Energy Price Freeze

Luciana Berger Excerpts

Wednesday 6th November 2013 Commons Chamber

[Caroline Flint]

I will take one more intervention and then make some progress.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

I thank my right hon. Friend for kindly giving way; she is being very generous with her time. I imagine that she, like me, has gone to visit energy companies and has seen for herself that one, not far away from this building, has its generation department physically next door to all its displays and where it buys energy. Does she believe that that is the issue we now need to address, as stated in the motion?

[Caroline Flint]

My hon. Friend is right; she is talking about the trading floor in Victoria. It is interesting how closely the different parts of these organisations work together. In fact, some companies have welcomed the move to separate the generation and supply side, but we are not interested in a piecemeal approach with six different versions of what it should involve. That is why we need law that is consistent, transparent, and does the job.

At the moment, poor liquidity is recognised as the single biggest obstacle to improving competition in the energy market. If all electricity had to be traded via an open exchange, or a pool, that would create a level playing field that would enable any market participant to compete on price in order to retail power to the public. This would be different from the previous pool in two important respects. First, under the previous pool there were only two generators, who were therefore able to exert considerable influence on the market price and, indeed, to ratchet it up over time. Today, there are many more generators. Secondly, when the old pool was originally established in 1990, only generators were able to place bids, which again gave them excessive market power. Today, there is no reason why a two-way pool, with generators and suppliers both placing bids, could not be introduced. Indeed, if the Government look around the world, at the Nord pool in Scandinavia or the power exchanges in the United States, they will see plenty of examples of markets with more exchange-based trading of this kind that are more liquid, more transparent, and encourage greater competition.

Of course, we should do this in the most cost-effective way. Given the volumes that are already being traded on the day-ahead exchange, we would be open to creating a pool by requiring all generators and suppliers to trade 100% of their output on the N2EX exchange. If the Secretary of State does not agree, will he explain why he thinks that allowing these firms to do most of their trading in secret, behind closed doors, serves the public interest?

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[Mr Davey]

I want to make some progress. I also want to talk about the context for this debate, which is the cost of living. When considering the cost of living, one tends to think about inflation and how the general price basket is affecting people, particularly the poorest in our land. We should be focused on getting inflation down robustly.

When we came to government, inflation was 3.4% and rising. We had to bring it down, and latest figures show that this month inflation is lower at 2.7%, and forecast to stay low. That is an achievement. In the context of the cost of living we have seen employment and growth go up, and unemployment, the deficit and inflation go down. That economic record will help people up and down the country because we are seeing the benefits of that. To give an example to the Labour party, in the past year alone, disposable incomes have grown.

[Luciana Berger]

Will the right hon. Gentleman give way?

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[Neil Carmichael]

The hon. Gentleman is right—that is a perfectly good point.

[Luciana Berger]

Will the hon. Gentleman give way?

[Neil Carmichael]

Not yet, because I am dealing with this point. A price freeze simply freezes the problem and does not enable a solution to be introduced. I have admitted that we need to find ways of driving prices down—of course we do—but a price freeze is not the right way because it will prevent firms from responding normally to the market. As the right hon. Member for Gordon (Sir Malcolm Bruce) correctly noted, if we start freezing one thing it is not long before we need to freeze a few more things in order to keep up.

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[Simon Danczuk (Rochdale) (Lab)]

It is a delight to follow the hon. Member for Stroud (Neil Carmichael); I cannot think of anybody I would rather follow in this debate. I thank my colleagues for initiating this important debate. I want to use this opportunity to talk about my experience and that of my constituents when dealing with energy companies.

I welcome the proposal from the leader of the Labour party to freeze energy bills, certainly for consumers but very much for businesses as well. In my constituency I meet businesses on a regular basis that have been treated appallingly by energy companies and/or their brokers. Businesses have been expected to put down unrealistic bonds or deposits so that they can get energy, and they are also being conned—quite literally—into energy deals that are wholly inappropriate for them. Action needs to be taken.

Let us consider how consumers are treated by energy companies. Over the past few days there has been talk in the press about how energy companies are deliberately hanging on to their customers’ money. I am in no doubt that that is a deliberate policy by some of the energy companies, and I will give the House two or three examples of what energy companies are doing with their customers’ money.

One example is something of which I have personal experience. Until two years ago I had a prepayment meter. Someone on a prepayment meter receives an annual statement that sets out what they have used and what they are likely to use in the next 12 months. It predicts how much energy someone will use, and what the likely cost will be. I decided, understandably, to move to direct debit to reduce the bill. I phoned the energy company—British Gas—and the call handler explained that they had to go through a process of assessing what my bill was likely to be. I pointed out that a prediction had already been made in the annual statement, but of course they insisted on going through the process of counting the number of radiators and asking how many people were in the household. Lo and behold, to nobody’s surprise the company suggested a higher direct debit on a monthly basis than what I had been paying for the past 12 months.

