Energy Supply Market: Small Businesses

Debate between Yvonne Fovargue and Robin Millar

Wednesday 13th September 2023 Westminster Hall

[Robin Millar (Aberconwy) (Con)]

I beg to move,

That this House has considered the energy supply market and small businesses.

It is a pleasure to serve with you in the Chair, Ms Fovargue. Tourism and hospitality are vital to the local economy of my north Wales constituency. Arguably, it is a centre of tourism in Wales, with attractions that draw millions of visitors each year. We are home to Llandudno, the queen of the Welsh resorts, the UNESCO world heritage site of Conwy castle, and we are a gateway to Eryri, Snowdonia national park.

Welcoming visitors to Aberconwy throughout the year are hundreds—if not thousands—of hotels, restaurants and pubs. Those businesses are at the heart of our local economy and communities. They showcase our local produce, which is among the finest to be found anywhere in the UK, and they provide employment and training opportunities to thousands. The warm welcome that they provide and their consistent high standards are a key reason that people choose not only to visit Aberconwy but to come back.

This summer I launched my Aberconwy pub of the year competition, and over 1,000 people took their time to vote—perhaps a reflection of the importance and value of pubs to our communities. They are truly at the heart of what makes Aberconwy such a great place to visit and, more importantly, a great place to live. But their energy costs are soaring; those same businesses are concerned that non-domestic energy suppliers and brokers are taking advantage—concerns that I have heard echoed by members of the British Beer and Pub Association across the UK. I am sure that these issues apply to small and medium enterprises in all sectors of the economy and throughout the UK. However, I want to take this opportunity to concentrate on the impact of the energy supply market on businesses operating in the hospitality sector.

Let me deal first with pricing. A recent sector-wide survey by UKHospitality found that the average energy price paid by hospitality businesses doubled between 2022 and 2023. A quarter of businesses had to tie in to prices at the peak of the market between October and December 2022, when energy rose from the fifth to the second highest cost to hospitality businesses. Those rises are accounted for in part by an artificial level of risk assigned to hospitality businesses, arguably unfairly, which has been used to inflate energy costs and reduce competition in the markets. I will return to that point a little later.

It is my good pleasure to serve as vice-chair of the all-party parliamentary beer group. Last night we hosted a Welsh beer-tasting reception here in Parliament. If Members were not there, they missed a treat. It was a wonderful opportunity to showcase the quality and diversity of Welsh beer. I was delighted to welcome Dave Faragher, the owner and managing director of the Wild Horse brewery in Llandudno, a producer of some superb beers, including my favourite pale ales. Speaking with Dave, I heard once again that same pattern: the brewery’s electricity costs nearly two and half times more than it did in May 2021 and gas costs three times more. Based on its current usage rate of 109,000 kWh of electricity and 24,000 kWh of gas, its energy now costs about £22,600 a year. That is £1,900 a month more than in May 2021.

Businesses—and I—accept that there is a trade-off between price and certainty when entering into a contract. I cannot see an effective way for the Government to intervene in contracts that have been voluntarily entered into. However, I note that wholesale energy prices have fallen considerably since their 2022 peak. I also note that they remain high compared with pre-pandemic prices. I hope the Government keep a close watch on the new prices of renewed deals over the coming months. I cannot move on from pricing without mentioning the increase in standing charges. North Wales has seen some of the highest increases across the whole UK. Surely, there must be some explanation and justification as to why those eye-watering increases were introduced. Surely, we must expect to see a fall in those standing charges when new deals are negotiated.

Secondly—and in many ways a bigger concern—are the behaviours and practices of non-domestic energy providers. The same UKHospitality survey found alarming reports of the behaviours of energy supply companies, including: a refusal to quote to hospitality businesses; increased prices for hospitality businesses, with risk premiums added in; excessive deposits levied on businesses; inflexibility in negotiations; a lack of transparency from brokers; and a refusal to renegotiate contracts agreed at the peak of the energy price spike.

In June, in response to those concerns, I worked with colleagues to launch a “common sense energy supply contracts” campaign—it just trips off the tongue. At the launch supported by UKHospitality, Kate Nicholls, the chief executive, summarised accurately—and, I must say, eloquently—the importance of hospitality and the campaign to the wider economy by stating that

“Hospitality is…the canary in the coal mine”

of the economy when it comes to energy price increases. She said that it is the first to be impacted and the consequences can be seen in the sector before spreading further afield. Those things have compounded the challenges of a global pandemic and a conflict-induced international energy crisis.

Those observations, together, lead me to my third point: I question whether the non-domestic energy supply market is not now operating as a quasi-monopoly. Since launching the campaign, I have heard from colleagues, SMEs and many in the hospitality sector from throughout the UK, who echo what the hoteliers of Aberconwy are telling me.

