Energy Prices

Mike Weir Excerpts

Wednesday 19th October 2011 Commons Chamber

[Caroline Flint]

Absolutely, and that is in our motion today. Every Member of this House has a chance to vote to urge the energy companies to share some of their profits with the people who are their customers and to get prices down. As my hon. Friends have said, the problem is that even when people try to find a better package they do not get the right information.

[Mr Mike Weir (Angus) (SNP)]

Are things not, in fact, even worse than that? People can reduce the amount that they pay by switching only if they pay by direct debit, which acts against those on the lowest incomes who do not have bank accounts, and those of our constituents who do not wish to set up direct debits as they want the ability to decide which bills they pay when, in these difficult times.

[Caroline Flint]

Absolutely. There is no point in the companies having a system that does not recognise the situation of ordinary families. The National Pensioners Convention talks about the fact that fewer than six in 10 pensioners have access to a computer to go online. It is not fair or right. The onus should be on the companies, not the public. However, all the Secretary of State could do this week was blame the public: “It’s your fault you’re not getting out there and getting a better deal. It’s your fault you’re not saving yourselves £200 a time.” He has got a lot to answer for, because he has just sat back and let people suffer.

--- Later in debate ---

[Chris Huhne]

I will make a little progress before giving way again.

Across the country, rising energy prices are hitting households hard. On top of increasing petrol and food costs, many households are facing an increase of more than £100 in their annual dual fuel bills. For those who are struggling, it can seem as if bills simply keep going up. I am sure that all Members will join me in expressing concern about that, but sympathy from the sidelines is not enough. It is our responsibility to do everything we can to help. That is why we are focusing on the things that will make a difference both this winter and in the long term.

First and foremost, consumers need to know how they can cut their energy bills right now. We need open and honest information, so people can see the savings they can make by checking their energy deal, switching tariffs or suppliers, and insulating their homes. One of the positive things to come out of Monday’s energy summit was a commitment from the energy companies that, as part of the voluntary agreement, they will notify all their customers when there is a cheaper tariff than that which they are currently paying. That is a step forward. It is not the end of the story, but it is a step forward.

[Mr Weir]

Does the right hon. Gentleman agree that the choice of language is important? He says that we can reduce bills by switching and insulating, but is it not the case that, given the massive rise in energy prices, if people switch or insulate they may stop the rise being so big, but bills will keep rising? That is why people are being hit so hard. Wages are not rising, but bills are. Unless we can reduce bills, we will not help the situation.

--- Later in debate ---

[Ian Lavery (Wansbeck) (Lab)]

rose—

[Mr Weir]

rose—

[Chris Huhne]

I am going to make a bit of progress before giving way again. The hon. Member for Angus (Mr Weir) has already intervened once, so he will have to wait until I have taken interventions from some of the other hon. Members.

This winter, energy bills will show customers how to save money, encouraging them to call their supplier and check online for savings. They will also have access to advice.

--- Later in debate ---

[Chris Huhne]

I am grateful for that question. It is absolutely right; we have learned an enormous amount from that. A lot of work has gone into the negotiations and a lot of good engineering work has been done with the front-end engineering and design studies. They will all be published, if they have not been already, and will be made available to everyone. We are absolutely confident, as a result of this process, that we are able to go ahead with the CCS project within that budget. Unfortunately, at Longannet the difficulties were specific to that project, including the length of the pipeline between Longannet and the reservoirs, as well as other issues concerning the rest of the plant such as its upgrading to comply with the large combustion plant directive. As a result of the knowledge that we have acquired in that negotiation and as a result of those feed studies, we are confident that we will be able to take a project forward.

[Mr Weir]

Earlier in his speech, the Secretary of State referred to the disgraceful decision of the previous Government to abandon the gas CCS project at Peterhead, but are not this Government doing exactly the same with Longannet now? It was chosen as the only viable CCS plant in the competition, as no one else came forward. By abandoning it now, is he not putting back CCS development and ensuring that its much talked about exportable technology will not be developed in this country?

[Chris Huhne]

No, I disagree with that. I think that we have a very good track record at a number of our leading universities, with Edinburgh being first and foremost amongst them, of work on carbon capture and storage. One lesson that we have learned from the negotiations is that we can build a commercial-scale CCS plant with £1 billion. Indeed, we have had a very clear indication of interest back at Peterhead from Scottish and Southern that it would be prepared to do that with consortium partners. That is clearly going to be an offer that other contestants will have to beat, so for all the reasons that I have given and that I have explained at considerable length, we are determined that we should be successful with CCS technology. It is disappointing to me personally and to many others that we were not able to proceed at Longannet because of the specific problems there, but that certainly does not mean that we are shelving CCS.