In reality, the company was trying to bamboozle me into paying more per month. I am fairly forthright and insisted that it stuck to a reasonable amount of money, but my concern is that many people, particularly those on prepayment meters, are some of the most vulnerable in our society and could easily have been bamboozled into paying a higher direct debit than they should have paid. I am convinced that that call handler had been encouraged to take people down that route so that they would pay more.

[Luciana Berger]

I thank my hon. Friend for kindly giving way. He articulates an important point about vulnerable customers who are paying above the odds on prepayment meters. However, it is not just those on prepayment meters who pay direct debits; we all have the opportunity to do that. I have raised this point before in the House, but is my hon. Friend aware of actions by companies such as E.ON, which was previously my energy provider? I see myself as very forthright, but when I called it to amend my direct debit—I knew I was paying above the odds on a monthly basis—it would not allow me to amend it. I had to pay the price it offered me, and that was it. I had to pay above the odds, and it was essentially allowed to accumulate money from me. That was the only choice offered to me; otherwise I had to pay a quarterly amount, and a much higher price for my energy.

[Simon Danczuk]

I am obviously not aware of that particular case although I am happy to make representations to E.ON on my hon. Friend’s behalf, and try to get her a better deal. She makes an important point.

My second example is from when I moved house, just over 12 months ago. I stopped the relationship with British Gas to move to another provider, yet the money it was taking from me continued to leave my account. I had to get on the phone and kick up a stink to get the money back. British Gas had retained literally hundreds of pounds that were due to me. That was being done to maximise its profits.

Let me give the House a third example. This one is from a constituent, Alan Valentine, who contacted me this week because of the hullabaloo on energy prices. His mother died in March, and he paid the final bills using British Gas’s automated payment system. Needless to say, a company called Past Due Credit Solutions was soon chasing him for payments he had already made. Mr Valentine states:

“I am concerned mainly that many thousands may be sent demands for bills already paid, many hundreds of whom may be elderly or forgetful, many of whom may then pay the bill again.”

Those are clear examples of energy companies doing all they can to maximise their handling and holding of consumers’ money. Those behaviours are wholly unacceptable.

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[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

It is an honour to follow my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson), who made an impassioned speech. I seek to echo some of the points she made and to speak strongly in support of the Opposition’s motion. I do so as the MP representing the constituency with the third highest level of fuel poverty, according to the Government’s new definition.

Not a week goes by when I do not have a constituent come to me to raise their serious worries about their energy bills. That is sometimes because they have been ripped off by their energy company. We have heard many examples of people who have paid above the odds for their direct debits or have been penalised when they have moved and have not received the credit to which they are entitled. We have heard about specific issues to do with people who have prepayment meters but often find that very difficult and have to pay over the odds in any repayments that they have to make. I speak in support of the motion on behalf of all my constituents and people right across this country.

The constituents we represent, and people up and down the country, are paying a staggering £315 more for their energy bills than they did back in 2010. That is against the backdrop of a cost of living crisis in which people have seen prices rise faster than their wages in 39 out of the past 40 months. Many of my hon. Friends have talked about the real choice that people in our country—the seventh most industrialised in the world—are having to make between heating and eating. That is not a joke or a catchphrase—I have seen it on far too many occasions, as have many of my hon. Friends. We are the only G7 country in which the Red Cross is providing emergency food aid. It does not help that people are having to spend £1,400 a year on average for their dual fuel bill, but have not seen their wages go up accordingly.

Some 700,000 people have accessed emergency food aid through a food bank. That is a national disgrace. The responses that the Prime Minister has given from the Dispatch Box at Prime Minister’s questions have been pitiful. He has not acknowledged the depth of the problem in this country. It is a stain on our national conscience. I am ashamed that people in my constituency have to go to a food bank because they cannot afford to put food on the table. To link that point back to this energy debate, people are often unable to use the goods in the emergency food aid bag that they receive from the Trussell Trust because they cannot afford the gas that it would take to heat them up on the cooker.

Those are the issues that our country faces in 2013. I look forward to the Minister’s response because what the Secretary of State said was pitiful. He talked about switching, but for all the people who are facing a very cold winter, the best deal in a broken market is not a good deal. The figures that were released yesterday showed that the gap between the wholesale price and the prices that energy companies are charging us is getting wider. The wholesale price has gone up by 1.7% and the average bill has gone up by 9%. At a time when people are struggling to get by and there is a cost of living crisis, it is difficult for people to deal with those price increases.

