Electricity Market Reform

Tom Greatrex Excerpts

Thursday 3rd November 2011 Westminster Hall

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

I will endeavour to be brief to provide that time, but I want to say a few things. I welcome the report and the clarity that it brings, because it puts very technical issues into relatively plain English. I congratulate the Select Committee on doing that. I am conscious that in coming months, when the energy Bill is published, the Minister and I will have plenty of opportunities to get into the weeds of these issues, so I do not intend to speak for long.

My hon. Friend the Member for Brent North (Barry Gardiner) outlined a number of the issues arising from the EMR process, as well as some of the omissions from the EMR proposals. I will touch on a couple of issues. I want to re-emphasise the most glaring issue, which has been referred to by the Chair of the Committee, the hon. Member for South Suffolk (Mr Yeo), and by other hon. Members—the omission from the EMR proposals of reform of the wholesale electricity market. I hope that between the White Paper and the Bill, the Government will look to deal with that, or others may well do so, because it is a pressing issue. It has come to the fore in recent weeks, and we know the reasons why. Those reasons have been acknowledged by some of the energy companies themselves. In particular, Ian Marchant of SSE has been candid in acknowledging that there is a trust issue. They have a trust issue because the market in which they are operating and the behaviours that go alongside it bear the hallmarks, in some respects, of a cartel. That is unsatisfactory and needs to be dealt with. The Committee report rightly highlights the proposals from Ofgem in relation to the 20% figure as relatively timid, and much more substantial work can be done on that. I am sure that the Minister will appreciate the support from the Opposition if he attempts to deal with some of those issues or, if not, we will find a way of giving him the opportunity to address those issues in the next few weeks.

I want briefly to touch on carbon price support, which the report is critical of. As my hon. Friend the Member for Southampton, Test (Dr Whitehead) has noted, the report reflects on the issues regarding the encouragement of new as opposed to older development. The report states that carbon price support

“will not influence investment decisions until 2018 at the earliest…Until then, the Carbon Price Support represents little more than an additional energy tax, which will be passed on to consumers.”

The hon. Member for Warrington South (David Mowat) has referred to energy-intensive industries. That is an important issue, particularly with the impact that the carbon floor price could have on some of those industries. I have a constituency interest in the issue, as do many other hon. Members. It is important to ensure, as the Select Committee warns, that UK companies are not disadvantaged in the long term compared with their counterparts in the EU and more widely across the world. I know that the Chancellor is seeking to address that issue in his growth statement at the end of the month, and I implore the Government to look seriously at the impact. I know of energy-intensive companies in my constituency that contribute to other objectives set out in the report and in the EMR process—for example, manufacturers of offshore wind turbine parts—and those companies might end up going to other parts of the world, causing the UK to lose growth and jobs.

Other aspects of energy policy will need to change and feed into the time scale of the reform. The Minister touched on one of them when we debated the potential changes regarding shale gas, and I want to refer to another, transmission charging. I know that the Minister now knows the arguments well. The Select Committee report points out that the TransmiT review will have an impact on the development of renewables, the siting of such developments and their attraction in association with the ROCs regime.

I know that the Minister is aware of the way in which such arguments are sometimes used to support a particular political agenda. The issue is not necessarily about discriminating against one part of the country, but it is a fact that the transmission charging regime was established in a pre-renewables world. That needs to change. I hope that if the outcome of Ofgem’s review is too timid, the Minister will use his powers to ensure that that is addressed to provide the right signals and basis for the market.

Finally, the Select Committee report notes:

“‘Affordable’ electricity in the short term cannot be achieved at the expense of meeting the other objectives of Electricity Market Reform. Lower prices cannot be a primary driver of energy policy, but developing greener and more secure sources of electricity needs to be accompanied by sound social policy to protect vulnerable consumers.”

We have seen a change in recent months that perhaps calls some of the sentiments behind that statement into question. While it is important to consider the security of supply and decarbonisation, we must always keep the people across the country who are struggling to meet energy bills at the forefront of our minds. The issue is not about a small number of people in fuel poverty, because it affects families and businesses up and down the country. Too often, in some of our discussions, we overlook the impact on consumers. We must ensure that we do not do that when reforming the electricity market and as the Bill progresses in the next Session.