Energy Market Reform

Tom Clarke Excerpts

Wednesday 24th October 2012 Commons Chamber

[Mr Davey]

I will come to that point, but I remind the right hon. Lady of what I said earlier. Under her party’s watch, the number of companies went down from 14 to six, so we will not listen to her too much.

Let me finish my point about switching and say why it is so important. Collective switching got going in Belgium just a few years ago, and we have now seen live, successful switches in the UK. The Consumers Association, Which?, led the way with its big switch earlier this year. It helped around 37,000 people to switch and get an average saving of £223. We have also seen smaller collective switches. Last month, South Lakeland district council was the first local authority to run a switch. Nearly 1,700 residents signed up, and early indications suggest savings that range between £60 and more than £200.

Yesterday, Oldham borough council launched its collective switch, which I attended. I did not see the right hon. Lady; perhaps she was there at a different time. That collective switch is called “Power to the people”—Citizen Smith would be proud. A wide variety of schemes are coming forward. I am already aware of eight, perhaps the most ambitious of which is Cornwall Together, in which the council, the NHS, the trade union Unison, the third sector, and St Austell brewery have come together to organise a collective switch.

Collective switching is not a silver bullet or panacea, but people are seeing how it can be part of the answer and reform the way switching works. Switching does not just force existing firms to compete more vigorously to keep customers, it enables smaller suppliers to grow their customer base faster. We know that customer inertia can be a barrier to competition, preventing new companies from getting market share, and collective switching reduces that barrier for small companies. Co-operative Energy won the big switch organised by Which?, and doubled its customer base overnight. Collective switching has the potential to be part of the way that we reshape the market.

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

I welcome the Secretary of State’s comments on community involvement and the role of local councils. Many years ago, I wrote to all six energy companies to seek their support. Some were aggressive in their replies, not least Scottish Power. Only one—Scottish and Southern—wished to participate in such a scheme. What is the Secretary of State’s experience of energy companies’ reactions to the important role he mentioned?

[Mr Davey]

I am disappointed that the companies did not respond more positively when the right hon. Gentleman wrote to them. I do not know whether he wrote to them under the Labour Government. The voluntary agreement that we managed to secure after two months in office included a commitment from the energy companies to take part in collective switching proposals. A number of the big six took part in the Which? big switch, so we have moved them and we are changing things.

A key barrier to collective switching and ordinary switching is individual bill payers getting their details to the third party organising the switch, the switching website or the new supplier. In principle, that should not be too difficult, but the evidence we have found is that it is. We have therefore started to tackle the problem. In the voluntary agreement I negotiated, the companies agreed to put quick response codes on their bills. “What,” hon. Members may ask, “is a QR code?” It is a bit like a bar code, but smarter. The QR code should make it much easier for people to provide the energy bill details needed for switching, reducing the effort people must make. I can announce to the House that we will be consulting on that and a number of other measures when we introduce our consultation on consumer bills.

The Government have gone further to reduce the hassle of switching. In another consumer project I worked on at the Department for Business, Innovation and Skills—it was called midata—we looked at other ways in which an energy company could provide the customer with the customer’s data, for example, in easy-to-use or easy-to-pass-on electronic formats. BIS is now consulting on making the midata ideas a statutory requirement. Coupled with the work of Ofgem on simpler bills, that could be a huge catalyst for helping many more people to switch.

--- Later in debate ---

[Mr Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)]

In order to save time, and to help those on the Government Members who might be tempted to intervene on me, let me say that I will be making the same kind of speech that I have made for the past six or seven years, although progress has been nothing like I would have liked. However, I support the motion, of course, as its proposals are radical, relevant and realistic.

I urge the House to look at the situation we now face. I found it chilling to read in this morning’s Order Paper an early-day motion entitled, “Excess Winter Deaths.” It points out that there are

“30,000 excess winter deaths each year in the UK”.

That alone is a powerful argument for saying we should address the real problems. The early-day motion also says that the cost

“has been estimated by the Chief Medical Officer at £890 million per year in England alone”.

That is another price we are paying for the current situation.

This is a real problem for my constituents. Of course we can make great statements about the markets and talk about who did and did not intervene, but the reality is that we find ourselves in the current situation because we have left so much to the markets over the years and because the regulators either do not have the power to act or do not seek to use the power. I want, as I did when we had a Labour Government, to change that.

What is the reality of the situation? In a recent poll, 90% of people surveyed claim that they are concerned about their energy bills, and continued rocketing prices mean that this is now the top household worry. Even worse is to come, as it is predicted that half the population will be in fuel poverty by the end of this year. That is a very sobering figure. About 2 million more people are experiencing fuel poverty than when I first secured a debate in Westminster Hall about six years ago. Eight years ago, the average household spent £522 a year on electricity and gas, but the figure has now risen to a staggering £1,232. That is an average increase of 140%, whereas average household income increased by a mere 20% during the same period.

People on low incomes, single parents, people with disabilities and many others are terribly worried about what is going to happen this winter. I had hoped that, arising from our debate, we might have been able to offer more hope than I have been convinced has been offered so far. The price of no other commodity has risen so steeply as that of energy. Consumers have been hit with huge energy price increases and they are powerless to do anything other than suffer in fuel poverty in increasing numbers, which is wholly unacceptable. New research has shown that half the population will be in fuel poverty by the end of this year. I know that I am citing statistics, but I plead with the House to remember that this is all about individuals and families; it is about ordinary households in our constituencies. On average, 37% of consumers are spending more than 10% of their income on gas and electricity bills, and the figure will rise by a further 13% by the end of 2012, leaving 30 million people falling into the defined category.

So there is a problem, and it does call for transparency, for improving competition and for driving down energy bills. The average energy bill doubled in the past seven years, and 2 million more people are experiencing fuel poverty. I support, profoundly, everything the Labour Government did to give heating grants and so on, particularly given the problems faced by pensioners. However, I do not believe that it is the role of government to look at the profits that the energy companies are making and say, “We should be subsidising them.”

That is the reality of the situation. What can we do about it? We have to act and we must have real regulation. In the limited time left available, I have to say that I do not believe that Ofgem has the confidence of consumers to the extent that I would want to trust it with the role that it has. There ought to be a new role for people who are given real teeth to deal with an absolutely scandalous problem, which is predictable and predicted. People should not be suffering this winter. We can avoid that and we can do so through a rational approach to energy policy.