Neil Carmichael
Main Page: Neil Carmichael (Conservative - Stroud)Energy Price Freeze
Neil Carmichael Excerpts
Caroline Flint
Small suppliers have told us on the record that the most important thing for their future viability and competition is openness, transparency and access, and that is what our proposals seek to do.
Let me deal with each of our proposals in turn. The first is to freeze gas and electricity prices for 20 months. We would do that—the Government could do this now—by legislating to give the Secretary of State the power to modify suppliers’ licences to stop them raising their prices. Over 20 months it would save the average household £120, the average small business £5,500 and the average medium-sized firm nearly £33,000.
Caroline Flint
I am not going to give way.
The reason that is needed is simple: the public have been overcharged. Figures we published yesterday revealed a large and growing gap between the costs that energy companies have paid on the wholesale market and the prices they have charged their customers. They confirm what the chief executive of Ovo said the week before last when he noted that wholesale prices had been broadly flat over the last two years and that companies could be facing higher wholesale costs only if they had bought energy from themselves and above the market price.
Those figures, which have been audited by the House of Commons Library, also confirm that the mark-up cannot be explained by any of the other excuses we keep hearing from the companies when they raise prices, be they network charges or policy costs, because more than half the increase in bills has gone straight to the energy companies, either in the form of higher profits or to pay for inefficiencies in their businesses.
Mr Davey
No, I will not give way. I want to explain to the House why the document is so important, and why Ofgem’s policies, which the Government support—we have put reserve powers in the Energy Bill to push them through—are so important for competition and pushing prices down for consumers.
Independent generators need to know who will buy their electricity. The right hon. Lady is right that the big six can sell it to themselves, but independent generators cannot do so—they must sell it to someone else. That is a big risk for the independent generators, and they need to be able to cover it. Primarily, they do so at the moment through purchase power agreements or through bilateral trades, which are used mainly when selling to businesses. However, they say that they cannot guarantee those, so they must spend more, and that their capital costs increase because of those risks.
Independent generators face another risk. The question is not only whether they can sell energy, but whether they can buy it. If they have a contractual power purchase agreement and their generation capacity is not working for a particular month and they are unable to supply, they fail their contract. To be able to enter more contracts and expand their businesses, they therefore need to know that they can buy energy in the wholesale markets if their generating capacity is not working.
It is therefore essential that we have a liquid market for four months, six months and 24 months ahead. Guess what? The previous Government did nothing to enable that competition in generating markets. Interestingly, the policies the Opposition have proposed today will also do nothing about the real problem. The description that the right hon. Lady gave of her policies proves that point. If she had read the document, she would have seen on page 8 the analysis by Ofgem—working on all the contributions from the independent suppliers and all the people in the industry—is that the problem she has identified is no longer a problem. It has marked that problem “green”. The problems that we have identified, which we and Ofgem are fixing, are all marked “red”. She really needs to do her homework. There is no point the official Opposition coming to this House with ill-thought-through policies that will not work. Our policies will work for the consumer, push competition into the market and get prices down.
Neil Carmichael
Does my right hon. Friend agree that it is slightly surprising that the Opposition know so little about the big six, when one of their number—a shadow Minister in the other place—was actually director of government affairs for SSE? How does that stack up?
Neil Carmichael (Stroud) (Con)
I think that this is the first time I have been in action while you have been in the Chair, Madam Deputy Speaker, so let me congratulate you on your election.
It is a great pleasure to follow the right hon. Member for Coatbridge, Chryston and Bellshill (Mr Clarke). I listened carefully to the hon. Member for Ynys Môn (Albert Owen), and I agree with his views about nuclear power. Nevertheless, I think that the Secretary of State made an excellent and powerful speech that drilled some very big holes in the speech by the shadow Secretary of State.
We have to get three things across straight away. First, we cannot talk sensibly about energy policy without noting that commodity prices across the globe are rising, and it is therefore unacceptable to talk about this in a strictly local way. My hon. Friend the Member for Wealden (Charles Hendry) made that point very powerfully in connection with rising gas prices having affected overall energy prices.
Sir Malcolm Bruce (Gordon) (LD)
The hon. Gentleman is making an important point. Does he think that the Labour party may have embarked on a process that will inevitably lead to a comprehensive prices and incomes policy, because when other prices go up, people will look for the same action in those areas? Have not we been there before, and was it not a very uncomfortable space to be in?
Neil Carmichael
That is a good point, and I will deal with it later. I thank the right hon. Gentleman for reminding me to mention it.
Secondly, we cannot talk sensibly about this subject unless or until we understand the economic circumstances in which we live. A lot of people would say that we want lower energy prices, and absolutely we do—the Government are right to emphasise that—but we have to produce some economic growth to help to drive down prices and to drive up wages and salaries where appropriate. We have to get that on the table and well understood.
