Mark Spencer
Main Page: Mark Spencer (Conservative - Sherwood)(10 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text
Caroline Flint
I agree with the hon. Gentleman. We could look at lots of different policies to improve customer choice and the ability to move more flexibly between suppliers. My point is that, whatever we do to the retail side of the consumer offer, we must deal with how the market works. Even the best tariff that we have at the moment might still not be a good one, because of how the wholesale market works. When I met companies that are part of Nord Pool, they did not voice the concerns that the Secretary of State mentioned today about hampering investment. Actually, I am pleased to share with the House the fact that over the past 18 months I have seen some movement in a number of the energy companies in the UK as well. I think that they are beginning to realise that some openness and transparency in the market would serve them and the British public well.
Caroline Flint
I will make some progress.
A pool or open exchange would have one other big advantage over the current market arrangements. The Energy Bill introduces contracts for difference to encourage investment in low-carbon sources of electricity. Those are essentially contracts with low-carbon electricity generators to pay a fixed price for the power that they produce. If the price that the generator receives in the market is less than the agreed strike price, consumers are liable to make up the difference. At the moment, with such little trading happening on the open market, there is no reliable way to work out what the market price actually is.
In August, the Secretary of State published more information on how contracts for difference will work, but what did it say on the question of how to work out market prices for baseload power? Let me quote from paragraph 15 of annex B of the draft operational framework, with which I am sure he is familiar. It states that
“indicating the precise source of prices, based on current price publications, in detail today would not be useful.”
Actually, I think that knowing how many billions of pounds of consumers’ money will be allocated would be pretty useful, but without a pool, I simply do not see how the Government will work it out.
Mr Davey
The hon. Gentleman makes a fair point in his usual informed way. The big six will be a big part of that investment profile, but as he will know, their balance sheets are weaker than they were in the past as a result of the recession, and there will be other investors. That means we will have to work harder to get that investment, but some of it will come from the big six.
Mr Spencer
The Opposition’s suggestion of an energy pool is an interesting one. Which party was in power in 2001 when the energy pool was abolished?
Mr Davey
My hon. Friend makes a very good point, which I will come to later. It was the Labour party.
The UK faces a huge challenge, which was made much worse by the failure of the Labour party when in government to even begin to tackle Britain’s energy and climate change problems—a lamentable Labour record, which I will return to shortly. The challenge that I as Secretary of State am tackling is the urgent need to attract massive investment while at the same time helping people with high energy bills. We are trying to attract that investment in a much more unfavourable economic and energy climate than Labour faced. The recession, and especially its impact on investors, has meant that people are less willing to invest, so we have to try harder to attract that essential investment.
We face global energy markets that are much tighter than they were during Labour’s time. International wholesale fossil fuel prices, which account for up to half of a typical household bill, have gone up by 50% over the past five years. The vast majority of countries are, like us, seeing energy bills go up, but unlike other countries whose recent Governments invested in energy, Britain faces another massive cost pressure on energy bills, all because Labour failed to invest. The synthetic anger and synthetic policies of the Opposition do not fool anybody.
Albert Owen
My hon. Friend is absolutely right; it was complex. I recall a conversation that I had with the new chief executive of E.ON, who has a master’s degree in mathematics. He told me—he has also said this in public—that he could not understand an E.ON bill because it was so complex. He has now taken steps to simplify the bills.
Energy markets are not delivering the low, stable prices that we were promised at the time of privatisation. The short-term profits that are said to have resulted from the privatisation of gas have meant long-term pain for many of our constituents, who have been paying higher prices for their gas and electricity in recent years. Switching is not an option for everyone, and it has not been taken up by the majority of people. We are paying high prices for our gas and electricity and the switching of tariffs is not working.
There is also mistrust between the public and the energy companies, as we have discussed in a number of debates. It remains a concern that prices are rising quickly, and that the price to the consumer goes up considerably when the global price of oil increases but does not go down nearly so quickly when the global price is reduced. I believe that there is consensus between the Government and the Opposition that we should examine that issue with the regulator, to establish how best to deal with it. Ofgem has done some good work on that already. However, I have to take issue with the Secretary of State’s comment that he was putting pressure on the regulator and that all the good results were coming from that Government pressure. When things do not work out quite so well for the consumer, the regulator is described as independent. The Secretary of State cannot have it both ways. The regulator is independent, and I believe that it needs more teeth. It also needs to use some of the powers that it already has.
In the time that I have left, I want to talk about the possibility of giving Ofgem a wider remit in regard to people who are not on mains gas, of whom there is a considerable number. I have been campaigning for them since about 2007, when gas prices became a real issue. The prices went up, but for those who are not on the grid, they went up considerably more. That has become a huge issue. The alternatives to mains gas are oil and other forms of gas.
