Energy Prices

Nic Dakin Excerpts

Wednesday 19th October 2011 Commons Chamber

[Pat Glass (North West Durham) (Lab)]

Thank you for calling me to speak in this important debate, Mr Deputy Speaker. This subject is of huge interest to the energy-consuming public, and these are matters of real fear and anxiety to many of them. We should remember that many of these British companies that are making big—even obscene—profits right now are the same utility companies, energy companies and communications companies that used to be owned by the British people. Whatever artificial market situation successive Governments put in place to try to manage those companies’ profits and markets, they continue to operate as a virtual oligopoly. There are few suppliers in the market, and entry into that market is virtually impossible. Those suppliers’ actions therefore have a disproportionately negative impact on prices.

The bottom line is that those companies were nationalised for a good reason—namely, to stop them using their strategic position to drive up prices. Ironically, we now find that our most strategic energy, water and communications companies are foreign-owned and are demonstrably using their position to drive up huge profits for a small number of senior staff and shareholders. We have moved from a position in which all of us owned and benefited from those companies to one in which only a small number benefit massively while the rest of us lose out big style.

I am not suggesting that we should renationalise those companies, but the present situation is clearly not working for the consumers of this country. It needs urgent reform. I am really pleased that the Government are supporting the Opposition’s motion today, including the part that calls on them to

“reform the energy market to break the dominance of the Big Six by requiring them to sell power into a pool, allowing new businesses to enter the market, increasing competition and driving down energy bills for families and businesses”.

To me, that means breaking up the big six, and I hope that that will be the Government’s policy. I also hope that the Opposition will hold them to account on that.

It is the greed of those energy companies that has brought about this situation. This year, they have fallen over themselves to announce big increases. British Gas went first, increasing its gas prices by 18% and its electricity prices by 16%, but that was quickly followed by similar increases from Scottish Power and the other four. This might not be a cartel as we know it, operating in smoke-filled rooms, but it appears to be a cartel that operates by watching Sky News to see who is going to go first before rushing in with similar price increases. To me, that is still a cartel, and it is the British consumer who is losing out.

British Gas defends its massive price increases and blames us, the customers. It tells us that we are not paying enough to reflect the increased cost of gas and electricity on the wholesale markets, and that that will depress its profits for the first half of this year. Not surprisingly, organisations such as Consumer Focus and Which? disagree with that, telling us that wholesale costs have actually gone down and are still about one third lower than their 2008 peak, yet the energy companies’ profits have risen substantially over the same period. So, costs on the wholesale market have gone down, and energy profits have gone up. For example, British Gas has had a 44% increase in its gas profits and a 21% increase in its electricity profits. Last year, British Gas’s residential business—not its whole business; just the residential part—made £740 million profit. I am not against companies making a profit, and I believe that everyone is worthy of their hire, but that is obsessive, and it is the poorest people in this country who are paying most.

All that leaves British energy consumers facing massive increases in the cost of energy at a time when wages are being frozen, food prices are rising, petrol and diesel prices are soaring and travel costs are ever increasing. About 9 million households in Britain face an average dual fuel increase of £190 a year. We were told last week that the energy companies made £120 profit from the average family on a dual fuel deal, increasing from £15 in June this year. That is nearly a 700% increase for the average family.

The Prime Minister’s response, therefore, is disappointing to say the least. He had the energy companies in on Monday, but instead of showing them the instruments of torture, he seems to have introduced them to the tea and coffee-making facilities. It is just not good enough. We desperately need the Prime Minister to start taking these people on. It was an opportunity wasted.

[Nic Dakin (Scunthorpe) (Lab)]

My hon. Friend is making a powerful argument to show how these massive energy cost rises are having an impact on the individual consumer. Does she agree that there is also a negative impact on British business, particularly on high-energy-using British manufacturing businesses, so it is yet another struggle for them in these difficult times?

[Pat Glass]

I agree, and it is not just businesses either; it is schools and colleges, too, that are being driven hard by these increases.

The Energy Secretary’s response has been equally disappointing. He has given us a White Paper on reform of the electricity market, but in my view, it is big on complicated legal mechanisms while saying nothing or very little about the impact of these increases on households. He has given us a list of his meetings with small providers and he has launched yet another Ofgem review into energy prices—the 18th such review so far. Personally, I do not find that impressive; I think the Energy Secretary should be doing more.

Finally, we are moving towards another winter and the nights are drawing in with temperatures beginning to drop. My constituents are telling me in my surgeries—not just now and again, but every time—that they are having to choose between putting the gas on or feeding the kids. Frankly, in the sixth biggest economy in the world, nobody should have to make that choice. I am pleased that the Government are supporting the Opposition motion, but they need to get a grip on this problem—and fast.