Jim Shannon
Main Page: Jim Shannon (Democratic Unionist Party - Strangford)
Caroline Flint
My hon. Friend is right. In the statement last week, I thought he made a very fair contribution, saying, “Look, there are real problems here that we all have to acknowledge, address and deal with.” I welcome the reference to the CMA, but we cannot allow the silence that some Government Members would now like to follow on this issue of public importance. That is why we have to draw a line in the sand and have a freeze. It is also why we should get on with some of the other ways in which we can address the reforms that are necessary in this market. I have been very open that there may be aspects of the CMA investigation into this murky world that will find other issues that Labour has yet to look at and that might be helpful to our reform programme. I very much welcome that, but we cannot allow this issue to be kicked into the long grass.
The report clearly highlights the need for reform in our energy market, as we have made clear for the last three years. It identifies five significant problems that are preventing consumers from enjoying the full benefits of competition. None of them is new.
Jim Shannon (Strangford) (DUP)
In Northern Ireland, there are just two electricity companies: Power NI and Airtricity. Last year, Power NI put up its prices by 14%. Does the right hon. Lady feel that it is time we had a more open market with more suppliers, so that the price can come down, and that the sooner that happens, the sooner we can take advantage of that?
Caroline Flint
I absolutely agree, which is why one of our proposals is to create an electricity pool or power exchange whereby all energy for that sector is put into a pool, enabling anybody to come in and compete on price to retail. Small suppliers, and, I have to say, increasingly some of the bigger players, recognise that this idea is making some headway in the discussions on what the future should offer. We look to Northern Ireland and other countries to learn from their experiences. We do not operate in a bubble; it is worth looking elsewhere for ideas.
The report identifies five significant problems. Many of them were things that Labour Members raised in the eight previous Opposition day debates on this issue and that feature in our Green Paper. The first problem is weak competition. Companies are able to increase their profit margins at will, without any obvious efficiencies or improvement in customer service. They are simply getting away with passing on cost increases, but not cost reductions.
The second problem is market segmentation: suppliers enjoying big market shares in their old monopoly areas, and companies charging some customers, particularly loyal customers, significantly more than others, even though they are providing them with an identical product. Thirdly, there is tacit co-ordination between suppliers: price announcements, normally increases of similar amounts, being announced at the same time and with growing lead-in times. Fourthly, there are barriers to entry and expansion for new players in the market. In particular, the lack of liquidity in the wholesale market makes it difficult for non-integrated players to access power at competitive prices. The fifth problem is weak customer pressure: low and declining levels of customer trust in this market.
That is the final reason a price freeze is so important. Yes, it is about compensating consumers for overcharging in the past. Yes, it is about protecting them from any more unfair price rises while the market is being reformed for the future, but it is also a line in the sand. It tells the companies that their days of overcharging are over, and it tells consumers that the rules of the game have changed for good. It tells them that the rules are no longer set by six giant companies, but by one Government acting for the many not the mighty few.