Glenn Evans is the director and general manager of two hotels in Aberconwy, the Royal Oak and Waterloo hotels in Betws-y-Coed. These businesses provide hundreds of jobs and strengthen our local economy by welcoming tens of thousands of guests each year. Glenn has made clear to me the impact of the failing energy market, saying:

“Our experience of the Non-Domestic energy market is that there is very little if any real competition with suppliers able to name their price and business having to accept on a ‘take it or leave it’ basis with suppliers able to act effectively as a Cartel.”

That should be a great concern if, in fact, it is true that businesses have no bargaining position or ability to negotiate, or that supply periods are extended under pressure from suppliers. Is it perhaps the case that the energy market was created for a time of stability, and is proving ill-equipped and ineffective in times like these—times of greater uncertainty and turbulence? It cannot be that businesses are forced to raise prices, which increases pressure on inflation, or to enter a game of Russian roulette depending on when they must renew their contract. Suppliers will not fight for customers who cannot go elsewhere. They will not renegotiate contracts as an act of good faith when there are no alternatives for the customer to turn to. I turn, then, to the question of what Governments can do.

In May, at Treasury questions, I said:

“The Treasury was quick to act during the pandemic when hoteliers in Aberconwy told me that banks were directing them to their premium lending products instead of the Government’s coronavirus business interruption loan scheme. Now those same hoteliers are telling me that the energy supply market seems to have failed…They fear that the supplier’s thumb is on their side of the scales.”—[Official Report, 9 May 2023; Vol. 732, c. 187.]

Many of our local businesses have also told me how vital the help of the UK Government has been throughout the pandemic. For example, all the jobs at Wild Horse brewery, which I have mentioned, were protected by the furlough scheme. They have told me how important the Government’s support with energy costs was last year at the peak of energy prices, but if small businesses are to flourish, they still need support and to be supplied by an energy market that is supportive, competitive and adaptive.

I leave on record my comments about pricing and standing charges, and market failure questions. I lament the reported unwillingness of suppliers to blend and extend existing contracts. I want to focus, instead, on solutions from the Government-commissioned report from Ofgem into the energy supply market. That has now published, and it identified a series of recommendations. I urge the Government, Ofgem and energy suppliers to implement the recommendations at the earliest opportunity —something that is endorsed by both UKHospitality and the BBA.

The first recommendation is to encourage suppliers to work with hospitality businesses to resolve the issues that many are facing with prices fixed at levels far above current market rates. That should include direct, immediate communication to suppliers from Ofgem.

The second is urgently to enact Ofgem’s proposals to secure greater transparency to customers, deliver more timely responses to customer complaints and drive better practice in setting deemed rates. The third is to deliver wider access to the energy ombudsman to redress the imbalance of power between energy suppliers and businesses, which currently lies too heavily with the suppliers.

The fourth recommendation is to put in place measures to prevent the blacklisting of entire sectors, particularly hospitality, as that dramatically reduces competition and unfairly penalises business; and the fifth is to improve regulation of energy brokers, including extending protections to more businesses, the introduction of a formal redress scheme, and greater transparency around fees.

I want to end by paying tribute to businesses in the hospitality sector, both in my constituency and throughout the UK, for the invaluable contribution they make to our communities and our economy. I thank the Minister for her engagement to date. I know she is keen to address these points. I can assure the businesses of Aberconwy, and those represented by my colleagues in the common sense contracts campaign, that we will continue to do all we can to support them.

[Yvonne Fovargue (in the Chair)]

I intend to call the Front Benchers at 5.33 pm. I now call Wera Hobhouse.

Future of the UK Constitution and Devolution

Debate between Yvonne Fovargue and Robin Millar

Wednesday 8th March 2023 Westminster Hall

[Robin Millar (Aberconwy) (Con)]

It is a pleasure to serve under your chairmanship, Ms Fovargue. In the next six or seven minutes, I hope to set out a contra-view of the Union. I compliment my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami) on bringing forward the debate. Colleagues will know that this is a subject close to my heart to which I have given considerable thought; they may think differently at the end of my speech, but I hope they will find it interesting none the less.

Let us take the old joke of a visitor coming to a rural area and asking for directions. The farmer, or whoever it is leaning on the gate, says, “Well, if I were you I would not start from here.” Sometimes, when we approach a subject such as this, there is that sense of that if we disregard where we are at and start from some idealistic blank page, or some other framework that does not exist in reality—if we believe hard enough and screw our eyes up tight enough—we can imagine that it is that way and start from there and a bright new dawn awaits us. I just do not think that is where we are at.

