Energy Prices, Profits and Poverty

Michael Fallon Excerpts

Thursday 7th November 2013 Westminster Hall

[The Minister of State, Department of Energy and Climate Change (Michael Fallon)]

I repeat to the House the apology that I gave privately to the Chairman of the Committee and the shadow Minister for having had to leave in the middle of this debate. I, too, congratulate the Committee on its inquiry. This has been a useful debate, and I welcome the opportunity to add to the conclusions that we have already published, and to comment on the recommendations.

We agree with one of the central points of the report: that transparency around the price that consumers pay is crucial—a point made by the Chairman of the Committee, the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith). We have already been taking action to help people and businesses who are struggling with their energy bills, and we are taking steps to make the retail market simpler for consumers.

[Albert Owen]

I think that was the first time that business was mentioned; I omitted to do so, too. Would the Minister consider in the energy review looking at switching for businesses, so that they can break their contracts more easily, or have a comparison website where they can look for bargains in the marketplace?

[Michael Fallon]

That is an important point, and I would like to reassure the hon. Gentleman that work is going on to make it easier for small businesses to escape some of the higher tariffs under the contracts they are placed on, and to encourage more collective purchasing among small businesses. There is an organisation called Lumina that covers small businesses in my county of Kent, and I think there are others. That is a very important point.

Consumers will get the best deals only when suppliers face tough competition, and that is what the Government and Ofgem are working to achieve. We are committed to tackling the problem of fuel poverty; I note what the Committee has said about that. I was pleased to see what it had to say about the new definition of fuel poverty that we are bringing in through the Energy Bill. We are committed to helping people, especially low-income vulnerable households, to heat their homes more affordably.

We have already introduced some immediate help: 2 million vulnerable households will get £135 off their energy bills this winter, thanks to the warm home discount. Around 12.5 million pensioners will get the winter fuel payment: £200 for the under-80s and £300 for those over 80. There are cold-weather payments that are available if needed, and last year, they delivered £146 million to help cut bills for the most vulnerable. This year, we have added to those policies with more direct action. The Big Energy Saving Network is training 500 volunteers to go out into communities to help people get better deals from their energy suppliers and reduce their energy bills.

Energy efficiency remains a central part of our strategy, to help the fuel-poor and to deliver permanent energy savings. I am well aware of the serious concern among colleagues in the House for those consumers who are off-grid. I have chaired two meetings of our round table on that, in conjunction with the all-party group on this issue, and we have now established a code of conduct for the suppliers to ensure that—again, as the Committee would wish—prices are properly transparent at the point at which they are delivered, in a way that matches the transparency at the point at which they were ordered. More than 230,000 low-income households will be warmer this winter, thanks to energy efficiency measures that have been installed through the energy companies obligation.

Let me turn briefly to retail market reform. Competition is the key tool in exerting downward pressure on prices. Companies that do not compete effectively will lose customers. We are using the Energy Bill to ensure that Labour’s big six companies now place consumers on the cheapest tariff that meets their preferences, and give those consumers clear information to help them shop around.

I was also asked about the review of levies that is going on. We are looking hard at how we can get people’s energy bills as low as possible, to help hard-pressed families, just as we have done with the fuel duty and the council tax. I was asked specifically when we would see the result of that work. I hope that will be around the time of the autumn statement in a few weeks. That work includes some of the network costs. Ofgem has yet to establish the distribution costs for the next period. There is plenty of work to be done there to ensure that we bear down on those costs that form a considerable amount of the bill.

I would like to give the Chairman of the Select Committee a few seconds to reply. In closing, I thank the Committee for its work and the inquiry it has led. We are acting to help those most in need to keep warm this winter. We are also acting to ensure that everybody will get a better deal from the energy companies.