Annual Energy Statement

John Bercow Excerpts

Thursday 31st October 2013 Commons Chamber

[The Secretary of State for Energy and Climate Change (Mr Edward Davey)]

Today, I am laying before the House the annual energy statement, alongside the statutory security of supply report. This coalition Government are putting in place the most coherent, sustainable energy policy the United Kingdom has ever had. We are creating one of the most competitive and attractive electricity investment markets in the world; improving our energy security and affordability; and boosting home-grown clean energy, and providing jobs and economic growth in the process.

This ambitious energy and climate change policy is vital so that Britain can meet our significant challenges. The coalition Government inherited from the previous Administration an energy future with a huge, multi-billion pound black hole at its heart, which was the result of years of underinvestment, dithering and delay. So this Government are having to take the tough decisions others ducked to make sure that Britain’s lights do stay on. Everything we are doing has to ensure that we drive investment into the system, not scare it off or freeze it out. But, as I will make clear in this statement, energy security must go hand in hand with affordability.

So let me set out the robust plans we have to deliver affordable energy security. To deal with the problem of tightening electricity margins up to 2018, the Government have been working with National Grid and Ofgem to develop existing safeguards, in order to have more electricity available for the grid at peak times, including, if needed, through the use of power plants currently mothballed. We are introducing to Britain a capacity market to ensure that we attract the investment we need in new power stations. The first capacity market auction will take place next year—for delivery from the winter of 2018. In addition to those measures to keep the lights on, Britain now has a long-term strategy encapsulated in the Energy Bill. Over the summer, we published draft strike prices for renewable electricity under contracts for difference. Detailed proposals for the implementation of electricity market reform were published this month.

The fruits of bringing this greater predictability and certainty to investment are already showing. Latest estimates suggest that at least £35 billion has been invested in new electricity infrastructure since 2010, and much more is in the pipeline. In the past 12 months alone, we have provided consent for seven major energy infrastructure applications worth about £20 billion, with the capacity to generate electricity for more than 6 million homes. That, of course, included last week’s announcement that we have reached key commercial terms with EDF for the first new nuclear power station in a generation at Hinkley Point C. And there is more: through the Energy Bill’s final investment decision enabling programme, 23 applications for 26 investment contracts are currently being evaluated by the Department of Energy and Climate Change for a broad range of renewable technologies, including onshore wind, offshore wind and biomass projects.

Even though British households pay some of the lowest prices for gas and electricity in Europe, such facts are scant comfort to those who have seen energy prices rise considerably over the past 10 years. The main driver of these energy price rises has been rising wholesale energy costs, not social and environmental policy. But apportioning blame is also scant comfort to people who are struggling to make ends meet. That is why we have been taking action to help people and businesses struggling with their energy bills.

We have already introduced some help that is immediate. Two million vulnerable households will get £135 off their energy bill this winter, thanks to the Government’s warm home discount. Around 12.5 million pensioners will get the winter fuel payment—£200 for the under-80s and £300 for those over 80. And of course there are cold weather payments if needed, which last year delivered over £146 million to help cut bills for the most vulnerable.

This year we have added to these policies with more direct action. Our new big energy saving network is training 500 volunteers to go out into communities to help people get better deals from energy suppliers and reduce their energy bills. These volunteers will be fully supported. We know how much people in communities across the country rely on the post office network, so we will be working with the Post Office to raise the profile of the big energy saving network so that it can make the links with the elderly, the vulnerable and other cost-conscious families trying to make their budgets go further.

We have also brought together in one place all the advice from across Government—from the Department of Energy and Climate Change and the Department for Work and Pensions—and from charities such as Age UK and Citizens Advice. Today, I am writing to all Members of this House with information about this new guide so that they can share it with their constituents, to make sure they are getting all the help to which they are entitled.

But while such immediate help for consumers and companies is important, we need more permanent change if we are to keep bills down not just for 20 months, but for 20 years and beyond. The energy company obligation is delivering such permanent change by modernising our housing stock and making it cheaper to heat our homes. Some 230,000 low income households will be warmer this winter, thanks to energy efficiency measures already installed through the ECO.

Energy efficiency remains a central part of our strategy both to help the fuel poor and to deliver permanent energy savings, but the permanent energy change that we seek also needs more competitive markets. This, however, is not something that the Opposition understand, for the previous Government created the big six, and their irresponsible policies would only help the big six. In contrast, from day one, this coalition Government have been determined to take on the big six for consumers—[Interruption.] The Opposition do not like it. We have been taking on the big six for consumers with the stick of competition. We have done a lot, but as I will set out, we need to do more.

Already our measures to deregulate have seen a major growth in the number and size of independent energy suppliers. In 2011 there was no independent supplier with a customer base greater than 50,000. Now we have three independents with more than 100,000 customers, and a further eight companies have entered the market since May 2010. We have delivered a doubling of the number of independent energy suppliers offering competition to Labour’s big six, and already hundreds of thousands of people are benefiting, but we are doing more. We are backing Ofgem’s reforms to help consumers get better deals—market reforms to make sure that customers are on the lowest tariffs for them, are moved off poor value dead tariffs, and no longer face the complex web of hundreds of tariffs designed more to confuse than to compete.

