John Hemming (Birmingham, Yardley, Liberal Democrat)

To ask the Secretary of State for Trade and Industry to comment on the gas supply and market.

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

The facts are that so far this winter there have been no gas shortages and supply and demand have remained in balance. Demand from gas is being met by deliveries from the North sea and the rest of the UK continental shelf, the interconnector, imports through the Isle of Grain and storage. We are also seeing a reduction in demand from gas-fired power stations and some large industrial users of gas in response to increased prices.

Gas storage levels remain full or nearly full. National Grid's daily report for 21 November shows short and long-range storage as being at 100 per cent. and 98 per cent. respectively. Medium range remains at 66 per cent. pending the new Humbly Grove facility, which is in the process of filling up.

We will continue to liaise closely with National Grid throughout the winter.

John Hemming (Birmingham, Yardley, Liberal Democrat)

I thank the Secretary of State for that answer. Will he confirm that on Saturday 93 GWh were taken from medium storage and 393 GWh from long-term storage; on Sunday 138 GWh were taken from medium storage and 469 from long-term storage; and on Monday 231 GWh were taken from medium-term storage and 496 GWh from long-term storage, which has maxed out at that rate? At that rate of withdrawal, we could breach the safety monitors during winter. At what point will the Secretary of State be concerned if that continues?

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

I should point out that I am not the Secretary of State. [Hon. Members: "Yet."] Let us wait until the end of the winter.

The serious point is that in terms of the gas market, supplies are taken from storage from time to time. They are then filled up. Let us remember that the North sea is this country's natural storage. The market is building—it is a matter for the market, not for the Government—more storage facilities, with 10 new projects under way. Reports from National Grid this morning say that what is happening to the spot gas price is irrational. It tells me that it is awash with gas at the moment.

Joan Walley (Stoke-on-Trent North, Labour)

While I understand that there is an issue about gas supplies, that has a bearing on the cost of gas to intensive energy users. Will my hon. Friend ensure that as soon as the cold spell is over, the price of gas will go down to what it was before? Will he meet pottery and ceramic manufacturers, who are concerned about the effects on production capacity of the price increase to £1.60 per therm?

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

Of course I will meet my hon. Friend's colleagues from industry. Since the spring, we have met intensive users of energy and their representative bodies. Most of business buys gas in the normal way, as do domestic customers. Globally, prices for energy are rising, often linked to the price of a barrel of oil. However, our prices are often lower than the median in the rest of the European Union. That is a fact. The particular problem is with intensive users of energy, who use gas as the feedstuff for producing chemicals, for example. They—not the Government—have chosen to buy on the spot market. It is one private company signing a contract with another, and they are suffering from very high prices. We are concerned about that and we are working with them, but as was said during Prime Minister's questions, the market is a liberal, commercial, privatised market in which judgments are made by private companies. We do not need someone posing as a shadow Stalinist Minister of Power saying that the Government should take command. To put the matter in context, the companies in question, although important British industries, represent 0.2 per cent. of companies that use gas and 0.05 per cent. of all companies in the UK. I am not complacent, but we have to put the present concerns in an intelligent and factual context.

Bernard Jenkin (Shadow Minister, Trade & Industry; North Essex, Conservative)

But the Government are responsible for the framework for long-term investment in the security of energy supplies in this country. Industry will be astonished to hear the Minister say that we are "awash with gas" when it faces the prospect of interruption to its gas supplies. The failure of the security of UK gas supplies reflects the failure of eight years of Labour energy policy.

We have not sought to provoke unnecessary anxiety about gas supplies, but we have been raising the issue with the Department of Trade and Industry for many years. I wrote to the Secretary of State weeks ago to ask about contingency measures, but he never replied. The right hon. Gentleman promised a debate on security of supplies, but we have not had it. Is it not astonishing that the Government have held their first meetings with industry only in the past few weeks?

Can the Minister confirm that for many industries the price of gas for delivery is five times higher than it was a mere four weeks ago? Does not that give the lie to the Prime Minister's claim that we are still paying the lowest prices in Europe? The Energy Intensive Users Group says

"Industry is already facing the highest electricity and gas prices in Europe this winter."

