[Relevant Documents: The Eleventh Report from the Business and Enterprise Committee, Session 2007-08, HC 293, on Energy prices, fuel poverty and Ofgem, the Government response, HC 1069, Session 2007-08, and the First Report from the Committee, Session 2008-09, HC 32, on Energy policy: future challenges.]
Motion made, and Question proposed,
That, for the year ending with 31 March 2010, for expenditure by the Office of Gas and Electricity Markets—
(1) resources, not exceeding £315,000, be authorised, on account, for use as set out in HC 1039 of Session 2007-08, and
(2) a sum, not exceeding £700,000, be granted to Her Majesty out of the Consolidated Fund, on account, to meet the costs as so set out.—(Chris Mole.)
This is the last occasion on which my Committee, the Business and Enterprise Committee, will initiate a debate on energy policy. We have produced our last report, so this is something of a nostalgic occasion, although it will be much briefer than I had hoped. I would like to associate myself with the remarks of the right hon. Member for Rother Valley (Mr. Barron), the Chairman of the Select Committee on Health. When there are so many Government statements on a day on which there are important matters to debate, injury time should be added to our proceedings, so that all those who want to participate can do so. It is very regrettable that we are down to less than two hours for each of today’s two important debates.
The Government were right to create a new Department of Energy and Climate Change given the importance of the issue of energy, but it is a policy area that members of my Committee and I will miss greatly. It is an endlessly fascinating policy area, with economics, domestic politics, science, geopolitics, social policy and many other considerations forming part of the mix. The policy needs to reconcile three often conflicting aims: security of supply, affordability and sustainability. For example, achieving sustainability often means subsidy and cost, and that is paid for by the consumer, which means higher prices. Security of supply means investment, and that means reasonable profits for the energy companies, which means that prices must move with markets—and with the imperfect wholesale markets, too.
At the start of the year, the six main energy companies announced double-digit price hikes for their retail gas and electricity consumers. Not surprisingly, those steep increases were met with howls of protest from consumers, politicians and the media. The Sunday Times even went as far as to say that the big six were operating a cartel. The firms told us that they were simply responding to rising wholesale prices. Understandably, the Chancellor and the Government wanted to appear responsive to consumers’ concerns, so the Chancellor hauled the Office of Gas and Electricity Markets before him and demanded to know what was going on—perhaps surprisingly, as he had had responsibility for Ofgem only six months previously. Ofgem responded:
“Britain’s competitive market in energy is working.”
We did not believe the regulator. We called in the then Minister for Energy, the right hon. Member for Croydon, North (Malcolm Wicks), who is in the Chamber—it is a pleasure to see him here—in order to understand what was happening. His evidence was eloquent and elegant, as always, but I have to say that we were not totally reassured, so we launched our own inquiry. It soon transpired that Ofgem did not believe its analysis of the markets either, as the regulator launched its own probe into the energy supply market little more than two weeks after we had done so. We do not believe that Ofgem would have launched its probe had we not forced its hand. At the very least, our inquiry ensured that the regulator did its job properly. Its initial findings are a very thorough job of work. Our work turned into one of the largest and most complex inquiries that the Committee has ever conducted, and this debate marks its culmination, as we hand over responsibility to the new Committee in the new year.
This debate is primarily about our July report, “Energy prices, fuel poverty and Ofgem” but also tagged is our most recent—and last—report, published last Friday, called “Energy policy: future challenges”. Together, the two reports represent our main views on those complex issues, and I hope that the new Committee will study them carefully. I believe them to be politically and economically well-founded and, for such a complex subject, to be pretty readable, too. I want to thank all the Committee staff who worked so hard to ensure that the documents were published rapidly and efficiently. I am blessed with a great team in my Committee office, and I am proud of them all.