Our reforms are ensuring that people are given clearer, more personalised information on their energy bills so that they can compare tariffs and switch more easily to save money. We are also promoting collective switching, particularly aiming to ensure that the more vulnerable get to benefit from the best deals on the market. Today, however, I am challenging the industry to deliver faster switching. If someone can change their broadband provider with a few clicks of the mouse, why should they not be able to do the same with their gas or electric? It should not take five weeks for the change to take effect; 24-hour switching is my ambition.

First Utility has been out in front with its target of reaching 24-hour switching. Now E.ON, SSE and Scottish Power and a number of independent suppliers, including Good Energy, Ovo and Co-operative Energy, have accepted my invitation for urgent talks over the next month on how we can dramatically speed up switching.

I want five-week switching to come down to one-week switching, and then I want to go faster still. Let us be clear that it will not happen overnight. We could announce 24-hour switching and then suppliers would say, “Okay, we’ll put up our prices to cover the cost”. That cannot and will not happen. I want to talk to suppliers who can agree to and deliver a plan to speed up the process of switching down to 24 hours, without increasing bills.

Companies that are interested in making things easier for customers to switch are invited to come and see me, in addition to the others that have already agreed to do so. Our preference is to do that jointly with suppliers, building on the good work of Energy UK, which has raised ambition on the issue across the industry, but we are prepared to take action, if required, to compel those who drag their heels.

I have also written to energy companies about direct debits. I share concerns that they might be holding on to significant credit balances when customers have overpaid through direct debits. I expect all suppliers to make every effort to return money to customers with closed accounts. I accept that that sometimes will not be possible, but, when it is not, my view is that credits should be applied directly to help the fuel poor and other vulnerable customers. The Minister of State, Department of Energy and Climate Change, my right hon. Friend the Member for Bexhill and Battle (Gregory Barker), will meet energy suppliers next week to discuss that question and that of the level of credit balances that energy companies are holding on to.

In our debates on energy bills, many have understandably asked whether competition is working in our energy markets. Although the coalition has already done a great deal to promote competition, we are ready to do more. As the Prime Minister announced last week, we now propose to introduce annual reviews of the state of competition in the energy markets. The first of the new competition assessments will be delivered by spring next year. The assessment will be undertaken by Ofgem, working closely with the Office of Fair Trading and the Competition and Markets Authority when it comes into being.

The exact metrics for the review will be a matter for the regulators but I will ask them to look in depth and across the energy sector at profits and prices, barriers to entry and consumer engagement. The Government have equipped the regulators with strong powers to deal with unjustified barriers to competition. If abuses are found they must be addressed.

We also need to ensure that the energy suppliers are open and honest about the profits they are making, so I have also asked Ofgem to deliver, again by spring next year, a full report on the transparency of the financial accounts of the energy companies and ways in which that could be improved, building on the work already completed by accountancy firm BDO.

Ofgem will publish its consultation on financial transparency this afternoon, but the public need to know that our reforms will have teeth and that companies that play outside the rules will be penalised and fined. With our Energy Bill, Ofgem now has powers to require energy companies to make compensation payments directly to consumers who have lost out, but today I want to go further. That is why I intend to consult on the introduction of criminal sanctions for anyone found manipulating energy markets and harming the consumer interest.

Ours is a record of delivery and action. As set out in the annual energy statement—[Interruption.]

[Mr Speaker]

Order. The remainder of the statement must be heard. Matters are not greatly assisted by the fact that the statement is over-long. Frankly, a blue pencil should have been deployed, as statements should take no longer than 10 minutes, but we must let the Secretary of State trundle towards his conclusion.

[Mr Davey]

I am concluding, Mr Speaker.

As set out in the annual statement, the Government are acting to help those most in need to keep warm this winter and ensure that everybody gets a better deal from the energy companies. We are also acting to deal with Labour’s energy crunch, filling in its energy black hole with home-grown energy and bringing stability and certainty to drive investment. That is our strategy for affordable energy security, a strategy to power the country, protect the planet and help keep bills affordable. I commend the statement to the House.

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[Several hon. Members]

rose—

[Mr Speaker]

Order. A very large number of right hon. and hon. Members are seeking to catch my eye. I would like to accommodate the level of interest, but I remind the House that we have very important business to follow, and it is heavily subscribed. There is therefore a premium on economy, in which we will be led by Sir Robert Smith.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

I am delighted to welcome the fact that the Government support the Energy and Climate Change Committee’s call for a competition review and to press Ofgem on greater implementation of BDO’s recommendations on transparency. Will the Secretary of State confirm that the market reforms will end the exploitation of the inertia on the part of customers on existing tariffs, which leaves them languishing on uncompetitive tariffs?

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[Several hon. Members]

rose—

[Mr Speaker]

Order. May I remind the House that Members who entered the Chamber after the start of the statement should not expect to be called?

[Frank Dobson (Holborn and St Pancras) (Lab)]

Surely the Secretary of State understands that the public believe that the energy companies are giving Ministers, civil servants and Ofgem the runaround. Would it not be better if the public and pressure groups had access to the figures that clearly mesmerise officialdom and we applied freedom of information to the energy companies?