Will the Minister for Energy inform the Prime Minister, who did not seem to know that? Will the hon. Gentleman confirm that the emergency summit at No. 10 on 9 November concluded that there is a very high possibility that industry will have its supplies interrupted?

Now that the Minister has done all the contingency planning that he claims to have done, will he tell the House who decides which businesses are cut off and to whom is that person accountable? Is it possible that gas-fired powered stations, which affect electricity supplies, will be cut off, too? Can he assure the House that every business that might have its supplies interrupted because of gas shortages has been informed and that they will not receive a fax five minutes before the gas is shut off, as has happened before? Have businesses been informed of the criteria that will determine which ones are shut down first? How much warning will they receive?

Does not the present situation, together with the splits and disputes going on in Government, underline the chaos of the Government's energy policy?

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

The last question was the simplest and the answer to it is: no. One or two people might be trying to talk up a crisis in gas prices, but the energy companies, most of business, the DTI, National Grid and Ofgem are not part of that. The more loose and totally inaccurate talk we hear, the worse the position may become.

The companies that have chosen—they have chosen, not I—to have contracts under which they buy on the spot market are suffering from high prices. I have acknowledged that and we are talking with the companies concerned, which include chemicals companies and some of the steel companies. However, let us look at the prices for medium-sized businesses—the hon. Gentleman might want to know the facts as opposed to the bluster. For such businesses, the latest figures available—for the summer—show that the price of gas is 17 per cent. lower than in Germany, 4 per cent. lower than in France and 4 per cent. lower than the EU median, and the price of electricity is 49 per cent. lower than in Germany, 10 per cent. lower than in France and 20 per cent. lower than the EU median. Those are the facts.

As for the hon. Gentleman's reference to a meeting at No. 10 Downing street, to suggest that my Department reacted only in mid-November is totally nonsensical. If he cares to table a written question—no, I shall write to him anyway detailing our meetings. In summer, I met representatives of the oil and gas industry operating in the North sea and the UK continental shelf to make sure that they were doing the repairs and had the spares necessary to ensure that they were in the best possible position this winter. I met the supply companies on two occasions—my officials have done so more often—to make sure that they are in the best possible position this winter. In November, the industry suggested that there were one or two other actions that we might wish to investigate, and of course we listened to their advice. However, to suggest that we are not prepared is nonsense.

Paddy Tipping (PPS (Rt Hon Jack Straw, Secretary of State), Foreign & Commonwealth Office; Sherwood, Labour)

Has the Minister seen reports in some newspapers suggesting that domestic customers could be cut off? Will he take the opportunity to deny such scaremongering and confirm that even in the most severe winter, gas supplies to domestic customers will continue?

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

I am very happy to do so, because while we need to reassure business that its prices are not higher than the European average—we need reassurance as opposed to panic—it is even more important that householders, including some of our eldest and best, the vulnerable and the frail, are reassured. If those people hear that there may be energy cuts from reports that, in fact, are inaccurate, scaremongering nonsense, they may fear the effects of the cold weather that we are now experiencing. The domestic customer is not threatened at all, and through home energy efficiency schemes, winter fuel payments, the targeted focus of pension credit and so on, the Government are doing their best to make sure that elderly people are warm this winter. That is my first priority.

Robert Smith (Deputy Chief Whip; Aberdeenshire West & Kincardine, Liberal Democrat)

The Minister said that his first priority is the elderly, so with the increased prices for energy, how many more people will suffer fuel poverty this winter compared with last winter? Will he emphasise the important lesson that we must improve energy efficiency and the housing stock so that people can keep warm in their houses and make best use of their energy?

Next Thursday, the Minister will chair the Energy Council of Europe. How does he plan to deal with what the European Commission has identified as serious malfunctions in the European energy market? While our liberalised market is connected to a malfunctioning market there are serious concerns about the way in which the latter market will impact on our market. What progress does he plan to make next Thursday in sorting out that market? He has held meetings with representatives from industry and UK continental shelf operations, but what meetings has he had with the Environment Agency to ensure that there is minimal impact on the environment and that we maximise the economic benefits this winter? Finally, while there are arguments about our relative position in Europe, the reality is that prices are going up this winter, which is a serious concern for the economy, especially for those parts that may be shut down.

