Energy Costs and Charges

Tuesday 21st November 2023 Westminster Hall

11:00

[Kenny MacAskill (East Lothian) (Alba)]

I beg to move,

That this House has considered the cost of energy and energy charges.

It is a pleasure to serve under your chairmanship, Mr Davies. I thank the Minister for her courtesy and consideration in our discussion yesterday.

Scots were told in 2014 that the benefit of being in the UK was the pooling and sharing that it afforded: assets and resources were pooled and then shared out across the nations, with the broad shoulders of the Union supposedly providing fairly for all. But how is that working out?

The King’s Speech had at its heart Scottish oil and gas, the extent of which was hidden from the Scottish people when it was discovered, as the McCrone report detailed. Ever since then its demise has been predicted and foretold. By 2014, it was apparently all gone, and Scotland left with only a burden. Now, Scottish oil is to save the UK economy. Scots can only look with envy at Norway, with its society and economy transformed by a resource the benefit of which has been denied us. Some nations discovered oil and saw the desert bloom; Scotland discovered oil and saw huge parts of her land turned into an industrial desert. Pooling and sharing? I don’t think so.

Now another natural bounty has blessed our land. Renewable energy is clean, infinite and what our world, not just our land, needs as part of a just transition from fossil fuels. Let us consider the scale of the bounty. Scotland produces one quarter of the UK’s renewable energy and has the potential to produce much, much more—offshore wind, as well as other forms of energy, including tidal, wave and onshore wind, ensures that. Scotland’s share of Europe’s offshore wind capacity has reduced because of improved technologies and opportunities in other countries, but Scotland is still the envy of other nations.

Naysayers who talk that bounty down are the same ones who predicted the demise of our oil. In 2009, only 27% of Scotland’s electricity came from renewables; by 2020, the equivalent of 97.4% of Scotland’s gross electricity consumption came from them. Three years on, the figure will be even greater, and that is before offshore wind, which is still minimal, comes on stream at scale.

The scale of what is coming from offshore wind is massive. That was confirmed by the then Department for Business, Energy and Industrial Strategy, which estimated that in 2021 Scotland exported south 35 TWh hours of electricity. That is to increase to 124 TWh by 2030. I struggled to understand what a terawatt was. For those similarly afflicted, let me clarify that 1 TW is 1 billion kW. Let us put that in context: the average Scottish household uses just over 3,200 kWh per annum. And let us remind ourselves that it is anticipated that by 2030 Scotland will be sending south 124 TWh, or 124 billion kWh. That is enough to power 37.6 million homes—the equivalent of powering Scotland’s 2.5 million homes almost 15 times over. That is year on year, and the figure is growing. That is the scale of Scotland’s resource.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for bringing this debate forward. He is making a compelling case for Scotland. May I suggest to the Minister that there is also a compelling case for Northern Ireland? We have not had the opportunity to advance to the same level as Scotland, but we wish to do so. Does the hon. Member for East Lothian (Kenny MacAskill) agree that if we are to move forward, there has to be a joint strategy for all of the United Kingdom of Great Britain and Northern Ireland, because we can and must all play our part? I envy what Scotland has done. We in Northern Ireland want to do the same.

[Kenny MacAskill]

Well, I prefer an independent strategy, similar to what Norway and Denmark are doing, but I concede that Northern Ireland is frequently ignored because so much of the gas grid is pan-Great Britain, rather than across the Irish sea.

Let us look at how Scotland’s resource is pooled and shared. I have detailed the 35 TWh rising to 124 TWh, but I have not explained that no payment is received for that resource. The energy is sent south, but there is no financial return to Scotland. Besides nothing being paid for it, there are now efforts to take it directly south with neither a bawbee nor a pretty please being given for it. Off south it is to go, and for no payment.

The Eastern HVDC—high voltage direct current sub-sea—transmission cables, also referred to as the Eastern Green Link projects, are the longest HVDC cables to be laid in the UK and will run from Peterhead to Redcar and from Torness to Drax. It is estimated that those links will take 5 TWh, or 5 billion kWh, of Scotland’s renewable energy source south, again with no payment. Additionally, the proposed Berwick Bank offshore wind farm in the firth of Forth will alone produce sufficient energy to supply more households than Scotland possesses, but a cable is proposed to be laid to take 40% of its energy directly south, again with no payment.