Let me turn to the subject of wholesale oil and gas markets. Any discussion of energy prices must begin with the price of oil. At the start of 2008, the markets heralded a price of $100 per barrel—an amount that would have been unthinkable five years ago. Not content with one high watermark, the markets continued to push prices up for the first half of the year. By the time my Committee published its July report, prices had reached almost $150, and some pundits were predicting that the price would be $200 or even $250 by about now. Such expectations now seem laughable. The energy price bubble has met the same end as most other asset price bubbles; it was pricked by the harsh reality of a sharp economic downturn. That is not to say that the oil price will not reach such heights again—it probably will, but not in the short to medium term.
The important point is that the price of gas and electricity are inextricably linked to that of oil. That is because the UK is no longer self-sufficient in its supply of gas, and must instead depend increasingly on imports, particularly from Europe. On the continent, for largely historical reasons, gas prices are linked to oil prices. There is no economic rationale for that at all, and no one could really explain to us why it persists, other than that it seems rather to suit the interests of the oil and gas companies.
Gas supply from the UK continental shelf is falling rapidly, and almost all the new electricity generating capacity due to come online in the short to medium term will use gas. That means, it seems, that the UK’s dependency on gas imports is set to increase. That poses major challenges for the Government. We have a liberalised gas market in the UK, but it is structurally tied to an unliberalised European market. UK gas prices rarely fall below European levels because our companies simply choose to export surplus production. That is particularly the case in the summer, when gas consumption is lower. In the winter, UK prices have to rise significantly above European levels to attract that gas back. That is part of the reason why we have seen such large spikes in the price of gas during recent winters.
A further big reason is that the European markets have not liberalised in the same way as we have. There is not much that we can do about that, try as we might. Heaven knows successive Energy Ministers have tried, and I am sure that they will continue to do so.
I agree with the hon. Gentleman’s analysis, but does he not agree that the situation is even worse than that? In its evidence to the Committee, the Energy Intensive Users Group said that even when its members were in a position to take gas from continental suppliers, those suppliers would not supply it to them, so they could not take advantage of cheaper supplies on the continent, even where an interconnector existed.
I am most grateful to the hon. Gentleman—a distinguished member of my Committee—for that remark. As far as I am aware, that issue has not yet satisfactorily been addressed. It seems to be a breach of the simple single market rules of the European Union, and I cannot understand that. It is a matter of great concern to the Committee, and I hope that it will be to our successors, too.
On gas supply, the Government must take some of the blame for the current predicament. If we were able to store gas at times when it is cheaper, the UK would not suffer from the current volatility in prices. Our growing dependency on gas and the need for more storage was a car crash that the Committee, and its predecessor, saw coming years ago, and I am afraid that the Government have been very slow to react to it. We have just 13 days of storage capacity. Germany has 99 and France has 122. Even if all the projects under construction or with the required consents were built, we would add only another five days of storage by 2014. In other words, we need growth of a greater magnitude than that achieved to date if we are to match the Europeans and protect our vital national interests. Planning has been a problem in that regard, as it has been for many aspects of energy infrastructure. We can only hope that the new Infrastructure Planning Commission will help in that regard, although even if it does—there are some doubts about that—it will be some time before it begins to have an impact. The Government must move quickly to put in place a national policy statement on gas storage.
Worryingly, planning is not the only important issue. The industry told us that the economic incentives for the market to build new storage simply did not exist until fairly recently. Those incentives have now been virtually wiped out by the collapse in energy prices, and by the reduced availability of financing resulting from the credit crunch. In simple terms, the market will not deliver. If new storage capacity is to be built on time, the Government must think again about the incentives that they can provide.
Lack of gas storage is not the only problem with the wholesale gas markets. Companies have been investing in new infrastructure for liquefied natural gas imports to the UK. One of our main facilities is at the Isle of Grain. Its owners—BP and Sonatrach—have barely used it this year, choosing instead to send LNG to the far east, where economies are willing to pay more. Third parties have the right to use the facility, but none has done so this year. Ofgem has been dismissive of the possibility that the regulatory framework for gaining access might be a factor, despite several witnesses telling us that it is. We believe that Ofgem should look again at the issue. Otherwise, we will have concerns about the outlook for new LNG capacity at Milford Haven.