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

The hon. Gentleman raised two or three serious matters. I chair the Energy Council during our presidency, and it meets next week, on 1 December. We have made it clear from the beginning of our presidency that the issue of market liberalisation in the rest of Europe was at the top of our agenda—indeed, it is the top item on the agenda next week. The Commission has published two major reports on the issue, and it has made it quite clear that there are "serious malfunctions" in the European market. We will discuss that with Ministers, and we need to take action, because we have market liberalisation in the UK, and we need it across the European Union. That is the policy, and it should quickly become practice.

On fuel poverty, I accept that prices are rising for the domestic customer. However, they are rising across the world, so we need to see the problem in a global context. Energy demand in China, for example, is increasing by 15 per cent. a year, and the hurricanes have not helped. There are therefore serious difficulties, but we must do our utmost to protect people to whom we refer as the fuel-poor. I tend to think of them as elderly and other vulnerable people who will be cold this winter. We have taken action on several fronts, as I detailed earlier, to protect that high-priority group.

Michael Clapham (Barnsley West & Penistone, Labour)

Will my hon. Friend confirm that while increased demand is forcing gas prices up, the very fact that gas prices are connected to oil prices is also forcing the price up? Will he also confirm that last winter, at peak cold periods, 48 per cent. of our electricity was generated by coal stations, which are ready and available to produce electricity in cold periods this winter?

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

It is right to be reminded that we have a mixture of energy sources in this country, including the still very significant role of coal. For that reason, when the details of the energy review are announced by the Prime Minister, possibly quite soon, it will be a review of energy as a whole, contrary to what some people are speculating, and the future of coal will be one of the focuses of that important review. I am very mindful of that point.

Peter Luff (Mid Worcestershire, Conservative)

There will be a degree of scepticism about the Minister's claims about relative prices in Europe and the UK, but leaving that on one side, he has rightly highlighted, in answer to the question from the Liberal Democrats, the importance of the single European market in energy. When he came before the Trade and Industry Committee a few weeks ago, the Minister said that that was the highest priority, but there is not much sign of progress yet. He speaks about forcing compliance on other countries when he chairs the meeting next week. How does he intend to do that? Does he think that there is a realistic chance of making a breakthrough in those crucial negotiations? The market is determined by Governments, and the British Government have a golden opportunity to help resolve it.

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

There has been progress. The market has been the major focus during our presidency. The Energy Council does not meet till next week. Meanwhile, with our strong approval, the Commission has published two major evidence-based hard-hitting reports. Commissioner Piebalgs, whom I met earlier this week, is as enthusiastic as I am to drive the matter forward. I believe we will see real action on it. The hon. Gentleman expressed some doubts about prices. Whenever these issues are raised, I try to produce evidence—an old-fashioned hankering after the facts. I hope that might become more fashionable on the Opposition Benches. I have given the House some evidence already. Let me also say—I am surprised that the party of the market is not parading this more than I—that between 1990 and 2004, British industry paid an estimated £7.9 billion less than German industry for gas. Those are the facts, as opposed to the nonsense and the scaremongering.

Paul Farrelly (Newcastle-under-Lyme, Labour)

The Minister rightly refutes the suggestion that he has been in touch with industry only over the past few weeks. I know that he has met high intensive users, including the pottery industry, throughout the year, and they have told me they are grateful that the Government are listening. None the less, there is great concern about gas prices in particular. What can my hon. Friend do to assure the industry, including ceramics, about the prices that it will have to pay not only in the months ahead, but next year and in the future?

