Mike Weir
Main Page: Mike Weir (Scottish National Party - Angus)
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?
Mr Mike Weir (Angus) (SNP)
I am listening very closely to the right hon. Lady, and I even agree with some of it, but I am genuinely confused about the idea of a pool and how it fits in with the Energy Bill’s contracts for difference, which guarantees a strike price for generators. I fail to see how putting all the energy into a pool will create competition, as the price has already been set, and if it goes above that, the company will have to pay back the difference, while if it goes below it, the taxpayer will have to pay.
Caroline Flint
That might be the price for the generator but it is not the retail price, and that is what is important in terms of competition and keeping pressure on. I am surprised that Scottish National party Members decided not to support the price freeze. They are on the side of the Prime Minister and the big six while my colleague Johann Lamont—Scotland’s Labour leader—and Scotland’s millions of energy consumers support the price freeze.
Mr Mike Weir (Angus) (SNP)
I hope everyone in the House agrees that the rising cost of energy is putting huge strains on families throughout the country. The motion calls for a freeze on energy prices. That is superficially attractive, but it is mired in difficulties, not least because it freezes the inequalities in the system. It is true, however, that the energy companies have serious questions to answer about the reason prices are rising. Every year we are told that it is due to the wholesale price of energy, and the Energy Secretary repeated that in last week’s statement. However, the chief executive of Ovo Energy, appearing before the Select Committee and on TV this week, stated that the cost of gas he is buying is lower than it has been in the past four years. Ofgem originally questioned whether there had in fact been a price rise, before rowing back. Its position can best be summed up as: “It depends how you read the figures,” which hardly instils confidence.
I fully understand that the situation is probably not straightforward, in that the need to ensure sufficient supplies well into the future and the volumes of energy purchased by the large companies, effectively as futures, as against that of smaller companies who may buy on the spot market, may make a difference, but both the regulator and the Department must act decisively. If there is any suggestion that wholesale prices have not risen as claimed, the rises must be cancelled or curtailed. It is not good enough to call for a Competition Commission inquiry. That will take years and we need quick action now to find out the truth of the claims. To that extent, I support the call to ensure that when wholesale prices are reduced they should be passed on to the consumer. The consumer is rightly suspicious and we require much greater transparency.
I have said on other occasions, and will repeat it again, that we would be prepared to look at any proposals for reducing energy bills, but I have concerns about the Labour proposal for a one-off energy price freeze. What would happen, for example, if energy companies substantially increased prices prior to, or immediately after, the freeze? Would a Labour Government force a reduction? Would they bring in a permanent control of prices? How would they deal with the urgent need for investment in our energy infrastructure? In an intervention, I asked about contracts for difference and the pool system. Hon. Members will recall that contracts for difference were supposed to guarantee a price to stimulate much needed investment in energy infrastructure. I do not understand how that would fit into the proposed system.
The right hon. Member for Don Valley (Caroline Flint) spoke at length about splitting up energy companies, but she seemed to be talking about the split between the two wings of energy companies—the wholesale and the retail supply side. That has dangers. Anyone who watched the recent “Dispatches” programme on energy prices would have seen what was said about E.ON and the rather unique way it deals with that. Apparently, the retail side makes no money because it pays huge rates of interest on money borrowed entirely from associated companies within the group. How will that be dealt with in the proposed system? E.ON is already effectively split between wholesale and retail, but that is not having an effect, because it is a matter of artificial accountancy, borrowing money from other companies within the group. As an alternative, we have proposed transferring from energy bills to general taxation the cost not of all green measures, but specifically of the fuel-poverty measures and the energy company obligation, which we calculate would reduce energy bills by 5% or about £70 each and every year—it would not be a one-off saving. This would have the added advantage of delivering a more integrated fuel-poverty programme than could be achieved if we left it to the energy companies.
In the energy statement last week, the Secretary of State again repeated that the Government had taken powers to implement the Prime Minister’s promise to put everyone on the lowest tariff. I have pointed out before, and will do so again, that the measures in the Energy Bill will not have that effect. The Bill requires energy companies not to put everyone on the lowest tariff, but only to make the offer, which might be lost in the mass of paper we receive from them already. Is not part of the problem that there is such a lack of trust in energy companies that whatever they offer will be met with total scepticism by consumers, even when they offer free loft insulation or suggest the most appropriate tariff?
The proposed changes will even fail to help the poorest in our society who have to rely on prepayment meters—this is another difficulty with the energy price freeze. For someone on a direct debit tariff, it might be fine, but anyone on a prepayment meter will still be stuck on a higher tariff, because generally their tariffs are higher than direct debit tariffs. If we are truly intent on ensuring that everyone has the lowest possible bills, these measures should not only operate within an existing contract, but allow people to move to a cheaper contract. Instead of freezing the price, we need to mandate that people be moved to a cheaper contract.
Perversely, prepayment meters are one of the few examples where consumers pay much more if they pay cash in advance. That is important, because Citizens Advice Scotland recently issued an energy report showing that the majority of people coming to it with energy problems have trouble with prepayment meters. It cited examples of people putting £10 in a meter, only to see £7 taken to meet existing debts, leaving them with only £3 of energy, which is completely insufficient to heat homes.