Thirdly, it is a bit rich for Labour Members to claim that this is all our fault when during 13 years they did not build one single nuclear power station. [Interruption.] They did not, and we have got on with the job. The Government are absolutely right about that.
My main points are these: first, commodity prices are global, and we cannot influence them globally but must respond to them sensibly and locally; secondly, we must consider the economic circumstances; and thirdly, we have the history of failure by the previous Labour Government.
We have to increase capacity, and that is why the Energy Bill is so important. We talk about the big six, but in my constituency we have a large number of small companies and one fairly big one that is not a member of the big six but is a powerful beast nevertheless—Ecotricity, which is busy taking new customers from the big six because of the price rises. That is an example of effective competition being driven, and quite right too, by the arrival of more capacity.
Duncan Hames
I have a small competitor in the electricity supply market in my constituency as well. Does the hon. Gentleman recognise that these smaller competitors would be disadvantaged during a price freeze because in trying to buy energy on the forward market they lack the collateral that the big six have, and therefore, during that period, the big six would be advantaged over the competition?
Neil Carmichael
Not yet, because I am dealing with this point. A price freeze simply freezes the problem and does not enable a solution to be introduced. I have admitted that we need to find ways of driving prices down—of course we do—but a price freeze is not the right way because it will prevent firms from responding normally to the market. As the right hon. Member for Gordon (Sir Malcolm Bruce) correctly noted, if we start freezing one thing it is not long before we need to freeze a few more things in order to keep up.
Neil Carmichael
I will give way to the hon. Member for Brighton, Pavilion (Caroline Lucas) if she is quick.
Caroline Lucas
That is immensely kind; I thank the hon. Gentleman so much. He talked about the smaller company in his constituency. If it is the one I think it is, its chief executive has said that the reason it was able to keep prices lower was because it had been investing in renewables, not getting hooked up in gas or other fossil fuels. Is that not the conclusion to draw from the hon. Gentleman’s remarks?
Neil Carmichael
That brings me to my next point, which is, ironically, that there is a tension between wanting to have lower prices and protecting the environment. I have often thought that the Department of Energy and Climate Change is both poacher and gamekeeper. We need to continue investing in green energy. I will always promote green energy because my constituency has a lot of important companies that are working extraordinarily hard to develop green technologies. However, we must respond to the price issue as well. That is why the Government are right to calibrate the green taxes more sensibly to reduce prices in the energy market. I get the sense more and more that the Opposition agree that the price freeze is simply idiotic.
I will talk about two other important matters. The first is energy storage. We do not give enough attention to that subject. Energy storage technologies will help and we need to invest in them. I hope that we will see energy storage treated as a capacity in the Energy Bill and that it will be invested in. Liquid air, for example, provides us with an opportunity to store energy and thereby flatten out demand and sort out the trough problems.
My hon. Friend the Member for Warrington South (David Mowat) spoke sensibly about the need to focus on making houses more energy efficient. Of course we must do that. We have the least energy-efficient houses in Europe in broad terms. We have to continue with the green deal. I am delighted that the Minister is promoting that and that it has got off to a good start. We have to ensure that our houses do not leak energy, but contain it and therefore use less of it. That is one way to reduce bills.
Something that has not been discussed in the debate thus far is competitiveness, not just in this country, but across Europe. In January, the Prime Minister set out the stall for renegotiating our position in the European Union. One of the key points that he made was that we should strengthen the single market in energy. He was absolutely right. We have to recognise that there are lower commodity prices on the continent. We must be able to benefit from those prices. We need to attract investment from the continent and we must invest in the continent so that we have a more competitive and more connected energy policy.
Connectivity is lacking in certain areas. We need more investment in our infrastructure so that we can be sure that whatever form of energy we alight upon can get to the right place in the most cost-effective and efficient way. That is definitely a way to drive down prices. We must set out the stall for increasing competition in the energy market both locally and internationally, with Europe as a target. That would not be a particularly difficult thing to do.
Dr Whitehead
The hon. Gentleman makes an important point about interconnectivity. Will he therefore explain why the Government have specifically excluded interconnections from their capacity market arrangement? Will he be at the forefront of trying to change that?
Neil Carmichael
It is always great to hear from a fellow member of the Environmental Audit Committee. He asks a very good question. [Hon. Members: “Answer the question.”] And he will get a very good answer. I am referring to connectivity across Europe. I do not think that the remit of the Energy Bill extends that far. There is not sufficient connectivity between England and France. There is no connectivity between Norway and—
Neil Carmichael
No, the hon. Gentleman has had a fair crack of the whip.
In summary, this is about powering through with more competition and ensuring downward pressure on prices, while recognising the global and economic challenges we still face, even though they are being rapidly dealt with by the Government. We cannot talk about a subject as critical as energy without considering those other issues—that is the key point on which I shall conclude.