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Energy Prices and Profits

Part of Opposition Day — [6th Allotted Day] — Living Standards – in the House of Commons at 6:21 pm on 4th September 2013.

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Photo of Michael Weir Michael Weir Shadow SNP Spokesperson (Business), Shadow SNP Spokesperson (Energy and Climate Change) 6:21 pm, 4th September 2013

We must never forget that it has been estimated that for every 5% rise in energy prices a further 46,000 households go into fuel poverty. The Department’s own figures show that between 2010 and 2012 average domestic energy bills rose by an average of £250, with 78% of that increase resulting from higher gas prices and 22% from higher electricity prices. The escalation in energy prices cannot be looked at in isolation: just as energy bills are rising, so is the cost of road fuel, food and another essentials. Clearly, that has a serious impact on families, who cannot continue to absorb such large increases at a time when wages are, at best, static. I accept what the Secretary of State said about the energy companies having to make profits, but the issue is the amount of these profits and their substantial rise at a time when everybody else is having to tighten their belt. That needs to be examined more closely.

In the Energy Bill, the Government sought to take powers to implement the Prime Minister’s promise to put everyone on the lowest tariff, but, unfortunately, as I have said many times, the Bill does not seem to have that effect. The wording does not require the energy companies to put people on the lowest tariff, but only to make an offer, which may be lost in the mass of paper we receive from them already. I suspect that many people are still not on the cheapest tariff. Even these changes fail to do anything to help some of the poorest in our society, who have to rely on pre-payment meters. Someone on a direct debit tariff may be fine, but someone on a pre-payment meter will still be stuck on a higher tariff, as meters are generally on a higher tariff than someone paying by direct debit. If the Government are truly intent on ensuring that everyone has the lowest possible bills, they need to ensure not only that that applies within the type of contract that people already have, which is what is happening at the moment, but that people can move to a cheaper type of contract.

Particular problems are faced by those with pre-payment meters. It has always seemed to me slightly perverse that such meters are one of the few examples where consumers end up paying much more by paying cash in advance. The issue is important, and the Minister and I have debated it previously. Citizens Advice Scotland issued a report on energy recently, which showed that it had dealt with a massive number of people who had different energy issues. It said:

“The cases highlighted by bureaux regarding difficulty paying are more commonly with regards to prepayment meters recouping an unaffordable amount for arrears every time the consumer tops up”.

The problem is that not only does the tariff tend to be higher—to be fair, many companies now fix it at their standard tariff—but it is higher than the tariffs that can be achieved by, for example, direct debit. That is coupled with the fact that many, but not all, of these people on pre-payment meters are put on them because they have a debt, part of which is recouped every time they top up the meter. Because this debt is added on, they are, in effect, pushed further into debt. The report cites the case of a single parent with two children who currently loses £7 towards the arrears every time she puts £10 in the meter—the remaining £3 is simply insufficient. That situation has to be dealt with.

The motion talks about putting those over 75 on the lowest tariff available, but Caroline Flint talked about the difference in tariffs between companies and it seems to me that that will not really hit the problem. We used to have a higher winter fuel allowance for more elderly people. We cannot go back to that, but perhaps we should be telling the energy companies that we should have a standard tariff across all the companies especially for elderly people to ensure that every one of them gets the lowest tariff irrespective of the company they are with, without their having to go through them all and having to switch. That would be the simplest way to do it.