The motion calls on the Government to put all over-75s on the cheapest tariff. Although any help is welcome, it rather depends on the tariffs. If the cost of energy continues to rise, the amount payable will also continue to rise throughout the various tariffs, so this measure would not hit at the heart of the problem of the relative affordability of energy. It is not clear whether the motion intends that people should be put on the cheapest tariff that their present supplier offers or the cheapest overall tariff. The best option is to have a cheaper specific tariff that is identical across all companies and available to the over-75s. That would attack the problem. A system of higher winter fuel allowances for elderly people would also be a much better option. Furthermore, to take up the point raised by the hon. Member for Ynys Môn (Albert Owen) about off-grid consumers, I have tried repeatedly—and will do so again on 27 November—to raise in the House the idea of earlier winter fuel allowances for those off the gas grid.
It has been interesting to listen to Labour Members. Understandably, they seem to have great disdain for the energy companies. I was particularly struck by the speech from the hon. Member for Glasgow Central (Anas Sarwar), who is no longer in his place. In a recent article in The Independent, however, I noticed that at the very conference at which Labour announced its new policy, it had a céilidh sponsored by Scottish Power, so it has not always been so reluctant to dance to the tune of the big energy companies.
Caroline Lucas (Brighton, Pavilion) (Green)
I am very pleased finally to have an opportunity to contribute to this important debate, because it concerns a crucial issue that is raised with me time and again by my constituents. We should bear in mind that, as many other Members have said today, behind all the statistics that often dominate debates such as this are real people and real suffering. We are talking about people who wake up with ice on the inside of their windows, and about people who huddle in a single room because that is the only room that they can afford to heat.
More than 1.5 million children in he United Kingdom are growing up in cold homes. Each winter, four times as many people are killed by fuel poverty as are killed on Britain’s roads, and fuel poverty-related illnesses cost the national health service more than £1 billion every year. I think that, given that background, few would deny that we have an energy bill crisis. In the context of the Fuel Poverty Advisory Group’s warning that fuel poverty affects 6 million households, the profits of the big six are deeply offensive. Between 2008 and 2010, their profits doubled to £4.6 billion. Last year, Centrica alone made profits of £1.3 billion, no doubt benefiting in a range of ways from the secondments of its employees to the Department of Energy and Climate Change and from its boss Sam Laidlaw’s influence as a former member of the Prime Minister’s business advisory group. That is just one example of the revolving door between the big fossil fuel companies and Whitehall, which was similarly well oiled under the last Government.
A temporary bill freeze would be a welcome respite from price hikes which, as the Committee on Climate Change has reminded us, are mainly due to increases in the price of gas. I called for a price cap, along with a windfall tax on big six profits and a public inquiry, almost two years ago, on one occasion during a Westminster Hall debate in February 2012, and many Labour Back Benchers signed my early-day motion on the subject. I support the relief that a temporary price freeze would bring, so I shall vote in favour of the motion, but we also need a much more ambitious, far-reaching and coherent response. I hope that today the Opposition parties will be able to unite behind calls for a radical reform of the energy market as well, because I believe that that is the only way—and a permanent way—in which to tackle high energy bills, and I hope that they will get behind effective measures to break the stranglehold of the big six.
As Fuel Poverty Action says:
“Freezing prices at their current level won’t help the thousands of people who already die each winter due to fuel poverty: our bills are already at deadly highs”,
so I want to set out five practical, positive and powerful policies to tackle fuel poverty this winter and for winters to come.
First, the only permanent solution to the Energy Bill crisis is to make all our homes much more energy-efficient, so I am disappointed that there is no mention of energy-efficiency in the motion, especially as the green deal barely scratches the surface. Under the energy company obligation, at current rates it would take about 32 years to insulate all fuel-poor homes. Insulation rates are plummeting when they should be rocketing, and energy-efficiency businesses, often SMEs, are struggling when they should be flourishing.
That is why a huge coalition of organisations representing consumers, families, faith groups and others all back the Energy Bill revolution campaign. It calls for revenue from carbon taxes, which currently disappears into Treasury coffers, to be recycled into a nationwide programme to make all homes super energy-efficient, with full insulation, modern boilers and renewable energy such as domestic PV, solar hot water and biomass heating. That could bring nine out of 10 homes out of fuel poverty, lower people’s bills, deliver four times more carbon cuts than current schemes and create 200,000 jobs. I again ask both the Government and the official Opposition why they will not support it.
Mandatory efficiency standards are crucial, too. Some 70% of Britain’s fuel-poor live in properties with bottom of the barrel energy-efficiency ratings of E, F or G. A genuine fuel-poverty strategy must, at the very least, commit to lifting all these properties to band D standards by 2020 and raising the rest of our housing stock to today’s new-build standards by 2030.
