Energy Markets (Competition)

Energy and Climate Change – in the House of Commons at 9:30 am on 19th June 2014.

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Photo of Anne McGuire Anne McGuire Labour, Stirling 9:30 am, 19th June 2014

What steps he is taking to improve competition in energy markets.

Photo of Susan Elan Jones Susan Elan Jones Opposition Whip (Commons)

What steps he is taking to improve competition in energy markets.

Photo of William Bain William Bain Labour, Glasgow North East

What steps he is taking to improve competition in energy markets. [904351].

Photo of John Robertson John Robertson Labour, Glasgow North West

What steps he is taking to improve competition in energy markets.

Photo of Edward Davey Edward Davey The Secretary of State for Energy and Climate Change

The Government are strongly committed to improving competition. Since 2010, 12 new companies have entered the market, meaning that there are now 19 independent domestic suppliers competing with the big six. Latest figures show that half the households that switch are moving to independent suppliers and we are set to halve the time it takes to switch. Ofgem’s retail market reforms have delivered a simpler, clearer market, and its market maker obligation is improving wholesale market access for smaller suppliers. Last year, we asked the competition authorities to make an annual assessment of competition in energy markets. Consequently, Ofgem has consulted on a market investigation reference, which we strongly support.

Photo of Anne McGuire Anne McGuire Labour, Stirling

Notwithstanding the Secretary of State’s answer, around 98% of homes in Britain still take their energy supplies from the big six. Wholesale prices are falling and consumers are seeing no benefit. Does he not wish that he had been a bit braver in the Energy Act 2013 to ensure that when wholesale prices fall, consumers get some of the benefit? He could have included such proposals in the recent Act.

Photo of Edward Davey Edward Davey The Secretary of State for Energy and Climate Change

I am grateful to the right hon. Lady for her question, but let me just correct her. The market share of the independents is now nearly 6% compared with less than 1% in 2010. That extraordinary growth in such a short period shows the value of competition, with 1 million people switching to independent suppliers over the past year. However, she makes an important point about wholesale energy prices, and we discussed that at length yesterday. We have taken action both through competition and through supporting the competition inquiry, which has real teeth. That stands in stark contrast to the previous Government. When the Leader of the Opposition was doing my job, he failed to take any action, even though wholesale energy prices fell much faster than they are doing now.

Photo of Susan Elan Jones Susan Elan Jones Opposition Whip (Commons)

The Minister seems to have forgotten that his party has been in government now for four years, and that last autumn the Which? survey showed that consumers have been paying almost £4 billion over the odds since 2010. Why does he not show a little courage and leadership and break up the big six when the evidence is all in favour of doing so?

Photo of Edward Davey Edward Davey The Secretary of State for Energy and Climate Change

Unlike the hon. Lady’s party leader when he was doing my job, we have referred the energy markets to the independent competition authorities for the most thorough investigation to check that they are behaving in the interests of consumers. More than that, unlike the previous Government who saw the number of energy companies fall from 15 to six, we have increased competition so that people have a real choice, and that is now working. There is still more to do, because the energy markets we inherited from the previous Government were in such a mess.

Photo of William Bain William Bain Labour, Glasgow North East

Once again, the Secretary of State is sounding dreadfully out of touch. Has he not looked at the latest annual fuel poverty survey, which shows that 2.33 million households in this country are in fuel poverty, and that the gap between what households can afford and what they are expected to pay has increased to £480 under this Government? When are the Government going to stop the excuses, take action and bring in a proper energy price freeze so that consumers can get some relief from this rising cost of living?

Photo of Edward Davey Edward Davey The Secretary of State for Energy and Climate Change

I am grateful to the hon. Gentleman for raising the issue of fuel poverty, because I do look at the statistics and we are focusing very much on that. It is worth noticing that fuel poverty went up under the previous Government, but under this Government it has gone down by 5% according to the latest figures. It is interesting that the figures have gone down under both the old definition and the new one.

Right hon. and hon. Members might want to understand why we brought in a new definition of fuel poverty. The old definition, which was introduced by the previous Government, was so ineffective that it described the Queen as being in fuel poverty in some years. We are targeting fuel poverty, and we are spending more on tackling fuel poverty than the previous Government. We have a good record, and we want to do more.

Photo of John Robertson John Robertson Labour, Glasgow North West

The Secretary of State once again manipulates the figures, and I think it is a bit of a con. He thinks that the Labour party’s policy is a con to restructure the energy market. Does he not agree, however, that the real con is the fact that the companies can sell their own energy to themselves? Does he not care about people in fuel poverty?