What about the sharing? Where is the benefit from the supposed broad shoulders of the Union? Where is the return for what we contribute? A recent question to the now Department for Energy Security and Net Zero asked whether consideration would be given to crediting domestic energy users in the localities where energy is produced and landed. After all, it is being produced onshore or offshore in Scotland, so we might have thought that some credit or benefit would accrue to Scotland, and it might even be cheaper there. But no—the answer was simply that it is a matter for Ofgem, which we know is a creature of statute and can act only within its set powers or as directed by Ministers. No such rules exist and no direction has been given. The energy is not only to go south for no payment, but no benefit is to accrue to Scotland from it.

There is talk of payments to those facing having pylons placed near them, but what about those who live in the land where the energy is being produced? Winter will soon be upon us. The weather is changing and the temperature is falling. The cold is being felt and the need to heat homes is increasing, but it is not simply heat but power that is required. Energy, and especially electricity, is needed not just to keep the cold at bay. It is required by the mother to wash her children’s clothes, keep them clean and uphold the standards she seeks to maintain. It is required by the parent seeking to power up an iPad or laptop to help their child’s education and advance their life chances. It is required by the worker charging their phone to allow them to find employment or do the additional hours that the Government want, or simply to keep body and soul together. More shamefully, it is also required by the sick, including those on dialysis and those recovering from cancer, whose immune systems are weakened and for whom warmth and power are a necessity for life, not a luxury for living.

Despite the fact that Scotland is energy rich, our people are fuel poor. Already more than a third of Scots have been assessed as being in fuel poverty. Even more shamefully, almost a quarter are in extreme fuel poverty.

[Sarah Dyke (Somerton and Frome) (LD)]

I thank the hon. Gentleman very much for securing the debate. Households in rural areas have the highest fuel poverty rate—15.9% in 2022—and I am concerned that that will continue into 2024 if the Government do not act. Somerton and Frome has an estimated 13,060 homes off the gas grid that rely on alternative sources of fuel. Does the hon. Gentleman agree that we should accelerate the deployment of renewable power, provide more funding and remove the Government restrictions on solar and wind?

[Kenny MacAskill]

I certainly agree that there is a prejudice against those off the gas grid. It is not simply about those in rural areas, whether that means the hon. Lady’s constituents or my own in the lee of the Lammermuirs, but about those in urban areas—often urban deprived areas, in multi-storey flats, where gas is not available and the heating system is expensive.

The numbers I was given are historical, and they will only rise—if they have not already risen. After all, the statistics from the Scottish Ambulance Service for last winter’s hypothermic call-outs were shameful, but that is likely to be the baseline, and worse could follow. Energy prices may have fallen along with the energy price cap, but according to National Energy Action the average household is still paying £800 more for heat and power than before the energy crisis started, at a time when the cost of living crisis has subsumed the energy price crisis. Costs will be higher this year than last, when support was given to reduce bills. It is not just the big energy companies making money out of others’ misery; the Treasury made money though VAT on increased bills, which amounted to £1.1 billion in the UK and £96 million in Scotland. The cash is there. It is who has got it, or not got it, that is the issue.

Scotland is geographically further north and our climate is colder and damper than that in other parts of the UK, which makes access to heat and power even more essential. Winters can be cruel and the hardship in northern parts extreme. Let us examine the sharing—after all, we are told pooling and sharing is a benefit of the Union. When there is so much renewable energy being produced in Scotland, why are costs so high? Where is the social tariff alluded to by Government that even many suppliers support? It could be paid for out of general taxation—shared, that is. But no, the vulnerable are again left to struggle this winter.

Where is the credit, or reduced costs more generally, as I have mentioned? In my constituency, people can see the turbines turning or the towers rising from their doors, but they are unable to heat their homes. Moreover, why are costs greater in Scotland, the nation providing more energy than it has households? I wrote to Ofgem, asking them to detail the standing charges for electricity imposed on consumers in Scotland and in England. They have provided the answer for the costs imposed up until this December, but there is no sign of any variation coming. This will run and run, and so will the injustice—with the consultation not closing until January when winter has passed.