That is why I support the Opposition motion. We need a price freeze. The Government have an opportunity to implement the price freeze today. I sincerely hope that they will, even though the Secretary of State indicated that they will not. A price freeze would assist 40,221 households in my constituency alone. It is not just households that will benefit, but businesses. We need a price freeze so that we can implement the raft of measures that are needed to reform the market. I notice that many Government Members are fixated on the freeze. The freeze is the vehicle by which we will implement the changes in legislation that are needed to fix the market.

What are the changes that are required urgently? We need to separate the retail market from the generation side. I mentioned in an intervention on my right hon. Friend the Member for Don Valley (Caroline Flint) that I have been to one of the energy companies. I saw for myself the physical collocation of the generation and retail sides. The room in which the company oversees its generation—the big six generate 70% of the capacity in the UK—is right next door to where it buys and sells its energy. The idea that the two sides do not liaise or engage with each another is ludicrous. That is why we need urgently to separate the retail side from the generation side.

We need to introduce a two-way pool in the energy market so that there is transparency in the cost of energy generation, which we do not currently have. It is in the best interests of the energy companies to charge themselves a high price. We do not know what that price is because it is decided in back-room deals among themselves. There is a pool, but it makes up only a fraction of the market. We need the whole market to use the two-way pool so that we can see the price of energy and to encourage new entrants into the market. At the moment, the big six dominate the energy market, making up about 99% of it, and there is little opportunity for new entrants to come in.

We need to have standardised tariffs so that people can compare energy prices properly. At the moment, the tariffs are very confusing. People need the switching websites because they cannot compare prices for themselves. The previous Secretary of State for Energy and Climate Change told the Select Committee that when he had tried to switch, he could not do so because it was so complicated. There are hundreds of tariffs. If we had standardised tariffs, people would be able to compare prices easily.

[Mrs Hodgson]

My hon. Friend is making an excellent speech. Does she agree that it is important that over-75s are put on the lowest tariff automatically, for the very reasons that she has just given?

[Luciana Berger]

I thank my hon. Friend for that intervention as I was just about to make that very point. I am delighted that the motion reinforces our policy that energy companies should automatically put over-75s on the cheapest tariff. That would assist 5,867 people in my constituency, and constituents of hon. Members across the House. Older customers are less able to benefit from direct debit deals because they are less likely to have access to a bank account, or access to the internet to get online deals. It is possible, perhaps through data-sharing, for energy companies to put the over-75s on to those cheapest tariffs. They could do that today and make a real difference to hundreds of thousands of pensioners up and down our country.

I am supporting the motion today because we need a tough new watchdog. We know that Ofgem is not doing a proper job because back in 2008 it was investigated, and 16 different areas identified.

[Debbie Abrahams]

Does my hon. Friend want to comment on what the Secretary of State said about Ofgem and that report? Does she think Ofgem is doing a good job?

[Luciana Berger]

I thank my hon. Friend for that contribution. Back in 2008, 16 areas were identified where Ofgem was not doing a proper job. The other year it was found that it had improved in only four of those 16 areas which, over that time, is frankly not good enough. When millions of our constituents and businesses up and down the country are suffering, we need a proper regulator with teeth, as well as the responsibility and ability to ensure that when there are reductions in wholesale costs, those reductions are passed on to consumers in way that is not done at the moment.

The Secretary of State was keen to talk about the green deal and the energy company obligation, which the Government have presented as a sort of quick-fix. Of course we need to do everything to ensure that we help millions of households across the country that do not have proper insulation in their homes, as that is one of the best ways to reduce bills. What the Government have proposed, however, and what they are doing on the green deal—well, the figures speak for themselves and we wait to see what will happen by the end of the year. The Minister said he would not be sleeping at night if 10,000 homes had not had a green deal package, but we wait to see the figures.

[Gregory Barker]

Well over 10,000 homes have already installed green deal measures.

[Luciana Berger]

I am referring to figures of those that have actually completed. I return to my point that we have the green deal in hand with the ECO, and thousands of people in the insulation industry have lost their jobs.

Let me mention an actual individual. Mr Sturdy in my constituency is 85 years old. He has previously had a stroke, suffered from angina, and undergone a quadruple heart bypass. He has been visited in his home three times by three separate companies purporting to help him with the energy company obligation. Separately, his energy company, SSE, said “Go to Carillion as it will help you with the energy company obligation.” He has paid hundreds of pounds to get his loft cleared and his thin insulation removed, yet all those companies cannot provide him with the insulation he needs. He has spent hundreds of pounds and his home is now less well insulated than it was before. He is facing a very cold winter and I hope the Government will address that in their remarks.