Liquidity in the gas market is a major concern for the Committee. For those who want to buy gas to use right now, the UK has one of the most liquid gas markets in the world, but that is not the experience for manufacturers who want to hedge prices by buying ahead; they just cannot do that. The financial crisis has served only to reduce liquidity further. Ofgem and the Government—I hope that this will not be true of the new Department—do not seem to believe that that is a problem. The UK’s manufacturing base has told us otherwise. When even an arm of government—the NHS Purchasing and Supply Agency—is concerned that there is
“no effective long term market”
for gas, the Government and the regulator should take notice.
What about wholesale electricity? Failings in the wholesale gas market feed through to the wholesale electricity market, because 40 per cent. of our electricity comes from gas, and it provides the marginal source of generation in the UK—it sets the price. Our Committee found serious failings in that market, too. In 2008, electricity prices have been driven up, not just by higher gas prices, but because of environmental costs. For example, Ofgem reckons that since the start of phase 2 of the European Union emissions trading scheme, £9 per megawatt-hour has been added to the price of electricity, despite the fact that generators receive 93 per cent. of their permits free of charge. The Government estimate that the resulting windfall is about £2 billion a year over the five years of phase 2.
No one knows exactly what the energy companies are doing with their windfall gains, which are distributed very unevenly between energy companies and generators. At first, the energy companies denied that the windfall gains even existed, and to the extent that they did admit to them, companies claimed that the value of the windfall had been passed on through lower prices or greater investment—investment that we need. The Government have rightly taken a different view in clawing back some of that money to tackle fuel poverty—that was one of the recommendations in our July report—but we are disappointed that neither they nor Ofgem has conducted a fuller analysis of what those windfalls were or how they were distributed.
When the Committee published its report, the big six controlled 55 per cent. of electricity output, with the rest shared among the independent generators. In recent months, further consolidation has been promised, with the purchase of British Energy by the French company, EDF, which will own nearly a quarter of the UK’s electricity output, with the big six controlling nearly three quarters of that output. Our report pushed the regulatory bodies to ensure that that consolidation did not affect the competitiveness of the market adversely, and I hope that the European Commission will have something to say about that when it reports on the acquisition of British Energy.
Consolidation, however, was not our only concern. Many witnesses hid the fact that their companies owned both wholesale and retail arms—there was no transparency on where their profits were made. If other firms—potential new entrants—cannot see where profit-making opportunities lie in the value chain, it is easy to see why they are reluctant to enter the market to compete with the existing players, which is why we welcome Ofgem’s decision, following the Government’s prompting in response to one of our recommendations, to require the vertically integrated companies fully to disaggregate their accounts. That is an important, and big, step forward.
The hon. Gentleman makes an important point with which I agree. It is something about which British Gas is particularly aggrieved, because it sometimes gets more of the blame than other companies because its profits are more visible than those of its competitors.
Sadly, that is not the only issue facing new entrants. We found that the electricity market suffers from a profound lack of liquidity—a problem exacerbated by the financial crisis—which contributes to price volatility and poor price transparency. It contributed, too, to the exit of two of the largest independent electricity suppliers outside the big six in recent months. We welcome Ofgem’s tough line on this issue, announced in its probe findings, and we hope that our successor Committee will look at the issue in detail. As it stands, the market discourages new investment in generation by new entrants, which leaves us heavily dependent on the big six to deliver the conventional capacity that the UK needs to replace the nuclear and coal-fired power stations that are set to close in the coming years. We are fearful that the economic and financial crisis will lead to delays in that much needed investment.
That creates a serious risk, highlighted in our most recent report, that the UK could face an “energy crunch” in the coming years. As with gas storage, it is clear that the market could fail to make the necessary investments on time without intervention from the Government. Every month that we lose increases the risk of the lights going out, or of increased dependency on gas generation, or both. The Government have already said in their White Paper last year that security of supply is their top priority alongside reducing carbon emissions. They will now have to work very hard to ensure that those two objectives do not become mutually exclusive. For example, new coal-fired generation will be possible only if there is significant progress on carbon capture and storage, which requires a much greater level of investment from the Government. They must quickly make the relevant national policy statement on nuclear power, and learn from the recent Finnish experience of cost overruns and delays, if new nuclear is to play the role that they want in the future energy mix, and which I believe it is right to want.