Scotland is divided into two zones: northern and southern, SSE and ScottishPower Energy Networks—that is, roughly the highlands and the lowlands. England is divided into north-west, southern and London. Ofgem’s answer disclosed that both Scottish zones were charged more, and often substantially more, than regions south of the border. That differential runs across all forms of charging, whether that is whether standard credit, direct debit or prepayment meter.

Let me detail the situation for those on prepayment meters. After all, they should be benefiting most from Scotland’s energy, which is being pooled. Their needs are invariably greatest and this bounty should be prioritised towards them, although similar benefits should apply equally across Scotland irrespective of payment method and could also be applied across the UK. Many are now counting their ability to access heat and power in pounds, if not pence. It is not 50p or £1 for the meter, but what they calculate that they can afford to use. It is why we have the weasel phrase of “self-disconnection”. That is not personal choice but imposed cruelty.

Let us look at standing charges for electricity. Including VAT, it is 69p a day in southern Scotland and 66p in northern Scotland, yet it is lower in England and only 46p in London. Per annum, it means that the standing charges for those on prepayment meters are, on average, £251.75 in southern Scotland, £241.92 in northern Scotland, yet only £166.10 in London. Those are not my figures—they are Ofgem’s.

We have seen the pooling and now we are seeing the sharing. We are giving, but not receiving. We produce the energy and our people, especially the poorest Scots, are charged more for it. The broad shoulders of the Union is the claim, but sleight of hand is the reality—as the bounty is taken, yet higher costs are imposed. As I begin to conclude on the costs of energy and energy charges—with the perversity of energy-rich Scotland and fuel-poor Scots—I make my first remarks to the Scottish Government. They have sold off ScotWind cheap and failed to stand up for Scotland. I am reminded of the words from the Proclaimers song “Cap in Hand”,

“We fight, when they ask us

We boast, then we cower

We beg

For a piece of

What’s already ours”.

As the song says,

“I can’t understand why we let someone else rule our land, Cap in Hand”.

It is time they stood up for our land on energy and electricity prices.

Meanwhile, I ask the Minister: if energy policy is reserved to the UK, where is the pooling and sharing? There is talk of payments to those having pylons nearby, but what about those where the energy is produced? Will there be a social tariff for the vulnerable this year? Ofgem is appointed by this Government and accountable to them. It is carrying out a welcome, if long overdue, review on standing charges. As I said, submissions do not close until late January—too late for this winter. Will the Minister direct Ofgem that standing charges should be abolished, as many suppliers argue? As National Energy Action states:

“How can it be right that someone who can’t afford any energy pays”

the same as

“someone in a mansion?”

It is an energy poll tax and equally unjust. Failing that, will the Minister ensure that standing charges are at least equalised across the UK, rather than seeing Scotland pool its energy, yet share higher charges? In summary, will she end the perversity of the land that produces the energy seeing its people and its poorest paying the most for that energy?

11:15

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Amanda Solloway)]

I thank the hon. Member for East Lothian (Kenny MacAskill) for his passionate and informative speech. I will say at the start that renewable energy clearly does not fit into my portfolio, but if I cannot answer on any points I will try to find the answers and follow up subsequently in writing.

First, the Government have been clear on the importance of protecting energy consumers, and I take my role as Minister for Energy Consumers and Affordability incredibly seriously. That is why I frequently meet energy suppliers and the regulator to remind them of their obligations and my expectations that they will do all they can to support customers, especially the most vulnerable, this winter and beyond. In response to the wholesale energy price challenge caused by Russia’s invasion of Ukraine last year, the Government acted swiftly to provide support to UK households and businesses, delivering almost £40 billion of energy bills support through different schemes from October 2022. The Government also continue to stand firmly behind energy consumers.

[Richard Foord (Tiverton and Honiton) (LD)]

Although I think our constituents are very grateful for the £40 billion of subsidy that was given across the cold winter last year, does the Minister agree that it would not have been necessary to spend that £40 billion of taxpayers’ money if we had carried on insulating homes at the rate that we had been up until the Liberal Democrats left government in 2015?

[Amanda Solloway]

I thank the hon. Gentleman for his intervention. Of course, the fact is that we had a cost of living crisis mainly, as I have pointed out, because of Putin’s illegal invasion of Ukraine. That was the situation we found ourselves in.

