Energy Price Freeze

Debate between Tim Yeo and Baroness Laing of Elderslie

Wednesday 2nd April 2014 Commons Chamber

[Mr Yeo]

No, I do not regret that at all. My concern about Ofgem is that it has very considerable powers that it is failing to use. If it were more effective in carrying out its functions, some of the present crisis would at least have been mitigated. The downside of the reference is that it may provide companies with a further reason to delay investment decisions for the period of the reference, which, in practice, is likely to last the better part of two years from now. If, as I strongly suspect, the CMA reference produces the conclusion that vertical integration must be addressed, that process itself will then take more time to implement, which will prolong the period of uncertainty and lower investment even further. There is now a case for ending vertical integration. Such is the loss of trust in the big six companies that only by separating generation from retail supply can that trust start to be rebuilt. I acknowledge that there will be some damaging consequences of vertical integration, as my hon. Friend the Member for Warrington South (David Mowat) has already touched on in an earlier intervention. In practice, we must grind through the CMA process.

My final point is that I very much regret that Ofgem, quite characteristically, has missed an important part of the target, which is the transmission and distribution industries. Those industries are, in the case of transmission, a monopoly, and in the case of distribution, a quasi-monopoly. In the past, they have escaped scrutiny by Ofgem to an extraordinary extent. As the public do not pay bills directly to either National Grid or its regional distribution company, very few consumers have ever heard of them. The truth is that transmission and distribution costs account for one fifth of the average bill. That is double the proportion accounted for by the green levies, which have received so much attention in the past few months.

I am glad to say that my Committee is about to examine transmission and distribution, including the charges that they make. There is little or no competition in the distribution sector. The difficulties of getting connected to the grid and the costs of doing so are a significant obstacle to many desirable, small-scale projects. Only this week, I talked to a large investor in solar power who told me that getting new projects connected to the grid is now a bigger problem than getting them through the planning system. Effective scrutiny of transmission and distribution and the introduction of real competition to the distribution sector would do far more to cut energy bills than any artificial externally imposed price freeze.

Instead of freezing prices, let us work for more competition. The CMA reference is not an ideal outcome because of the length of time it will take to complete, and its scope should be widened. Let us at least try to make it work and serve the aims of energy policy instead of obstructing them, as a Government-imposed price freeze would do.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. The House will be aware that there are more Members who wish to speak than there is time allowed in this debate if everyone takes a long time. I am therefore obliged to impose a time limit on Back-Bench speeches of six minutes.