Albert Owen
I will not, if the hon. Gentleman does not mind. I do not have much time left, and I want to develop this important point. I have raised it with the Secretary of State and with the Ministers who have appeared before the Select Committee. They have always tried to push the subject away by saying that it is a matter for Ofgem. In the Select Committee, however, I have put questions to the chief executive of the regulator, and he says that it is a matter for the Government. It is time for us all to sit down and look at this together, because the rise in prices is causing great anxiety and hardship for many of our constituents.
I want to see the establishment of a champion for those customers who do not have mains gas or electricity, as well as for those who do. Those customers do not benefit from dual fuel deals. We can talk about an average price for a household, but they will be paying more. I would appreciate a straight response from the Secretary of State on this. A Back-Bench Committee and an all-party group have looked into it and made recommendations. I am sure that he has seen their report on the off grid, and I believe that we can work together to establish that champion.
I want to make a few more brief points. We talk about the domestic customers who have been severely hit by the uprating in prices, but businesses, including small businesses, are also affected. I would like businesses to be able to compare prices in the same way that domestic customers can. When small businesses are set up, they are hit by rates and start-up costs, and they then get hit by high energy bills. However, it is difficult for them to switch from one company to another. To be fair, the Government are looking at this issue and trying to do something to help, but I believe that if those businesses could use a price comparison—instead of receiving bespoke prices from each individual energy company, as they do at present—they would have a greater choice. Businesses are telling me loud and clear that excessively high energy bills are resulting in a lack of investment in their business.
My final point is on the cost and impact of the transmission of electricity and gas to the regions. The National Grid Company is a private, American-owned company that passes all its profits to shareholders. It passes any extra costs on to its customers via the generator. I would like to see National Grid acting in the British national interest, not in shareholders’ interests; I would like to see a not-for-profit organisation distributing our electricity. We could then have a bigger impact and reduce the transmission costs, which are considerable—about 16% of the energy prices that customers pay.
Another problem is that people pay more for gas and electricity on peripheries and in rural areas, yet many of those areas produce that gas and electricity, which is unfair. I would like us to help customers in these areas more by looking at the cost of the transmission and distribution of electricity and gas.
Mr Mark Spencer (Sherwood) (Con)
I am delighted to have the opportunity to speak in this debate, which is very important for my constituents. When the energy bills land on their doormats, the impact on their household budgets is enormous. All Members will therefore recognise how high up the agenda this subject has to be.
We should take a moment to look at how we got into this position. GCSE economics tells us that demand and supply drive prices. If there is low supply and high demand, prices inevitably go up, and electricity prices have been rising by more than inflation for a long time now. That is because we as a nation have not addressed our electricity supply. We did not go to the trouble of building power stations when we should have done, but we cannot build a power station overnight. It takes a long time to get it through the planning process and to put the funding in place, and that process should have begun under the last Labour Government. We should now have been turning on nuclear power stations that could supply the base load to keep the lights on in this nation. We are having to pick up that difficult position and try to deal with it.
At the same time that was happening, our coal-fired power stations have been going downhill. They have not been upgraded and repaired. We are therefore now in a situation in which the renewables sector is not growing fast enough, the nuclear power stations have not been built, and our coal-fired power stations are about to come to the end of their natural life. Dealing with that will be an enormous problem, and the impact on consumers will be massive.
What are we going to do to deal with that? Credit is due to this Minister for starting to deal with some of the problems. He is trying to get the green deal moving so people can insulate their homes. He is trying to reduce their energy bills and educate them about how they can reduce their energy bills and consumption, and he is working with Ofgem to try to put pressure on the energy companies to reduce the tariffs so people’s bills can be squeezed lower. He has also addressed the need to build new power stations to get new electricity supplies on stream. This is not easy, because not only are energy bills increasing, but some of those new technologies are not very popular, certainly with my constituents. Some new technologies, such as anaerobic digestion, are palatable and people will tolerate them. However, people are not as enthused about wind turbines and they are certainly not enthused about energy recovery plants, such as the one proposed in my constituency at Bilsthorpe; people do not want incineration. I hope that the Minister will talk to his colleagues in the Department for Communities and Local Government and ask them to consider what they build and where they build it.
Lastly, I wish to mention one thing that will have a big impact on some specific constituencies: the loss of concessionary coal for consumers who used to work in the coal industry. The collapse of UK Coal means that they will lose their right to free coal. I hope that the Minister will take that on board and talk to the Treasury to try to support those people, because that will have a big impact on them as the winter draws in.