The retail markets receive most attention, and we uncovered many problems in the service provided to households and small businesses. I want to make it clear that neither we nor Ofgem found any evidence of the energy companies acting as a cartel, but they do not need to do so. Given that the market is dominated by just six players, it is easy for them to make informed judgments about one another’s actions and position in the market. They do not need to collude, because the market is broken. Ofgem has, rightly, always advocated the benefits of consumers switching to realise the benefits of the liberalised markets. About half of households have changed either their electricity or gas supplier since liberalisation. Most of them have done so to benefit from a dual-fuel tariff or some other offer. However, 20 per cent. of households have never switched, and they are predominantly pensioners, people in social group E and those in rented accommodation—in other words, some of the most vulnerable people.
Our inquiry and Ofgem’s probe found that those consumers least likely or able to switch were most likely to be the victims of price-discriminatory practices by the energy companies. For example, suppliers charge their legacy customers—the ones who stay with them and do not switch—an average of 6 per cent. more for electricity than out-of-area customers. Suppliers earn much higher margins on electricity than on gas, thus disadvantaging 4.3 million households that are not on the gas main. Both standard credit and prepayment meter users are disproportionately overcharged compared with direct debit customers. I therefore welcome what Ofgem said today, but I want to highlight the issue and ram the point home: it is not just about prepayment meters—where standard credit terms operate, that is where the bulk of fuel poverty exists.
Most of us welcome the Committee’s work and the timely reports that it has produced. Does the hon. Gentleman agree that many of the 6 million people on prepayment meters in particular do not have bank accounts and cannot switch, so it is not an option for them? They pay £100 a year more than standard payers, and they pay £500 a year more than people on direct debit. Even under Ofgem’s proposals, they will pay £51 a year more. Is it not time to end the iniquity of the poorest subsidising the rest of us, and to ensure that people on prepayment meters do not pay a penny more?
The Committee’s view on that point was very simple. There are additional costs involved in running prepayment meters, and it is essential that there is no excessive recovery of price beyond that actual economic cost. If the Government want to say that those people should pay the same price for electricity as people on other terms, some kind of subsidy is required—either a cross-subsidy from other consumers or a subsidy from the taxpayer. That is a perfectly legitimate thing to want to do, but I point out that a cross-subsidy from standard credit customers to prepayment customers would work against the interests of tackling fuel poverty. However, I accept the point that the right hon. Gentleman makes.
May I, too, congratulate the hon. Gentleman and his Committee on their work? In recent weeks something has come to the fore that I discussed with interested groups in the summer recess, and it concerns people who pay by direct debit who have received demands from their supplier to increase their monthly payment. On a personal basis—and I let my good lady wife deal with this—I received a demand in recent weeks for an increase of 57 per cent. on what we previously paid. When my wife challenged that—that is the point: I have encouraged people to challenge those demands—the energy company reduced it to 17 per cent. The companies are taking people’s money, putting it into their bank accounts, and they may well be dragging people needlessly into fuel poverty.
I am grateful to the hon. Gentleman for making that important point, which I was going to mention later.
I said some things about that to the BBC two or three weeks ago, and all hell broke loose. My e-mail inbox and my postbag have swollen to huge proportions, because there are many experiences like that. The essential weakness of the energy companies’ position is that nine times out of 10, they reduce the price. When the Minister appeared before the Committee, he admitted that he had a similar experience with his direct debit. I have had a similar experience with mine. I know police officers, journalists and colleagues in the House who have all had the same experience. The problem is too widespread to be ignored. I gave a file of evidence to Ofgem, which is looking at what it can do to investigate the problem. It says that it lacks quantitative evidence but, my God, it has a lot of qualitative evidence. It needs to get on with it and look at this, because it is an important issue. If we want to move people on to direct debit terms to get the benefit of better prices, we must tackle other aspects of the deal that hurt those people, as could well be the case at present.