--- Later in debate ---

[Mr Mike Weir (Angus) (SNP)]

In his opening salvo against the Labour party, the Secretary of State rightly condemned the previous Government’s decision to close the Peterhead carbon capture project. Inexplicably, he went on thereafter to pull the plug on the Longannet project, which drives a coach and horses through energy and industrial policy. We have been told for months, if not years, about the prospect of carbon capture and storage producing an export potential, but that will now be lost. After Peterhead was not proceeded with, we lost the lead on gas carbon capture and storage, and the same will happen with the Longannet project. That is a daft decision that will come back to haunt this Government.

Fuel poverty is affecting more and more of our people. A total of 770,000 homes in Scotland are in fuel poverty, and for every 5% rise in energy prices, a further 46,000 move into that situation. The last energy price rise was nearly 20%, which shows the effect that those rises have. That is an utter scandal in an energy-rich nation such as Scotland. Last week Ofgem said that the profit margin for energy firms had risen to £125 per customer per year—up from £15 in June—with the average dual fuel bill now £1,345 per year. And that cannot be considered in isolation. Just as energy bills are rising, so is the cost of road fuel, food and other essentials. This week’s inflation figures are a grim reminder of the pressures on family budgets at a time when wages are static, at best. In June I received a written answer about energy price inflation, which showed that in four of the last five years the rise in domestic energy prices had outstripped the rate of inflation, whether we use the retail prices index or the consumer prices index—and that was before the recent round of price hikes.

Last week we had the energy summit. I fully understand the need for energy efficiency, and I support it, but we must be honest and accept that the current rate of price rises far outstrips the ability of the average family to reduce their bills through greater energy efficiency. At best, energy efficiency might mitigate some of the rise. I will cite my own experience in this area. I pay for my gas by direct debit. I took measures to reduce energy consumption and managed to reduce my gas usage substantially, yet I still found that the gas company wished to increase my direct debit payment. I suspect that many families will face the same situation. I urge Ministers to watch their language when talking about the effect of energy efficiency measures, because the claims that they reduce bills may well turn out to be hollow, and put people off taking the necessary measures. A little honesty would not go amiss.

A similar situation exists with regard to switching. Much has been made of the reduction in the number of people switching. I do not find that particularly surprising, because the pool of potential switchers is bound to be reducing. Again, Ministers have to be much more honest about the effect of switching. It seems to me that unless one is on a particularly bad tariff or using a pre-payment meter, the benefit of switching will not be great. Call me cynical, but I also wonder about the apparent follow-my-leader strategy of the energy companies on price rises. Switching when one’s company raises its prices might just mean that one’s price rise is slightly delayed, until the new company gets around to doing the same. There is also evidence that many of those who switch end up on a worse deal. In that respect, I welcome the promise of more transparency. That is urgently needed on pricing and tariffs.

Another outcome of the summit was that the 8 million quarterly credit customers were written to, telling them of alternative payment methods. That is all very well, but the truth is that many of them will not want to change, because in difficult financial times many people juggle their bills, delaying the payment of one bill in favour of paying a more pressing one. Such people may not want to pay by direct debit, because they would have no control over when the money left their account.

I strongly support the effort to increase insulation, with the proviso that I have already mentioned about being more up-front about the benefits.

Although many of the factors affecting fuel poverty and energy prices are outwith their control, the Scottish Government are pushing forward with efforts to tackle this problem. As well as holding discussions with the energy companies, they have introduced an energy assistance package worth £33 million, which has helped 150,000 people on low incomes to reduce their energy bills. One in six Scottish homes have been visited for a home energy check, and almost 18,000 installations have been made. The scheme has been extended to help the most vulnerable. In addition to helping pensioners, the scheme now includes the disabled, families with young and disabled children, those with severe disabilities and the terminally ill. It is to be extended next month to people on carer’s allowance, which could benefit up to another 7,000 households. Next year the £50 million warm home fund will also be in operation to give additional help to the fuel poor.

That is in stark contrast to what the coalition Government are doing. In his comprehensive spending review, the Chancellor announced cuts of more than two thirds to Warm Front, and over the next three years, responsibility for the assistance package will pass from the Government to the energy companies.

That brings me back to the energy companies. It is easy to paint them as the unrestrained villains of the piece. However, I do have some sympathy with the position that they find themselves in. They are being told to invest in new capacity, and at the same time they are being attacked on prices. The Ofgem report shows the vast amounts that they are making in profits. I recall one particular occasion when I was on the Energy and Climate Change Committee and we had the big six before us. We pressed them on where they made their profits. They managed to deny simultaneously that they were making profits on generation and that they were making profits on selling energy. That prompts the question: where were the profits are coming from? If we are all in this together in these difficult times, as is claimed, we have to recognise that when family incomes are not rising the energy companies have to make their contribution. We have to take action to force them to reduce prices, because asking them to take action does not seem to be working.

In closing, may I ask whoever is winding up for the Opposition to explain one point about energy being pooled? I can understand it in the case of electricity, but I am less sure about how it would work in the case of gas, particularly as so much of our gas is now imported, much of it in the form of liquid petroleum gas. I cannot see how that can possibly be pooled for the benefit of gas customers.