Energy Market Reform

Simon Hughes Excerpts

Wednesday 24th October 2012 Commons Chamber

[Caroline Flint]

That is another bit of casework to look into. The obstructions to energy plans are numerous. At our party conference, we launched the “Power Book”, which is a collection of ideas and articles on ways to decentralise energy through energy generation and energy efficiency. It looks at ways in which community groups can be supported, rather than hindered, in doing the right thing. In many ways, that could be far more cost-effective.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

When I did the right hon. Lady’s job at the end of the last Parliament and shadowed the current leader of the Labour party, who was then the Secretary of State for Energy and Climate Change, I tried to get Labour and Ofgem to reduce the number of tariffs from a ridiculous number to a small number. That was not done. Secondly, I tried to get them to legislate to persuade Ofgem that there should be an obligation to reduce the price to the consumer when the wholesale price went down, and not to leave it for six, nine or twelve months. None of those things was delivered. I welcome the conversion, but does the right hon. Lady not recognise that it has come several years later than it could have done?

[Caroline Flint]

On the basis of the right hon. Gentleman’s contribution, I look forward to our being in the same Lobby for the vote. Our proposals would tackle some of the issues that gradual reform has not tackled. The energy market has changed a lot since it has been privatised. Efforts were made to enable Ofgem to be stronger, but on the evidence of the past few years, it has not been. That is why we believe that our proposals, which are now on the stocks, are the best ones to take us towards a market that is more competitive and more use to consumers.

--- Later in debate ---

[Caroline Flint]

I absolutely agree, and I commend the Select Committee for its fantastic work over the past year. Since I have been in my post, it has been most useful to my discussions and thoughts about how policy should develop.

Thirdly—this takes me on to Ofgem’s role—I am afraid that too often in the past, Ofgem has ducked the opportunity to get tough with the energy giants. I believe that we therefore need to create a tough new regulator that people can trust. I can tell the House that we seriously considered whether it would be better to reform Ofgem or start again from scratch. In the end, I do not believe that just giving Ofgem new powers is the answer, because it is not using the powers that it already has. It has failed to enforce its own rules, and time after time it has let the energy companies get away with ripping off hard-pressed families and pensioners.

As I said earlier, when Ofgem removed price controls a decade ago, it did so in the belief that competition had developed sufficiently, and that privatisation had delivered a functioning competitive market. It is now clear that that was a mistake. Almost every indicator, such as consumer engagement and market share pricing, gives us cause for concern. The answer is not to go back to nationalisation but to reform the energy market to make it more open, transparent and competitive. Until that happens, we must ensure that the regulator has the power and authority that it needs to protect consumers.

That was why, at the Labour party conference, I announced that the next Labour Government would abolish Ofgem and create a tough new regulator with a statutory duty to monitor the relationship between the prices that energy companies pay for their energy and the bills that the public pay. It would have the power to force companies to pass on price cuts when wholesale costs fall. It would be a new watchdog with new powers, new responsibilities—including for small businesses and off-grid customers—a new focus and new leadership.

[Simon Hughes]

Will the right hon. Lady give way?

[Caroline Flint]

I have given way to the right hon. Gentleman already. I am sure he will want to make a speech, and I will be very interested to hear any other policy ideas.

The Government promised change, but nothing is changing. Energy bills are up by more than £200 on their watch and fewer people than ever are engaging with the energy market, which is untransparent, uncompetitive and unfair. People need real help now and a more responsible energy market for the future, which is simpler, works in the public interest and protects the most vulnerable. Real action, not warm words—that is Labour’s promise, as shown in today’s motion, which I really do commend to Members of all parties.

--- Later in debate ---

[Mr Davey]

Unlike the right hon. Lady, this Government respect an independent regulator. Ofgem has been conducting its retail market review. It would have been completely inappropriate for the Government to publish a consultation before the independent regulator completed its work. She ought to know that. We have been waiting for the report and got it just last week. As a result of receiving that work, we will take forward our consultation, which will enable us to introduce new legislation in the Energy Bill.

[Simon Hughes]

My right hon. Friend is right to say that it would have been nonsense not to wait for the review to finish before considering what to do, but given that it is also absolute nonsense to propose abolishing a regulator, only to create a new regulator to do a similar sort of job—namely, regulating the energy industry—will he take the much more sensible option of being open to suggestions from wherever they might come as to ways in which we might toughen the role of the current regulator to make it much more responsive to the needs of our constituents?

[Mr Davey]

My right hon. Friend is absolutely right, and the Government will do just that.

I pay tribute to Ofgem’s work on simpler bills—the retail market review it published last week is an excellent piece of work. I was disappointed that the right hon. Lady did not welcome it. That might be something to do with her policy of abolishing Ofgem, which I should like briefly to turn to as my right hon. Friend has raised the matter. We want to understand why the right hon. Lady believes that abolishing one regulator and replacing it with another will make any difference whatever. That is a recipe for delay and chaos and for letting the energy companies get away with it while the Opposition mess around moving the deckchairs on the Titanic.

The right hon. Lady said that the previous Government looked at whether reforming the regulator would be better than creating a new one. She gave no good reason why we could not reform Ofgem, which is what this Government will do. It is interesting that she wants to spend time rebranding public bodies. I do not know whether she believes that is a good use of taxpayers’ money, but, interestingly, her proposal is rather disloyal to the Leader of the Opposition. I am sure she is aware that he legislated on Ofgem when he was Secretary of State for Energy and Climate Change. Just two and a half years ago, he told the House that the purpose of his Energy Act 2010 was

“precisely to strengthen Ofgem's powers in a number of respects and to make it a more proactive regulator”—[Official Report, 7 January 2010; Vol. 503, c. 254.]

Will the right hon. Lady come to the Dispatch Box to suggest that the Leader of the Opposition got it wrong just two and a half years ago?