I, too, am grateful for the work of the hon. Gentleman and his Committee. Were they able to look rigorously at the weakness of Ofgem’s claims about switching and the fuel-poor? The reality is that 1,000 households a week have been forced, as a result of fuel debt, to come off standard tariffs and on to prepayment meters, which is the only choice that they are offered. Even the argument that someone who has not been forced on to a prepayment meter could choose to switch to another tariff is not valid, because they do not have access. Conditions applied by energy companies say that to gain access to the best tariff people must have been a customer for at least a year before they can have such an entitlement. Those measures progressively exclude the fuel-poor, rather than include them.
That is a powerful point. I strongly suspect that my hon. Friend the Member for Wealden (Charles Hendry) will make some observations about the Post Office card account when he speaks on behalf of the Opposition, and offer some proposals to deal with that issue. The hon. Member for Nottingham, South is absolutely right, but that is not the only concern, because we are concerned, too, about the number of people who switch on to higher tariffs. The evidence is that 20 to 32 per cent. of households move on to a higher tariff after switching, so it is a mess.
On the specific issue of the fuel-poor and direct selling, recent evidence from Ofgem showed that 48 per cent. of gas customers and 42 per cent. of electricity customers who switched as a result of a direct sales approach—doorstep selling—failed to achieve a price reduction. Ofgem has proposed action, but we think that although direct selling plays a role in helping people switch, if it helps people switch wrongly, it is doing more harm than good and needs to be banned. We will look at that carefully.
Incidentally, it is not just private individuals who are affected, but small and medium-sized enterprises. We heard compelling evidence of predatory pricing, delaying tactics to win back customers, and confusing contract cancellation requirements. We are glad that Ofgem is looking at the SME market as well, but it is sad that that has come too late for my constituency company, BizzEnergy, which has gone into receivership, and for Electricity4Business, which has been driven out of the market. The market is thus becoming less, not more, competitive.
I would say a great deal more about fuel poverty, but time is against me and a number of colleagues wish to speak. Briefly, we believe that fuel poverty levels will reach 5.5 million. That figure is quite widely accepted. The Government will therefore fail to meet their target to eradicate fuel poverty for vulnerable households by 2010, unless there are sharp reductions in price in the future. In our reports, we asked for the Government to go back to the drawing board in their approach to fuel poverty.
We asked for a mandatory definition of what constitutes a social tariff and who qualifies for it. We said that income-raising measures should be targeted more accurately at the fuel-poor, not only pensioners. Pensioners are not the only group in fuel poverty, just as prepayment meter customers are not. Disabled people and many other vulnerable groups are also in fuel poverty, and we need to take action to help those groups as well, particularly through levels of investment in the energy efficiency of our housing stock.
We were very pleased to see the Government’s £1 billion fuel poverty package, which we thought struck the right note. That will prove the most effective way of addressing fuel poverty in the long run. However, I repeat that we are very sorry that so little has been done to address the needs of the fuel-poor other than pensioners.
Finally, our work over the past year has shone light on many problems in the UK’s energy markets—energy markets of which we all thought we could be rather proud. That light caught the market’s regulator, Ofgem, unawares. We feel as a Committee that we have set the agenda for Ofgem on too many occasions—for example, the direct debit issue was not being considered, but as a result of our Committee’s activities, it is being looked at now.
Although we welcomed the regulator’s recent probe of the energy supply market, and many of its proposals, we hope Ofgem will make a new year’s resolution for 2009 and take time to reflect on how it fell so far behind the curve in 2008. Part of the solution may lie in its powers. We hope the Government will look to ensure that the regulator has all the tools it needs to police the sector effectively. There is an important recommendation in our most recent report in relation to market abuse powers, which we are sympathetic to Ofgem’s claim to gain for itself.
