Energy Markets (Competition)

Debate between Roger Gale and David Mowat

Wednesday 26th March 2014 Westminster Hall

[David Mowat (Warrington South) (Con)]

I did not rise to indicate that I wanted to speak, because I was with a colleague last night and I left my speech in the pub. I have been trying to rewrite it and I will happily now go ahead.

[Sir Roger Gale (in the Chair)]

Order. The hon. Gentleman did the courtesy of putting his name down to speak, which is why he was called. We try to call people, as a general rule, who bother to put their names in first. No doubt the circumstances he faces will lead to brevity.

[David Mowat]

Certainly the second part of my remarks will be brief, Sir Roger.

The issue before us is serious. Everyone at this debate is concerned about fuel poverty in their constituencies and high fuel prices. Most of us, I think, are concerned about energy intensive industries, particularly in the north-west and the north-east. Some 900,000 people work in industries where the price of energy is a significant determinant of profitability, and it behoves us all to take the issue seriously. We are where we are because issues have been raised on the market fairness and market effectiveness of the energy industry in the UK, and it is right that we look at that. The Secretary of State has talked about referring the industry to the competition authorities, and I support that.

It is important—the opening remarks did not do this—to distinguish between gas and electricity, because they are different markets. I want to talk a little bit differently about each of them. There are suggestions that the industry is some kind of cartel and “the big six” is, frankly, often used in this House almost like a swear word. We hear that the big six do this and do that. I have heard the shadow Secretary of State use the phrases “price fixing” and “secret deals”. If the Opposition have evidence of cartels or price fixing, that is extremely serious. If it exists, directors of public companies will go to prison. Fines can be levied that are several times the turnover of those companies. It is important that the Opposition bring that evidence forward, if it exists.

When words like “cartel” and phrases like “secret deals” and “price fixing” are being used, be aware of what is being suggested and be willing to take that forward and give that evidence to the competition authorities in the European Union and the UK and to the police. If such evidence does not exist, it might behove the Opposition to use more moderate language, which they were doing in their opening remarks in this debate, at least.

I want to make some comments on how the UK market compares with the EU market. One way to find out whether there is price fixing, cartels or other problems is to see how our market compares in structure and outcome with the rest of the EU. I have done a little analysis on that, under three headings. The first is out-turn prices for gas and electricity in the UK compared with other EU countries. The second is market structure. People say that we broadly have the big six in gas and electricity, and other countries in Europe do not have that structure. The third is the profitability of those energy retailers in the UK versus other places. I report that the answer is different for gas and electricity.

On gas, we have to distinguish between taxed and untaxed prices. In this country, we tax gas very little, while the EU taxes it much more heavily. It can appear that prices are higher there, so it is only fair to look at untaxed prices; on that basis, our gas prices are the second lowest in the EU, although it is true that they are significantly more than in some other countries. They are triple the prices in the United States of America, but we know that that is to do with shale gas and all that goes around that. Our gas prices are the second lowest in the EU, yet broadly speaking we have an EU energy market for gas, and some comparability would be expected. If a cartel is operating in the gas market, it is hard to see that it is being very effective.

On electricity, our retail prices are among the lowest in the EU. When we look at the position without tax, it is a little more nuanced. According to the EU portal, our untaxed electricity prices are slightly higher than those in Germany, Holland and France, although not by very much—5% or 6% higher. That is a lot of money, however, by the time that all works through. On the face of it, there might be a more significant issue with electricity than there is with gas. I would be interested to know whether Opposition Members are talking about the need for a price freeze for both industries or just for electricity.

--- Later in debate ---

[David Mowat]

I want to put on the record the fact that our gas prices are the second lowest in the EU, according to the EU energy portal and the International Energy Agency. I realise that we cannot spend our time bandying this around.

[Sir Roger Gale (in the Chair)]

No, we cannot.