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

We have touched on some of that in relation to the importance of market liberalisation. The dialogue with the industry which, as my hon. Friend acknowledges, and I thank him for that, has been going on for a very long time at both ministerial and official level, is part of that process. One body of evidence to bring to bear on the debate at this stage is that there is now a great deal of investment in new infrastructure. I opened the Isle of Grain terminal yesterday, and I am told that the next ship will arrive today with liquefied natural gas. The Langeled pipeline to Norway is being built. There are many, many other projects, including upgrades of the interconnector, which will mean that in terms of the infrastructure of terminals, LNG and pipelines, we will have capacity for some 26 per cent. more gas in a year or so than we currently have. So the infrastructure and the investment by the private market are there.

Michael Weir (Spokesperson (Environment & Food; Health; Rural Affairs; Trade & Industry); Angus, Scottish National Party)

The Minister will understand that we in Scotland find it extraordinary that there is a gas shortage and rocketing prices, when we produce eight times the amount that we consume—indeed, we land at St. Fergus alone six times what we consume. He mentioned infrastructure, but does he accept that much of the problem in the UK as a whole with supply and rising spot prices is due to the lack of investment in the pipeline system over many years, leading to a lack of flexibility and capacity for storage to meet periods of exceptional demand? He spoke about improvements in infrastructure, but when can we go back to manufacturers in our constituencies and tell them that there is no chance of interrupted gas supplies in the future?

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

I am glad that the hon. Gentleman acknowledges the strong partnership between Scotland and the rest of the United Kingdom. I have mentioned the investment that is now taking place, which should make an impact on the price issues. I repeat that for most of the economy, certainly for the domestic customer, the spot gas prices are not the relevant feature; they are for those companies who are the intensive users, using gas as the feedstuff for chemicals and other materials, who have chosen freely, as part of the private market, to sign such contracts, which often enable them to reduce their own demand at difficult times. But I hope that, with the extra supply of gas and more generally with the announcements that we have recently made about connecting up the Scottish islands to the national grid in terms of wind power, the situation will steadily improve. I expect it to.

Michael Jack (Fylde, Conservative)

The Minister may have heard on the radio this morning the director of the interconnector saying that 30 per cent. of his capacity was not being used due to structural problems in the German gas market that were inhibiting our ability to obtain supplies. What does the hard-hitting report in the Energy Council to which he has just referred say that Germany should do and when should they do it by? Will he ensure that the matter is on the Prime Minister's agenda when he meets the new German Chancellor to ensure that we have some action on this by the end of the year?

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

The Prime Minister has recently talked about energy and energy strategy as an important component of the European debate, so he needs no reminding about the importance of that. I have acknowledged and talked about what needs to be done in terms of ensuring fair competition across Europe. We believe that liberalisation—an end to monopolies—is not only good for the UK consumer, but, critically, is also important for the German consumer, business and domestic, as well as elsewhere in Europe. That is why we are driving this forward.

One has to keep reminding the House that the interconnector is a matter for private enterprise; it was built not by the state or the EU, but by entrepreneurs with their money so they make the decisions about it. Nevertheless, I am advised that on a daily basis at the moment—these are bound to be average figures that will vary from day to day—some 25 to 30 million cu m of gas are flowing through the interconnector to Great Britain.

Crispin Blunt (Whip, Whips; Reigate, Conservative)

The Government have no excuse for complaining about the state of the European market. Three years ago at the Energy Council there was a qualified majority in favour of imposing on France and Germany a liberalised market in gas and electricity by 2005. Mr. Brian Wilson, the Minister's predecessor, chose not to press the issue and to do a deal with the French and the Germans that has led to the compromise that means that now there is not a liberalised market in Europe, which is causing us precisely the problems that we are now experiencing with the Germans being able to withhold supplies to the United Kingdom through the interconnector. Equally, the Government failed to take decisions in the Energy White Paper, and now we are to have an energy review by the Prime Minister. Will the Government understand that they must face up to their responsibilities to take decisions in a timely fashion and not go on putting off difficult decisions because of the presentational problems?

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

I do not understand the reference to presentational problems, because the issue is top of the Energy Council agenda next week. We have put it there and we have consistently—[Interruption.]

Michael Martin (Speaker)

Order. When the Opposition Front-Bench spokesmen have an opportunity to question a Minister, I expect them to be silent for his reply.

