Cost of Energy

Mike Reader Excerpts

Tuesday 11th February 2025 Westminster Hall

[Mike Reader (Northampton South) (Lab)]

It is a pleasure to serve with you in the Chair, Mr Western. I thank the hon. Member for Bath (Wera Hobhouse)—a fellow member of the Energy Security and Net Zero Committee—for introducing this important debate. We have been doing a lot of work over recent weeks in the Committee on energy pricing and the cost to consumers, so it is very timely.

It is clear that the Government have an ambitious plan to achieve clean power by 2030. For families in my constituency and across the country, that mission is really about lowering energy bills. Quadrupling offshore wind, tripling solar, doubling onshore wind and getting projects such as Hinkley over the line and operational are all critical things that will ensure resilience in our energy markets. Importantly, they will also protect UK consumers from volatile foreign markets, taking back control from Putin and petrostates, and placing the power of energy in the hands of British people. Those targets represent the biggest expansion of renewable energy in our history, and could save families hundreds, if not thousands, of pounds a year on their energy bills.

I recognise the great points made by the hon. Member for Bath in her opening speech, particularly on innovation in the sector. I also welcome her thoughts on heat pumps because I, too, believe that more than just heat pumps can solve this crisis, and it was positive to hear her talk about heat batteries. I want to add to the debate by speaking more about the energy cost crisis the Government are tackling, how it started and what we need to do to solve it.

The Select Committee heard evidence that paints a stark picture. Average energy bills are now 43% higher than in 2019, with over 6.1 million people living in fuel poverty. The situation in my constituency reflects the national crisis, with families and businesses struggling under the astronomical weight of energy costs.

However, the crisis did not happen overnight; it is the direct result of years of Conservative failure to properly insulate our homes, diversify our energy sources, reform the energy market and, ultimately, protect consumers. The previous Government’s resistance to onshore wind, their devastating cuts to energy efficiency programmes and their reckless over-reliance on volatile international gas markets has left British taxpayers paying the price.

When the last Labour Government left power, energy efficiency installations were at their peak, with 2.3 million homes upgraded, but the next Government dropped support and the numbers plummeted. As was mentioned, we now have some of the least efficient housing in the whole of Europe. The consequences of those decisions are felt every day by my constituents, who find themselves living in poorly insulated homes. There are 17,000 homes in Northampton South with an energy performance certificate rating of C or below. Those homes waste energy, but also my constituents’ money.

The fundamental issue is clear: we must break our dependence on gas if we want energy bills to come down. As Ofgem’s chief executive officer told the Committee a few weeks ago, unless we transform energy infrastructure we will remain at the mercy of volatile international gas markets. The evidence shows that, in a clean power system, even a major shock of the kind we have seen in recent years would see bills rise by an average of 9%, versus 44% following the gas crisis in 2022. That is why this Government’s mission for clean power is so vital. It is not just about the climate; it is about bringing bills down. Under questioning from our Committee, Ofgem’s representatives agreed that the target, while ambitious, is very achievable. However, they also warned that, without urgent action on planning reform and supply chains, we risk missing that crucial deadline.

We must also acknowledge the historic failures of market regulation. Consumer debt has now reached an astronomical £3.82 billion, which is nearly double what it was two years ago. When we pressed Ofgem representatives on what would trigger serious Government intervention, they could not give a clear answer, but it is clear that something more has to be done. The chief executive admitted that they should have developed much more detailed rules on prepayment meters and market regulation much earlier, rather than relying on broad principles that left vulnerable customers exposed. Even now, Ofgem acknowledges significant gaps in its powers to protect consumers, particularly around data sharing between Government Departments to identify vulnerable households that need support.

The Committee dug into one particular example: the regulator’s handling of supplier failures, which is deeply problematic. We were told that when energy companies went bust, the shareholders were able to walk away with hundreds of millions of pounds of energy hedges, while taxpayers were left picking up the bill. Ofgem admitted to us that it lacks the power to recover those funds on behalf of the taxpayer, so hundreds of millions of pounds have been lost to those who have gambled on our energy market. That is a striking example of how the market has been stacked against ordinary people. The regulator’s director of markets did acknowledge to the Committee that some suppliers are still not compliant with new financial resilience requirements, but he could not assure us as to what actions Ofgem would take if those suppliers fail to meet the deadline by March.

Moving to clean power is essential, and we must take immediate action to protect vulnerable households. That is why I support the move to a social tariff; a discounted energy scheme for low-income households would make sure that we build a fairer, greener and more sustainable energy system for everyone. At its core, a social tariff is a targeted discount on energy for people on low incomes, which would act as a vital safety net and ensure that nobody must choose between heating and eating. A social tariff could provide a guaranteed below-market rate for eligible households, with automatic enrolment for those who qualify. There would be no complex switching around or shopping around, just straightforward help for those who need it.

The evidence shows that 6.1 million households now live in fuel poverty, with many of those who are struggling paying a poverty premium. They are using prepayment meters or are on standard variable tariffs, which is simply wrong. A properly designed and implemented social tariff would be mandated across all suppliers, so that no one misses out; it would automatically enrol eligible households, using existing data to remove barriers to entry; and it would deliver real savings for those most in need.

As one of the richest economies in the world, we should make sure that everyone can afford to keep their homes warm. The technology and the mechanism exist, but now we need the political action to make it happen. Achieving clean power by 2030, combined with proper consumer protection and targeted support, will bring bills down for good. The previous Government’s failures have cost families dearly, and I urge Members on both sides of the House to use their voice to call for greater protection for energy users and greater power for regulators, and to call out the profiteering of energy companies at times of crisis.