Energy Prices

Jonathan Lord Excerpts

Wednesday 19th October 2011 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

I will try to keep my comments short. I have listened to the debate and I am seriously concerned. We seem to talking about tinkering with a market that has failed. Let us be straight about it. We are told that for the next 10 years we will be faced with volatile energy prices. Consumers are being ripped off. When privatisation was first mooted in the Chamber nearly 30 years ago, I do not believe that anybody on either side of the argument would have envisaged that we would be faced with the madness of six energy companies holding us to ransom, punitively putting up prices, while the Government stand idly by.

Yesterday I read an article about Centrica, which owns British Gas. Centrica has paid out almost £145 million in shareholder dividends, yet the average dual fuel customer will pay £1,317. I am not singling out British Gas for criticism because, in June and September, all the big six increased their energy prices. All of them are bringing misery and pain to the consumer. When I talk about misery and pain, I understand what it means. I have people coming to see me and saying that last winter, which was the coldest on record, they were sitting in their living rooms with their duffel coats on and going to bed at 8 o’clock at night, fearful that when the utility bill drops on their doorstep, they will not be able to pay it.

Fuel poverty has affected the most vulnerable in society, but it seems that we are at the tipping point where anybody on an average household income could be in fuel poverty. I think of the pensioners living in my constituency, many of them former miners with industrial diseases, who have to keep their houses a little warmer than other people do because of the diseases they suffer from. They are feeling the pain. When I read statistics that tell me that, between 2003 and 2009 in my constituency, Islwyn, there were 41 excess winter deaths, and right across my country, Wales, there were 1,700 winter deaths, I think to myself, “Why, in the 21st century, are people dying of the cold?” It is like something that we would read in Dickens, yet it is happening now.

What do we get? We get the Prime Minister, in response, inviting the big six energy companies to tea and biscuits at Downing street. Yes, I am sure that a day-long energy summit will fix a cataclysmic failure of the market, which has seen the emergence of a legal cartel, for want of a better word.

[Jonathan Lord (Woking) (Con)]

Is it not the case that over the past 10 years only 50,000-odd customers have been serviced by independent suppliers because the previous Government had so much red tape and regulation in the market? That is why we have the big six and why others are unable to get in.

[Chris Evans]

I do not agree, and I am sorry but I do not think that that adds to the debate at all. We have to deal with the here and now. The simple fact is that people’s lives are at risk because of the profiteering of six energy companies. That is where we are now and it has nothing to do with the past 10 years. People are dying because of a cartel of companies that put profit above people.

What do we do now? We have a problem in this country. The Secretary of State says, “Oh, it’s like buying a £20 toaster, or a £40 toaster.” It is not like that. If I want to buy a television, I can walk into Currys and the retailer will charge me depending on whether I want an LCD television or a plasma screen. It is not like that in the energy market. Electricity is electricity; there is no luxury version and everyone needs it. How do the electricity companies create competition? They do so by creating tariffs. In some cases there are more than 100 different tariffs. Which? magazine has reported that a trained accountant could not understand his own energy bill. What hope do elderly customers or vulnerable families have when trying to work out their energy bills?

We are faced with problems of energy security. It seems to me that we have three options. One option is a windfall tax on the energy companies. It is all very well saying that we should tax the energy companies to the hilt until the pips squeak, to use the words of a former Labour Chancellor, but that would only be a short-term solution to the problem. Judging by how the energy companies are acting at the moment, I fear that they would probably pass the costs of such a tax on to the customer.

The second option, and probably the best one, is to get more entrants into the market. I would like to see energy being sold in banks, in supermarkets, or by any lifestyle company, but the problem is that the barriers to entry are so huge that they cannot get involved. There is an absolute monopoly on the power stations, which are owned by the big six. They can charge whatever they want.

What can the Government do? They have an option. They could create a central electricity body, just as Ofgem suggested in its Project Discovery report, which would mean that there would be a single energy supplier. It could be set up not as a nationalised company, as under the old rules, but as a co-operative, with profits being pumped back into the system to improve infrastructure. These are ideas that we may have to talk about, because eventually we will have to come here and talk about our energy needs, but what can we do in the short term?

One major problem is that Ofgem has no teeth. I do not believe that the big six are particularly worried by warnings from the Competition Commission or inquiries by MPs and Select Committees. They do not care. There have been more than 18 such inquiries since 2001, and what has happened? Energy prices have still increased year on year. We must do something now. Let us give Ofgem real teeth and real powers to punish those energy companies.

I end by saying that we face something extremely serious, and we must pay it serious consideration and ask serious questions. For so many people, such as those in my constituency, it really is a matter of life or death.