Secondly, we need ambitious fuel poverty eradication targets. I want to highlight a coalition amendment that was sneaked in during the Lords Committee stage of the Energy Bill. Astonishingly, Ministers are trying remove the statutory duty on Government to eradicate fuel poverty. They are replacing it with a vague provision to do something at some point merely to address the situation of those in fuel poverty, and all in secondary legislation, thereby reducing accountability and scrutiny. As the fuel-poor prepare for the onslaught of the cold and avoidable winter deaths, I trust the Minister and the Opposition will rethink their position and give strong cross-party support to the fuel-poverty amendment tabled by Lord O’Neill of Clackmannan when the Bill returns to this House.
The Committee on Climate Change has confirmed that by far the greatest contributory factor to higher energy bills has been the rising price of gas. That makes the Government’s dash for gas deeply irresponsible. It will increase our dependence on gas with higher energy bills, as well as fatally undermine our hopes of tackling climate change. That is the third area where we need urgent action. This also makes Labour’s position of conditional support for shale gas inconsistent with its enthusiasm for a 2030 decarbonisation target and its rhetoric on affordable energy.
There is an alternative to gas. Renewable energy can go hand in hand with affordable energy and can help cut our exposure to high and volatile fossil-fuel prices. While fossil fuels are on an upward cost trajectory, renewable technologies have seen dramatic price falls in the past few years. So if we are serious about creating an affordable energy system, we should be going all out for renewables and energy-efficiency.
Fourthly, we should be doing much more to end the big six’s control over power generation and supply, not regulating them better, not just erecting a paper wall between their generation and supply businesses, not just requiring them to sell their power through a different structure. If we are serious about diversity in the energy market and cutting costs by allowing renewables to push down wholesale peak prices of power, we need to ensure renewables are given priority access to the grid.
We have an opportunity to create a radically different energy system, where co-operative and community and independently-owned local renewable energy schemes flourish. In those circumstances, local people benefit from the energy created. The Belgian co-operative Ecopower provides energy for over 30,000 members. Denmark guarantees that 20% of all energy projects are open for community financing. In Germany over half of all the installed renewable energy capacity is owned by private citizens and co-operatives. That is the sort of transformative scale of community power we should be aiming for here, too. It is where the greatest wins for households and business energy bills can be secured. Projects such as the Brighton Energy Co-operative in my constituency provide a glimpse of an incredibly positive alternative energy future where people are active producers rather than just passive consumers.
Community energy should be central to the debate about energy bills. Words alone will not deliver, however; we need policies and action. For every community to generate its own electricity, we need a regulatory framework that allows communities to buy the electricity they generate at wholesale costs, freeing them from the rip-off retail market.
Caroline Lucas
I thank the hon. Gentleman for his intervention, because it makes exactly the point that I want to move on to. For as long as both the Opposition and the Government are committed to these huge subsidies that are going to be behind nuclear power, their outrage at energy bills sounds a bit thin—it beggars belief. The size of the subsidies that will go to nuclear power will lock us into extremely long periods of paying over the odds to companies such as EDF. The rate of return on investment reportedly given to EDF is a whopping 10%—that is 10% profits, guaranteed for decades, going from our constituents to EDF, one of the big six. Why is it acceptable for UK bill payers to be fleeced in order to provide a rate of return to EDF that is double that which Ministers have said they see as fit for renewable projects—schemes that could be owned by communities themselves? Let us not forget that Hinkley Point C will not boil a kettle until the early 2020s, at best, by which time many renewable energy technologies will be a much better deal when it comes to keeping energy costs down.
Caroline Lucas
I thank the hon. Gentleman, who must have been looking over my shoulder, because these are exactly the points that I would make. When we compare nuclear with renewables, we see that in some cases renewables are already cheaper. They are also asking for a strike price of £91 by 2018, which is substantially less than what we are going to be giving to nuclear.
Consumer Futures said that the Hinkley deal
“moves the risks of future variations in wholesale prices from investors onto consumers, will likely see household bills increase and will distort future investment in electricity generation.
Consumers will again feel that the energy market is stacked against them.”
I just cannot understand why there is not greater outrage at the way in which we are allowing ourselves to be locked into these long contracts with EDF, paying over and above market prices for decades to come. I repeat that it is hard to take seriously the crocodile tears we are seeing from hon. Members on both sides of the House while we are suggesting paying hand over fist to the nuclear companies, which will be laughing all the way to the bank.
In conclusion, I welcome the greater focus on the problem of high energy bills that we have seen in recent months. It is a massive issue in all our constituencies; people come to us on a daily basis worried about how they are going to be able to survive the winter. It is a matter of life and death, not just of discomfort; we are talking about people who are going to be suffering from radically ill health and about the premature deaths associated with fuel poverty. So I welcome this debate, but I regret that most of the solutions put forward do not fully address the root causes of fuel poverty and high energy costs. A fundamental shift should be at the heart of energy market reform. I am worried that we have heard much more about tinkering around the edges of a system that keeps the big six in power and far too many people in fuel poverty, rather than about much more radical energy transformation, which we are beginning to see in other countries. There is a precedent and we could be following it here—if the political will existed.