I am grateful and add my support for the report. It is a very good job and extremely readable. I was interested in what the hon. Gentleman said about whether Ofgem’s powers had kept up with the changes in the energy market. Interestingly, the report mentions that where Ofgem had tried to intervene, the Competition Commission had blocked it. Does he think it is just an issue of Ofgem’s powers, or is there a bigger structural problem?
What the chief executive said to us is that
“‘the Enterprise Act or the Competition Act is quite often a very clumsy tool—using a sledgehammer to crack what may be a big or a small nut’”.
If we could give Ofgem more carefully defined and targeted market abuse powers, it could crack those small nuts, which are often the problems that cause most grievance to our constituents, and understandably so.
Such considerations as we have been debating need also to be placed within a wider debate on the effectiveness of the overall regulatory regime for energy. A plethora of bodies now exists. They include Consumer Direct, Consumer Focus, the energy ombudsman, the energy companies and Ofgem itself. I find such a framework confusing and I am trying to work my way through it. Members of the Committee find it confusing, and the witnesses who came before us said that they thought it probably would be confusing.
I know that there have been changes recently that will take time to settle down, but one wonders how our average constituent is supposed to understand the system. After saying that I was referring the direct debit issue to Ofgem, I have been getting quite a lot of letters saying, “But Ofgem has been abolished.” No, it is Energywatch that has been abolished. These constant changes are unhelpful, and the structure runs the risk of not properly informing the regulator about issues and problems in the market.
The events of 2008 within the energy sector and the wider economic context have profound implications for the UK’s future energy policy. Ofgem and the Government must now rethink whether the assumptions that they have made are the right ones. Is the market working as effectively as both claim? I do not think it is. Will that market deliver security of supply? It is far from certain that it will. Can that be achieved without sacrificing our carbon reduction ambitions? It must be, and I hope it will be.
Are the renewable energy targets really achievable? I have yet to hear anyone who thinks they genuinely are achievable. They are good targets to work towards, but can we achieve them? I doubt it very much. A question that worries me a great deal is whether it is right to devolve important social policy questions about poverty to Ofgem and the energy companies. Are those not matters for Government to decide?
On a specific point, I think smart meters are an important part of the answer to the direct debit question, to carbon dioxide reductions, and to informing consumers about what they are consuming. I note that the Government are in a two-year consultation period for a 10-year roll-out programme for smart meters. Italy did smart meters in three years, so I hope we can move a little more quickly on that subject. We could find mechanisms to enable us to do that. There might be some extra cost, but the benefits would be huge.
These are many of the questions—not all of them—that the regulator, the Government and the new Energy and Climate Change Committee face, among others, in the coming years. I am sorry to kiss goodbye to these issues. They are vital ones, and the Committee and the Government have some very important questions to face.
Several hon. Members rose—
Order. May I advise Members that the Chair of the Business and Enterprise Committee, Mr. Peter Luff, and the Chair of the Health Committee have decided that the time for debate will be divided equally between the two subjects, so the present debate will conclude at about five minutes past eight. I hope, therefore, that hon. Members will be as brief as they can so that more Members can make a contribution.
I join right hon. and hon. Members in paying tribute to the work of the Business and Enterprise Committee and its two recent reports, both for their content and for their quick and timely production. They address the current volatile issues in the market and the longer-term trends on which we should base our energy policy, rather than what is happening daily.
Although oil peaked at $147 a barrel in July, it has apparently been in free fall ever since, with its current price at $40 to $45 a barrel. That underpins everything else connected with our energy supplies. We must track those curves to make sure that the energy companies charge consumers prices that relate to those and other changes, such as the fact that two nuclear power stations have been out of commission for a considerable time, which raises issues of confidence in our electricity supplies, and the changes in the value of the pound, which have implications for the importation of gas.
It is important to keep those curves in sight when we discuss energy charges. Notwithstanding the cheaper energy prices that may be with us for a while, it remains fundamentally true that the era of cheap energy is firmly over. It is more than possible that when leading industrial companies come out of recession, the price of oil could rapidly rise very high indeed. We need to make structural changes to our medium and longer-term energy policies and supplies, rather than simply deal with shorter-term changes.
