Mike Weir
Main Page: Mike Weir (Scottish National Party - Angus)(10 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text
John Robertson
When more than one Department is involved in this place we always have a problems—it does not seem to matter what is done. If we involve a Secretary of State for Business, Innovation and Skills and a Secretary of State for Energy and Climate Change, they are going to have their own drivers, which are not always the same. A Minister put in place to cover both Departments has a hard job, because it cannot be easy dealing with the Secretary of State for Energy and Climate Change, let alone the other one. So good luck to the right hon. Member for Sevenoaks—we will see where he goes. We certainly need to look at how energy is governed, and it should not be done across Departments. One Department should be dealing with it, although it could be done by a bigger Department.
I have no objection to companies making profits, but profits have gone up by £3.3 billion since 2010. The Secretary of State talked about what happened in 2009, 2006 and 2007, but he never said anything about what happened after that. The fact of the matter is that an increase of £3.3 billion since 2010 is a touch excessive. Public affairs consultants in the big six say they make only 2% profit while bragging to their shareholders that profits have gone up 20 times as much. That deals with what the hon. Member for Warrington South (David Mowat) was saying about the splitting of wholesale and retail. Everybody knows that I have spoken about that for a number of years. I believe that they should be split, because all we ever get from energy companies is that they have an increase in profits—it could be 4%, 5% or 6%—but that it is not enough to help them invest.
Mr Mike Weir (Angus) (SNP)
Is the hon. Gentleman’s position that the companies should be split into separate companies or two separate divisions? I cite, as I have done before, the position of E.ON, which apparently has two separate divisions but has complicated loan arrangements within them that reduces the profits. We must have transparency if this is to happen.
John Robertson
The hon. Gentleman is right about that. I am not a business man. I was an engineer, so I only like to fix things—I do not particularly like to break them, although in the case of the Government that is perhaps something else I would like to do. What he describes is a problem. When we split these companies up, do we say, “You can have either wholesale or retail, but you cannot have both”? Or do we say to a large company, “You have to split, as happened with BT, where it was split into wholesale and Openreach”? Do we say, “You have a choice, you can be one or the other but you cannot cross-fertilise and give people loans”? I do not know whether that is a good idea, but we have a regulator and a Government to deal with these things. Cleverer people than me will be able to work out what the best fit for the nation will be. But what I do believe is that the people I represent are the ones nobody consults but they are the same people we want the money from at the end of the day.
Mr Mike Weir (Angus) (SNP)
Things are certainly beginning to move fast in the energy market with this week’s reference to the Competition and Markets Authority and the announcement of Scottish and Southern Energy’s price freeze. The price freeze is welcome, but it is worth noting that it is not quite what it seems as it applies only to the standard tariff charged by the company, and anyone who looks at the website will see that the company still has many different tariffs.
However, the two events do, I suppose, allow both sides to claim some success. This afternoon the Government have claimed that competition works, while the Labour party points to its idea of a price freeze, and of course the two-year investigation has the added benefit of kicking difficult decisions to the other side of the general election. What it does not do is take action to deal with the huge contradiction that sits at the heart of energy policy. We all agree that we want our constituents to get relief from high energy bills, but we also want the massive investment that is required to meet our future energy needs, and to decarbonise the electricity supply.
In the very week when the IPCC issued a very alarming new report on the current impact and probable future impact of climate change, these are issues that cannot simply be swept aside as we struggle over how we get relief from higher energy bills for our constituents. The argument about how we got to the position of the big six energy companies will not take us very far. It is undoubtedly true that the privatised companies, at least initially, did not take adequate action to deal with future energy security, but like all newly privatised concerns set about making sure that they were attractive to investors and maintained a high share price. This offers one explanation for why most were quickly swallowed up by multinational energy companies and the big six came into being, with only SSE and Centrica still being independent UK-based companies.
I have looked at the Labour party document "Powering Britain: One Nation Labour's plans to reset the energy market". It is long on analysis, but I have some queries about how it will work. A price freeze is a headline idea, but so far there have been no real ideas about what will happen thereafter, and whether it would actually do much good. The price freeze would be temporary. It would do nothing to deal with the huge inequalities that currently exist within the energy system; it would simply freeze these in place. For example, those who are on an expensive tariff or on higher tariff pre-payment meters would still continue to pay more than those on direct debit payments. Surely some action should be taken on these issues, which we have debated several times in this place.
SSE, in its response to Labour's consultation, said:
“the proposals would not significantly reduce energy prices or provide energy investors with the long- term certainty they require to invest in the energy infrastructure consumers depend upon".