I am afraid that when I hear words such as “regularising”, I immediately think of words such as “cookie cutter”, “wait your turn” and “stand in place”, because that big stamp that is coming along will get you as well and turn you into something—into a moveable piece that fits with the rest of the puzzle created somewhere else. I find instinctively that that does not fit with me. Members will not hear a defence of the status quo from me. This is not an exercise in party political point scoring—which Members have avoided so far, and I commend them for that—but about exploring what the Union means, what its future holds and what role devolution might have to play in that.

I hold an organic view of a Union that has started and developed inevitably from things such as our location in the world; the temperate climate we enjoy, our maritime nature and identity have all contributed to the nation that we are. We cannot and should not ignore that, and we would not wish to. The system of law we have is, again, an important part of our identity. Identity—there we are. How has our reputation, for good or ill, developed around the world? The values we hold, the Judeo-Christian principles that have been at the heart of so much of who we are as a nation—these things have shaped us. Inevitably, that has dictated and shaped the relationships we have formed around the globe.

When Bill Gates came here a couple of years ago, I had the opportunity to ask him why he came to the UK Government. He said, very simply, “Because of your network of relationships around the globe.” He recognised that history and the depth of contact and relationships we have across the globe and the influence that came with them. From that, then, comes the economy. We are the fifth or perhaps the sixth-largest economy in the world, and part of that is because of that network of relationships. Part of that, too, is driven by the internal relationships we have forged and the transport links, which have already been mentioned, across all parts of our United Kingdom.

We then need to think about the future. In understanding ourselves as a Union, what are we moving towards? That is an absolutely salient and current question. I again commend my hon. Friend for bringing forward exactly the question that we face now: what are we, now we are post-Brexit Britain? If we are no longer on a trajectory into a federalist, liberal, social democracy within the EU, where are we heading? Some would say we are going back to the days of empire and colonial oppression —that kind of thing. I do not think it is, but what are we heading to? That is the Union I think of, and it is absolutely correct to think about what the future holds.

Time does not allow me to develop my points in the way I would wish, but I want to make a couple of key points. I contrast the covenant that holds us together with the contract that is presented in the form of devolution. The covenants that hold us together are those relationships built on shared dreams, shared ventures, shared losses and shared institutions that we have built on the values we hold together. All those things speak to me of covenants, and a vested interest in what every other part of the Union is thinking, feeling, experiencing and hoping.

I contrast that with what we did by devolution. Let me be clear that I fully support the democratic establishment of devolved Assemblies and Parliaments across the UK—there is no disagreement from me on what has been established democratically. The biggest damage that has been done to our Union was not in the creation of those institutions, but in convincing us that the relationship is now not covenantal but contractual—that it is a transactional relationship that says, “You now do these bits. You now make the decisions on these policy areas, and we will give you some money for it.”

Trying to turn that covenant into a contract and a series of transactions does not work, just as it would not for my own marriage: “Right, Robin, on a Monday, you do the bins, and on a Wednesday, I will wash the dishes.” It is the same for our Union. Phrases like “regularising” and the focus on a technocratic design chill me a bit, because they do not capture the essence of who I think we are.

When we start to look at how the contract operates on points such as accountability, we start to find flaws. I support subsidiarity—decisions should be made as close to the local point of impact as possible—but we must not imagine that what we have done is perfect or should be replicable. There are deep problems, which I do not have time to develop today.

Let me finish with one analogy. We are all familiar with new housing estates. Very often, there is a green space in the middle of them. When the houses go up, and the green space is marked out, brown lines cutting across that green space, faint at first, start to appear very quickly. There is actually a phrase for them—they are called desire lines. Those desire lines do not reflect the footpaths that are in place.

I am sure hon. Members know what I am talking about. Residents have decided that the shortest way from A to B is to walk across the green. That is absolutely a metaphor for what we need to learn and how we need to think about the mistakes we have made and the lessons we need to learn about our institutions and how we think about our Union. There is a temptation to say, “We can create a beautiful place. We can put down straight lines, and maybe even curved lines, that reflect what people want,” but we would soon find that people’s actual desires —their organic response to their environment; the thrust of where their ambitions, hopes, dreams, relationships and ties take them—cuts across that place, and creates desire lines, not always where we designed for them.

I urge caution in imagining that technocratic cleverness could take us to a better Union. I urge the proper consideration of the organic model we have, which has grown the covenant that holds us together, and of the bright future ahead.

[Yvonne Fovargue (in the Chair)]

I remind hon. Members that they should bob if they wish to be called in the debate. I call Samantha Dixon.