Let me warn them: much though they might wish it, this debate is not going away. I have it on good authority that the Prime Minister does not want to talk about energy between now and the election, but let me say to him and to the House that that is exactly what this election is about. It is about more than energy prices; it is about how our country is run and whom it is run for. The first, last and most important test to judge any Government by is the level of success for working people in our country—for the many, not the few.