Westminster Hall Debate: Energy Regulations (Consumer Prices) - 5th February 2008

It is always a great pleasure to speak in debates under your chairmanship, Mr. Amess.

I congratulate my hon. Friend the Member for Twickenham (Dr. Cable) on securing this debate. He has great expertise as an economist, particularly of energy and oil companies, and has been able to relate complicated issues of Competition Commission to the fate and experience of vulnerable people who are finding it more and more difficult to keep their houses warm, and to survive the winter. However, he represents Twickenham, so he was remiss in not mentioning the great energy surge there during the second half of the Wales and England game last Saturday. That was one of the last great class battles and for once we had the result that we often deserve, but rarely achieve.

Fuel, food, water and air are essential commodities for life, and we must pay for three of them at the moment. The hon. Member for Selby (Mr. Grogan) mentioned that there are 22,000 more deaths during the winter, which could be avoided if we had properly insulated houses and fuel that people could afford. That is a testament to our inability to address the fuel poverty issue, and brings into question whether we are such a civilised country as we claim and hope to be.

My hon. Friend focused on competition issues, and it is important to reflect on them again. Fossil fuels, which are the mainstay of heating and lighting our homes, are a finite resource. Many of us are aware of the concept of peak oil and peak gas, and there is competition in that also, because that finite resource is coming to an end, and exploration and exploitation to produce that resource is becoming more difficult and expensive. It is sometimes said that the best cure for high prices is high prices, because higher prices encourage investment in exploration, exploitation and so on. However, we are approaching the stage at which wherever we look for such resources, they will cost more, and some of those issues will be reflected in the price.

Another competition issue to which a number of hon. Members referred is consolidation. The number of energy companies has fallen from 20 to six, and that was mentioned often during the debate. There has been a similar experience with supermarkets. Morrisons recently bought Safeway, which reduced competition. When there is consolidation, even if the remaining companies try to remain within the spirit of competition law, it is sometimes difficult. Indeed, an inquiry by the Competition Commission into supermarkets has established that there was uncompetitive practice in the grocery trade, particularly the dairy trade. A number of supermarkets have admitted to that breach of competition law and been fined, while others refuse to accept that and are contesting the issue.

When a small number of companies are vertically integrated, it is more difficult for them not to be uncompetitive than in the supermarket trade where at least vertical competition has not reached the same scale as in the energy sector. Ofgem must look at that, and consider whether there should be a referral. The market is huge and domestic energy accounts for 27 per cent. of total UK consumption, of which gas makes up 69 per cent., electricity 22 per cent., petrol products 7 per cent., and coal 1 per cent. The problem is not restricted to domestic supplies; small businesses also find it difficult.

When I was having a pre-match drink on Saturday in the Old Cognac, which is an excellent pub and provides excellent food, the landlady told me that her fuel bill is now £3,000 a quarter for that very small but high-quality establishment. The problem affects domestic consumers, but also small businesses. I remind the Minister that it would not be new for the Competition Commission to investigate the fuel industry. At the instigation of my predecessor, the noble Lord Livsey, and following continued pressure from me, there has been an inquiry into liquid petroleum gas, on which a number of people who are not on mains gas have to rely. That fuel is much more expensive per unit of energy than mains gas or electricity.

In the inquiry, the Competition Commission uncovered some uncompetitive practices, and we are still waiting for it to make its recommendations on how to deal with the problem. I understand that the park home owners have put in an objection to the recommendations. I ask the Minister to accelerate the outcome of that inquiry because vulnerable people such as park home owners and pensioners, who are not on mains gas, suffer from the very high prices of liquid petroleum gas.

Clearly, problems exist for consumers. Energy prices are quick to rise when gas and oil prices go up, but they do not seem to drop when prices come down. May I refer to the point that was made by the hon. Member for Carmarthen, East and Dinefwr (Adam Price)? The Western Mail today reported that energy prices in Wales were between 15 and 20 per cent. higher than from the same supplier in England. By referring the matter to the Competition Commission, I want to ensure that the issue of regional pricing disparities is addressed. In my constituency, some of the ex-mining villages do not have mains gas and have to rely on oil and electricity, which is an expensive form of heating. Therefore, this disparity in pricing really must be tackled.

Ofgem claims that the level of competition can be calculated by the number of people who switch energy suppliers during a given year. We have heard that about 4 million domestic users out of a total of 36 million have switched. As the right hon. Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) said, many of those switched because they were encouraged to do so, and did not necessarily secure a good deal.

In conclusion, a number of issues relating to competition need to be addressed. Fuel poverty is a scourge from which this country suffers. I thought that the Minister was very measured in his response to the interview on Radio 4 this morning. He clearly understood the problems. The Government's energy policy is that prices should be reduced through competition. We can see that that is not happening for a number of reasons, including limited supplies and the consolidation of the industry itself. The Minister will know that although some of the Warm Front schemes have been very successful, the Government are now reducing their investment in them.

To sum up, are the major companies being really competitive? I am not alleging that an overt cartel exists. So, are there any ways in which companies are co-ordinating prices by means other than overt cartel making? We must look at the social tariff, which was raised by the hon. Member for Selby, whose early-day motion will probably be signed by many of us. We need to look at meter payment, the associated high tariffs, and the difficulty of those on meters to switch supplier. We also want to look at regional differences in supplies. The liquid natural gas pipeline has come through my constituency, but not a single constituent will be able to tap into it. Despite all that disruption, prices are still higher in Wales. Will the Minister address the liquid petroleum gas issue and tell us when people in isolated villages and homes can benefit from true competition?

Associated links

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Publish date: 6th February 2008
Modified: 6th February 2008

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