It further makes a point that I have often asked: what happens at the end of the freeze? The executive summary of the document talks about creating a tough new regulator to replace Ofgem, but what will be the powers of that regulator? If it is the intention to keep down prices, will it have the power to impose price caps or profit caps? Or as SSE put it in its more gentle terms
“Notwithstanding the proposal for a 20-month price freeze, the consultation does not appear to have a clear commitment or a sustainable solution to reduce costs of electricity and gas”.
The document talks about tackling the vertical integration of the companies. We all seem to assume that the CMA will tackle vertical integration, but hon. Members should look at what it says about that on page 14. It also talks about some of the benefits of vertical integration. Given the history of the Office of Fair Trading investigation into companies and what it says itself, we cannot take it for granted that it will tackle vertical integration. In an intervention on the hon. Member for Glasgow North West (John Robertson) I asked exactly what the terms of the ring-fencing will be. That will be important.
Other items in the document are old favourites, such as simplifying tariffs to encourage switching. But the elephant in the room is how we continue to encourage the much-needed investment in our energy infrastructure. When SSE announced its price freeze, it also announced that there would be 500 job losses and that it was pulling out of several renewable developments, which seems fairly clear evidence that those of us who did question whether a price freeze would come at the cost—
Pete Wishart (Perth and North Perthshire) (SNP)
My hon. Friend will know that SSE is based in my constituency and there is great concern among the Perth staff about exactly what will happen. With the advantages that we see from the press release there are also consequences. I am sure that my hon. Friend will address those.
Mr Weir
My h F is correct. As I was just saying, the price freeze does come at the cost of much-needed future investment and the jobs that it could create. It does seem to me that the CMA investigation will mean that there will be a slow-down in investment over at least the next two years while companies wait to see what will happen and how they will be affected by its conclusions.
Mark Tami (Alyn and Deeside) (Lab)
I would accept the hon. Gentleman's point if we had seen investment anyway, but we have not. For years and years, we have not seen the level of investment that we need. To say that it is the price freeze that is stopping it is ludicrous.
Mr Weir
The hon. Gentleman clearly is not listening. I said it would make the situation worse. I fully appreciate that we need this investment. It is not happening sufficiently now, but it will get worse under this. The hon. Gentleman should perhaps listen a little more closely. Effectively there will be a slow down in investment whatever happens now, and that could be disastrous since it is only by investment in new renewable energy that we can break away from the dependence on carbon-emitting generation and bring down bills permanently in the long run.
But if we are to have an investigation, it should look at the whole of the energy industry and in particular the very costly subsidies that are being provided for new nuclear. The deal announced for Hinkley C is almost double the current wholesale energy price, and incidentally, I understand, very much higher than prices agreed by EDF for similar stations overseas. It will cost the taxpayer an eye-watering sum of money and be guaranteed for at least 35 years. Indeed, the cost of that station alone will be more than four times the total amount paid out in renewable obligations for the first 10 years of its existence. If more stations are built, we can assume that developers will be seeking the same sort of deal, and Hinkley will become the benchmark of how nuclear developers can soak the taxpayer. Perhaps this is an area that could be improved by more ‘transparency’ and ‘accountability’ as sought in the motion. All this, despite the fact that the similar stations being built in Finland and France are many years behind target and vastly over budget. Surely in any investigation into the market this should have been a major factor, yet there is simply no mention of it in the documents issued with the announcement of the review.
We believe that if we are to reduce and retain lower energy bills, we need to move to a renewable future and make that investment now. We believe that we need to remove the cost of the energy company obligation and warm home discount from energy bills and put it into general taxation, but maintain the level of spend. It is interesting to note that although the UK Government have removed those to some extent, that is a temporary measure for a couple of years, not a long-term measure. Doing this would be much fairer and allow a much more targeted approach to dealing with these issues. It is undeniably true that there is now so much distrust of the energy companies that even a good deal from them is now looked at with suspicion and rejected out of hand by many consumers.
The investigation by the CMA may well finally get some agreement on what is happening in the energy market and allow us a way forward. I could agree with most of the Opposition motion, but I do have difficulty with the last part which seems to have come to a conclusion about the investigation before it has taken place. Given that previous investigations by the OFT have decided that the market was working, I am not entirely sure that we can rely on this current one coming to the conclusion that the market is broken, as the motion puts it, although most of us would agree that there are indeed serious problems with it. It will be interesting to see the conclusions that it comes to. Clearly there must be changes in our energy industry, and the sooner the better.
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. With all due respect to the hon. Member who has just delivered his speech, I should point out to the House that three hon. Members in a row have spoken past the point at which they should have stopped. There are clocks in the Chamber, and when they show zero, it means it is time to stop speaking.