For households in fuel poverty, we have targeted support such as £150 directly off energy bills through the warm home discount, which last year we increased in value and extended to around 3 million households. We are also tackling the root problem through our energy efficiency schemes. We are looking at ways to make the warm home discount more flexible, and also to help respond to future increased pressures on consumers’ bills, and we continue to monitor energy bills and keep options under review.

[Carla Lockhart (Upper Bann) (DUP)]

Figures released by the utility regulator in Northern Ireland show that small and medium-sized enterprises in Northern Ireland are paying almost 10p per kW more than a typical EU price or that in the rest of the UK. Does the Minister agree that this places Northern Ireland businesses at a competitive disadvantage, particularly given the land border with the Republic of Ireland? Does she agree that further support measures need to be put in place, particularly for small to medium-sized businesses?

[Amanda Solloway]

I point out to the hon. Lady that I had a meeting yesterday with the Secretary of State for Northern Ireland, and we were discussing these very particular issues. She has my assurance that those discussions are always mindful and at the top of my thoughts.

I also encourage hon. Members to make their constituents aware of the Government’s “It All Adds Up” campaign, which shows simple measures to save people money on their energy bills this winter. I know that the hon. Member for East Lothian has a particular interest in standing charges, as he discussed them with me yesterday. Standing charges are a matter for Ofgem.

I am pleased to share that last week Ofgem published a call for input on standing charges to look at how they are applied to energy bills and what alternatives could be considered. The standing charge is used to recover the costs required to provide vital energy company services, including providing and maintaining the wires, pipes and cables that deliver power to a customer’s door. If the standing charge were scrapped, as the hon. Member for East Lothian suggests, suppliers would still have to recover reasonable costs in other ways, which would mean charging a higher price for every unit of power used. That could have significant consequences for some categories of vulnerable customers: for example, those with high energy use due to medical equipment. That is one of the reasons we are working through the matter very carefully.

The standing charge can also vary from region to region, as has been pointed out, because of the differing costs associated with the transmission and distribution of supplying energy to a particular area. Geographical factors mean it costs more to run the local electricity distribution network in the north of Scotland than elsewhere. To help protect consumers in the north of Scotland from those costs, a Government cross-subsidy scheme provides an annual cross-subsidy of some £112 million to that area. The scheme is funded by electricity suppliers from across Great Britain and reduces the electricity distribution charge for a typical household in the north of Scotland by more than £60 a year. The cost-reflective approach means that Scottish consumers actually pay lower charges for the high-voltage transmission network than most consumers in England and Wales.

I am also aware that the hon. Member for East Lothian is interested in the benefits available for communities located near transmission network infrastructure, especially those in Scotland near offshore wind facilities. Offshore wind farm developers already provide a range of community benefit packages developed in consultation with local communities. For projects based in Scotland, developers follow the Scottish Government’s offshore energy good practice principles when creating a community benefit package. However, we want to ensure communities hosting transmission network infrastructure can benefit from supporting the delivery of cheaper, secure and low carbon energy for all of Great Britain. We have therefore consulted on proposals for community benefits. The consultation proposed to introduce voluntary guidance on the appropriate levels and forms of benefits to give communities the knowledge, power and flexibility to decide what benefits they want in consultation with the project developer. The consultation has now closed and we intend to publish a response as soon as we can.

I now want to come on to prepayment meters. Historically, customers on prepayment meters have paid higher standing charges than direct debit customers, reflecting the higher cost of serving those customers. The Government subsidises prepayment meter customers through the energy price guarantee to ensure they pay no more for their energy than direct debit customers. That seems to be the fair thing to do. The support is due to end at the end of March 2024 when the energy price guarantee ends, but Ofgem is due to announce shortly how it will create an enduring replacement for that scheme so that prepayment meter customers will have that unfair premium they were paying removed from their bills once and for all. Furthermore, the Government have worked with Ofgem and the industry to see that the rules extending protections with regard to prepayment meter installations for the most vulnerable consumers have come into effect.

I wish to close by reminding all hon. Members that they should encourage their constituents to contact their energy suppliers if they are concerned about their energy bills or their ability to pay. Energy suppliers have an obligation to their customers and Ofgem has also introduced further rules on customer services for this winter. Once again, I sincerely thank the hon. Member for East Lothian for securing this incredibly important debate.

Question put and agreed to.

11:24

Sitting suspended.