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

It should be gas, not gassing, I think.

We have significantly pushed the issue within the EU. I have described the two new reports as hard hitting. The hon. Gentleman may want to read them one day. They are hard hitting. We need to push the matter through during our presidency, and after that. We do believe in market liberalisation; it is good for European business and good for British business.

Peter Bone (Wellingborough, Conservative)

In evidence before the Trade and Industry Committee, we were told that wholesale gas prices in the United Kingdom were more than 50 per cent. higher than in the EU. When will the Government fight for a level playing field in the EU on the matter, or have they given up totally on the EU?

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

We are committed to the EU. Following my appearance before the Select Committee, we sent it some statistical evidence. I repeat that, when one looks at the record over 10 or more years and the data today, our gas prices, both for domestic customers and the business community, are lower than the median. Mr. Bone shakes his head. I can present him with the evidence; I cannot make him understand it. I have acknowledged—it is an important acknowledgement—that those heavy users choosing to buy on the spot market are having to pay very high prices, and we are doing our best to look at that and improve the situation. The market is through great investment.

Vincent Cable (Shadow Chancellor, Treasury; Twickenham, Liberal Democrat)

The Minister said that Britain does not need a strategic gas reserve, as we have for oil, because of the reserves in the North sea. Will he describe the circumstances and the legal powers under which, in an emergency, he could require private companies to sell into the market?

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

As I have explained, the contracts that some intensive users freely sign mean that in certain circumstances they will take less gas than in normal times. Some companies make money by selling it back to the grid. That is the reality of the market in that situation. It would be in only the most extreme and unlikely circumstances, in serious emergency conditions, that the state, via the national grid, might have to intervene. I answer the question because the hon. Gentleman asked it, but no rational commentator anticipates such a situation.

Richard Ottaway (Croydon South, Conservative)

The Minister has openly acknowledged that we now import gas through the interconnector. That has profound political implications, particularly with regard to the energy mix. Does he have a long-term policy on whether there should a limit on an acceptable level of gas imports?

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

My own Member of Parliament has asked me an important question. [Interruption.] I always think that how one votes is a secret. The hon. Gentleman raises an important question about national security and the geopolitics of energy policy, and that is a matter of growing concern. In 2004 we became a net importer of gas, as the hon. Gentleman knows, and in a year or so we will become a net importer of oil. Therefore, we are moving from energy island to a heavy dependence on imports of energy, notwithstanding the issues around coal and the contribution of renewables, and so on, which I could go into if we had more time. Therefore, as the Prime Minister said at the Labour party conference in Brighton—I do not think that the hon. Gentleman was there on that occasion—we now need rigorously to consider issues relating to our depending on some unstable parts of the world, and that will be an important dimension of the new energy review.

Laurence Robertson (Shadow Minister, Northern Ireland; Tewkesbury, Conservative)

The Minister has accused Opposition Members of scaremongering about the prospect of cuts in the gas supply. May I direct him to the comments made by Minister with responsibility for energy, in January 2005 in Westminster Hall, when he said that gas supplies could indeed run short if there were a cold snap this winter, or next winter? Will he take time to familiarise himself with those remarks, and perhaps look into what the hon. and learned Gentleman meant by that?

Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)

We all recognise that the balance between energy supply and demand for two or three years is difficult. That is to some extent why we are having this discussion. Why is that? I am advised that it is partly because the rundown of oil and gas from the North sea and the rest of the UK continental shelf has happened at a faster rate than was being predicted only a few years ago. It is also because—it is regrettable but it is where we are—the heavy investment by the market in infrastructure, such as pipelines, liquefied natural gas terminals and the rest, is only now coming on stream, or will be in a year or so. I rather wish that it had been there a year or so ago. Of course I do. But there is this time lag. There is a tightness in the market, but domestic consumers will not be affected and most of business will not be affected, although high prices are now a global phenomenon. However, there is the issue, and I am repeating myself now, of the heavy users, which is where the difficulty is, if people have chosen, rightly or wrongly—it is their commercial judgment—to buy on the spot market.