Energy Price Freeze

Tom Greatrex Excerpts

Wednesday 2nd April 2014 Commons Chamber

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

Not least in the last speech, we have had an interesting, illuminating and at times passionate debate on the issue—more accurately, the set of issues—that is high on the agenda of many right hon. and hon. Members from across the House. As ever, and we are becoming used to this, the debate has been characterised by some very considered contributions, as well as by what are frankly rather desperate attempts to divert the debate away from fundamental concerns about how this market works or—more accurately—does not work.

As my right hon. Friend the Member for Don Valley (Caroline Flint) mentioned, this is the ninth Opposition day debate on aspects of energy policy. During that time, we have seen a remarkable shift from the Government, with the Secretary of State, who is not in his place, finally seeming to catch up with reality. For the record, I remind the House that his position has shifted from there not being an issue to address, through the answer being switching on its own, to a cack-handed attempt to jump on the back of concerns about the level of profitability in gas via his special adviser in the press a few weeks ago. Last week, he eventually accepted that the market over which he and his predecessor have presided for the past four years is not fit for purpose, does not work for consumers and does not work for the industry, in which there is a crisis of confidence and a deficit of trust. Today, we have heard the considered, final evaluation of the Secretary of State: a thought experiment. If the vacuous, empty, floundering response that we heard from him today does not make him realise that he is completely out of touch, nothing will.

My hon. Friend the Member for Glasgow North West (John Robertson), who has been a constant, dogged presence on the Energy and Climate Change Committee, like many Members in the Chamber today, made a persuasive case, as he often does, about the impact of policies and market failures on his constituents and those across the UK who struggle to pay their energy bills.

The Chairman of the Select Committee, the hon. Member for South Suffolk (Mr Yeo), referred to investment opportunities. He was right to point out that the investment record of Centrica has not been good for a number of years. However, he was wrong to link SSE’s decision last week to freeze its prices to its pulling back from investment in offshore wind. I am sure that he will have the opportunity, if he has not had it already, to speak to SSE. It has been very clear that its decisions are related to continued difficulties, including the lack of clarity on the detail of the contracts for difference, and technical and cost challenges with the round 3 offshore projects, in which it is limiting its involvement.

The hon. Member for South Suffolk will know that SSE’s decision does not necessarily mean that those projects will not go ahead, because investment is coming from outside the big six. A number of state-owned utilities from other countries, including Norway and DONG in Denmark, are filling the investment gap with a number of projects. That helps to deal with the suggestion that is sometimes made by commentators—in fairness, it has not been made in this debate—that the big companies are a prerequisite for the investment that is required. As he knows, a number of utility companies are over-exposed in their home markets, which is leading to a pulling back of investment that has nothing to do with the price freeze proposals.

The hon. Member for South Suffolk made two other important points. The first was about the failures of the current regulator and the second was about the ring-fencing and legal separation of the generation and supply arms of the big companies. He is concerned about the impact of that. I am sure that he will be aware that when SSE announced its decision to separate last week, it referred to it as a tool to “improve transparency” and a

“reform that is in the clear interests of customers”

that would have only marginal cost implications. I believe that others will reach a similar position in the weeks and months ahead.

My hon. Friend the Member for Southampton, Test (Dr Whitehead), whom I served alongside on the Public Bill Committee that considered the Energy Act 2013, rightly pointed out that reform to make the market clear, fair and transparent was almost entirely absent from that legislation. He will recall that he, I and others tried several times during the course of the Committee to move amendments to insert those issues into the Bill. I am sure that the Government, on reflection, will regret turning their face against those issues. My hon. Friend also made a point about mandatory open trading, which is the best possible way to increase liquidity and to have an impact on the forward market.

The hon. Member for Warrington South (David Mowat) referred to the number of power plants that have closed and been mothballed. I am sure that he is aware that some of the mothballing seems to have been done in anticipation of the capacity market. That makes the case for the auctions to happen as soon as possible.

The hon. Member for Angus (Mr Weir), either intentionally or out of genuine ignorance, failed to understand the proposals in our Green Paper on market reform. If he had read properly the document that he claims to have read, he would have seen that it makes a number of proposals to increase transparency in the market, which is required for investment and for consumer confidence.

The hon. Member for East Hampshire (Damian Hinds) suggested that the solution may lie in trusted brands. I am sure that he is aware that a number of trusted brands have been reluctant to enter the market, not least because the lack of transparency in the market would damage their reputation. The key is to ensure that we have transparency for the long term, as we have proposed.

My hon. Friend the Member for Newport West (Paul Flynn) referred to marine energy and to the nascent technologies that could have an impact in the 2020s and beyond. We need a long-term commitment to decarbonisation and a 2030 decarbonisation target to maximise those opportunities.

The hon. Member for Bracknell (Dr Lee), in a wide-ranging contribution, highlighted the potential role of co-operatives in the mix and the crisis of confidence in the current market, which underlines the case for change.

My hon. Friend the Member for East Lothian (Fiona O'Donnell) referred to her constituents and, in particular, to those who are off the gas grid. I confirm for her again that the new regulator that we propose would regulate the off-grid market, as well as the on-grid market, because a number of her constituents and many other people have been the victims of poor practice in that part of the market.

The hon. Member for Poole (Mr Syms) said that he was concerned that the CMA reference would slow down investment. As he has heard today, investment has already slowed down. There is not a huge amount more that it can slow down. What he said made the case for getting on with the reforms now, rather than being an excuse to kick the issues into the long grass.

My hon. Friend the Member for Ynys Môn (Albert Owen) put the issues with the functioning of the market and the failures in regulation into context very cogently. There is no reason why they should not be addressed now, rather than waiting until the end of the CMA investigation.

Finally, my hon. Friend the Member for Huddersfield (Mr Sheerman) made clear the concerns that are held across this House about the functioning of our energy market.

The contributions of many Members this afternoon have reflected the reality that in recent years it has become increasingly obvious that there is a dysfunctional market and alarmingly urgent that it be reset so that it is clear, fair and transparent. The reality is that the mark-up for domestic electricity increased from an average of 7p between 2001 and 2009 to 9.2p between 2010 and 2013. The reality is that bills have gone up by £300 in three years. The reality is that the investment in lower-carbon technologies has fallen from £7.2 billion in 2010 to less than £3 billion last year. The reality was exposed by the qualitative research by YouGov, which appeared in The Times, in which leading figures in the energy industry at CEO level said:

“Customers were taken for granted, service was poor, and no one bothered to explain the situation to them”.

That is a damning indictment of the reality that is known by the public, that is seen in the figures and that has been acknowledged, belatedly, by the industry itself.

The response from the Government cannot be to say, “We will just sit tight and hope it gets better. Put it into the long grass.” The Government must not use the market referral as an excuse for inaction. As the SSE changes showed last week, there are reforms that can and should be made now. Ring-fencing between supply and generation, scrapping Ofgem and introducing the open trading of energy are policies for which we already have the evidence. There are some who worry that market referral is simply an attempt to kick the can down the road. I urge the Minister, who called for cross-party consensus in the Chamber last week, to demonstrate his interest in that by showing today that he has the stomach for reforms that can happen ahead of the CMA outcome. If the Government want to demonstrate that they are serious about reforming the market and improving the situation for customers and for the industry, including small suppliers and generators, they will vote for the motion. We can then get on with making the market clear, fair and transparent.