Energy Markets Competition Assessment

Tim Yeo Excerpts

Thursday 27th March 2014 Commons Chamber

[Mr Davey]

First, I welcome the right hon. Lady’s welcome for today’s announcement. That is very important for people outside this House to see: not just consumers and small businesses who will be the beneficiaries of this action, but investors and the industry. Cross-party agreement on the way forward to promote competition in energy markets is very important for investment, so I strongly welcome her welcome. Political agreement is a good step forward for energy markets.

I disagree, I am afraid, with some of the right hon. Lady’s other comments. Of course I agree that there are serious problems. One of the reasons why the Government have been reforming energy markets from day one is that we thought there were problems. One of the reasons we asked Ofgem and the competition authorities to do this work is because we were impatient that not more was happening in the markets. What is interesting about the referral is that the Leader of the Opposition could have done it when he was doing my job, but he refused to take this measure. He refused to do so when he had the power, so I have to say to her that Labour does not really have a leg to stand on. Labour created the big six; we are taking action to create competition.

I am surprised that the right hon. Lady continues to bash Ofgem, the independent regulator. It has taken action in the past few years, particularly under this Government, to improve competition. I thought Labour supported the retail market review and the wholesale market reforms of the market maker obligation. I know she was not on top of reforms in the wholesale market, but Ofgem has taken that action and is now proposing the referral. In the spirit of welcoming the statement, she should also welcome the action Ofgem has taken. Labour set up Ofgem and when the Leader of the Opposition was doing my job he reformed it to make it more effective, so it is ironic for the right hon. Lady and the Opposition to criticise their creation that they reformed.

The right hon. Lady asked one or two specific questions. She asked me whether small business would be covered in the reference. Yes, it will. That is, of course, the independent competition authority’s business, but we believe that it will be and that it should be. On the timetable, as I set out in my statement, we expect the consultation to finish by 23 May. Ofgem will then make its final decision. We expect all of that to happen and the assessment to get going before summer.

The right hon. Lady asked about the price freeze. The problem with Labour’s blanket price freeze is that it is a pro-big six policy. Labour created the big six and it is supporting the big six. Of course SSE is able to have an energy price freeze—it is a big company. Big companies have the balance sheets that enable them to buy 18 months ahead. We have never said that the big six could not have a price freeze. It is the smaller competitors who oppose the price freeze. When the Leader of the Opposition made his announcement to the Labour conference, it was the small companies that were complaining, saying that it would put them out of business. That is the true Labour party: putting the smaller competitors out of business.

The right hon. Lady needs to reflect on all her policies. I am delighted that she has, at long last, changed her mind and agreed to the market investigation reference. That is good to hear, but the Government have been acting to help people with their bills through the warm home discount for the 2 million lowest income households, through the average £50 we took off bills before December, and through our work on energy efficiency and switching. We have been extremely active and will continue to be active during the review, as will Ofgem. The Government are in favour of better prices through more competition to deliver secure green energy.

[Mr Tim Yeo (South Suffolk) (Con)]

I warmly welcome my right hon. Friend’s statement and, in particular, the recognition by Ofgem—belated, admittedly—of both the market failure and the dangers of vertical integration in the energy industry. Will he confirm that although it is absolutely right for the Government to do everything they can to promote competition in the energy industry, it would be dishonest for any Government, either current or future, to pretend to consumers, anxious as they are, that energy bills may never rise in future? By far the biggest component in the energy bill is the wholesale price of gas, which is completely beyond the Government’s control.