Photo of Edward Davey Edward Davey The Secretary of State for Energy and Climate Change

I think I have proved that I certainly do care, because we have done a lot more than the previous Government. Let me take up the point about the wholesale market. The previous Government did absolutely nothing; they created the big six that sell energy to each other. [Interruption.] Opposition Members do not like it, but it is a fact. Under this Government, Ofgem has brought in the market maker obligation, which creates the transparency that the Opposition were asking for. The Opposition failed, but we have succeeded.

Photo of Matthew Offord Matthew Offord Conservative, Hendon

In my constituency, I have promoted the big switch, and I believe that the way to drive competition in the market is for people to vote with their feet. Will the Secretary of State advise the House and my constituents what actions he has taken to make it simpler and faster for them to switch to a better energy supplier?

Photo of Edward Davey Edward Davey The Secretary of State for Energy and Climate Change

My hon. Friend makes an important point. The collective switch, of which that scheme was a part, has made big progress. We have seen a lot of initiatives and we are learning a lot of lessons. A lot of people are saving a lot of money because they are coming together for group purchasing.

The point about faster switching times is absolutely right, and that is one of the reasons why we called in the industry. We inherited a situation in which it took five and a half weeks, on average, to switch, which was unacceptable. We have now got commitments from industry, with Ofgem leading the way, to halve switching times by the end of the year, and we have a plan to get the time it takes to switch down to 24 hours. That is the right approach.

Photo of Christopher Pincher Christopher Pincher Conservative, Tamworth

Does my right hon. Friend agree that the price freeze that Labour proposes, but that many energy players and experts oppose, will not only reduce competition in the energy market but reduce investment in our energy infrastructure, which is sorely needed after too many years of neglect?

Photo of Edward Davey Edward Davey The Secretary of State for Energy and Climate Change

My hon. Friend is absolutely right. An energy price freeze would hit investors, hit investment, hit energy security and hit our efforts to decarbonise. Worst of all, it would hit consumers, because energy companies would put up their prices directly after the freeze. Everybody knows that, and it is one of the reasons why we have been pushing competition. Competition means not merely freezing bills—five of the big six have announced that they will freeze their bills this year—but, because of independent suppliers, enabling people to cut their bills. Our policy is to cut bills; the Opposition’s is simply to freeze them. We are the ones who are ambitious and on the side of the consumer.

Photo of Alan Reid Alan Reid Liberal Democrat, Argyll and Bute

Many of my constituents live off the gas grid, and there is limited competition for liquefied petroleum gas or heating oil to heat their homes. Many of my constituents depend on one local supplier and have to pay whatever prices that supplier chooses to charge. What can my right hon. Friend do to help my constituents who are in that position?

Photo of Edward Davey Edward Davey The Secretary of State for Energy and Climate Change

My hon. Friend makes a really important point. The Minister of State, my right hon. Friend Michael Fallon has been working with the industry on the concordat. The statistics that have emerged from the new fuel poverty definitions show, unlike previous ones, that much fuel poverty is in off gas grid areas. When we bring forward the fuel poverty strategy shortly, we will be focusing on off gas grid customers, because they are really suffering, and—guess what?—the previous Government did nothing about it.

Photo of Caroline Flint Caroline Flint Shadow Secretary of State for Energy and Climate Change

There are more than 1 million families with children in fuel poverty, which is more than there have been at any point during the past 10 years. If wholesale prices are falling but those reductions are not being passed on to consumers, it is a clear sign that competition is not working. Yesterday, the Government opposed our proposal to give the regulator the power to force energy companies to pass on falls in wholesale prices if they have not done so. If the regulator does not have the power to protect consumers and if the Government will not give it that power, how does the Secretary of State expect the public, particularly the 1 million families with children in fuel poverty, to have any confidence in the energy market?

Photo of Edward Davey Edward Davey The Secretary of State for Energy and Climate Change

The right hon. Lady will remember that yesterday I made it clear that we have real concerns about the energy market. That is one reason why we support the competition inquiry. I made it very clear that we are worried about the fact that when wholesale prices go up, retail prices follow them quickly, which is the rocket effect, but that when wholesale prices come down, retail prices do not come down as quickly—the feather effect. We believe that that has to be addressed. The previous Government had the same problem and they did not address it. We are addressing it.

The problem with the proposed regulation, as I told the House yesterday, is that when we look at the detail we can see that it would fail and would lead to prices going up. It is a bungee-jumping approach to energy prices and it would increase volatility and fluctuations. If the House wants a little more analysis, let me point out that a few months ago wholesale prices were coming down, yet in the past few weeks they have gone up. Are the Opposition saying that they would force energy companies to move directly with daily and weekly moves in the wholesale costs? That is surely madness.