Those considerations are relevant to the problem of fuel poverty. We are told that, because of the definition of fuel poverty as a percentage of income, 40,000 people go into fuel poverty for every 1 per cent. rise in electricity prices. Logically, 40,000 people come out of fuel poverty, according to that definition, if prices come down. If prices are in a slump, the Government might look as though they are reaching their target for the eradication of fuel poverty over, say, a six-month period, yet six months later they might look as though they are way off beam. The people involved, of course, do not have more money in their pockets to pay for fuel, and neither do they consume different quantities of it; they have simply moved around as a result of forces way beyond their and other people’s control. We need to concentrate on structural changes to the relationship of fuel-poor people to the energy that they consume. That is the right way to combat fuel poverty in a high-cost energy economy.
That will require measures to enable fuel-poor people to control their energy consumption more effectively, and the recent measures to equalise prepayment meters are a pointer in that direction. The issue is not just that people with such meters are more likely to be in fuel poverty, although that is not exclusively the case, or that it is unfair that prepayment meter users are charged excessive premiums, although my right hon. Friend the Member for Leeds, West (John Battle) is absolutely right to be concerned about how those meters have effectively been used as an additional charging device. The issue is also that if consumption is controlled, an additional expense for the fuel-poor is avoided.
In defence of the direct debit payers, who are the yardstick by which pre-payment meters are measured, I might add that, as the hon. Member for Mid-Worcestershire (Peter Luff) emphasised, just as small imbalances in a roulette wheel system will always benefit the casino, small changes in direct debit payments appear systematically to end up putting money in the energy companies’ banks. Even given the churn over time, direct debit consumers are probably systematically lending energy companies money. That does not appear to be right as far as long-term energy supplies are concerned, and I hope that Ofgem will take seriously an investigation into the matter. One of the roles of the successor Committee should be to make sure that the issue is pursued.
Does my hon. Friend agree that there should be maximum pressure, certainly from Parliament and the Government, on the energy companies to reduce their prices substantially, given what is happening with wholesale prices? Does he not agree that the feeling among so many of our constituents about the energy bosses is one of contempt—even more than they feel for bankers? In fact, the general mood is that when people deal with the energy bosses, they are dealing with greedy swine.
I do not entirely go along with everything that my hon. Friend says about energy companies. However, we are moving into a new form of fuel economy and a number of energy companies’ assumptions about how the market operates—and for their own benefit—need to be fundamentally reviewed. There were assumptions that worked apparently well in an era of very cheap energy, when people were not particularly concerned about the environmental consequences of their energy consumption and the role of energy companies was—provided that the lights stayed on—to provide as much energy as possible to people at the lowest possible cost. If they made a lot of money, there were no further issues to address. However, now the issues have all fundamentally changed, and the role of energy companies in addressing them and changing things becomes crucial. Energy companies that do not change are guilty of living in a different era of energy supply and making assumptions that are not acceptable in the current debate on energy supply.
I accept that the hon. Gentleman does not altogether subscribe to what the hon. Member for Walsall, North (Mr. Winnick) said about energy bosses, but I think that he would acknowledge that the energy companies have acted too slowly and not sufficiently to deal with the problems. Does he not think that one of the solutions is to put social tariffs on a statutory basis—standardise them across the companies so that the public can understand them, and make sure that we in the House, the Government and the companies themselves make the public aware of them? Currently, the public are simply not aware that social tariffs are available. Does the hon. Gentleman not think that what I have mentioned might be part of a good solution?
I thank the hon. Gentleman for that suggestion. Putting social tariffs on a statutory basis and making sure that they are not simply a device to shift responsibility for underwriting them to different forms of customers is important. However, I emphasised earlier that our world has changed; I also think that simply saying that we can shift notions about how people pay for electricity is not a sufficient answer to fuel poverty or energy supply problems.
I mentioned the problems of prepayment meters and those who pay by direct debit. Both those issues could be resolved instantly by the introduction of smart meters. Smart meters give people control of their energy supply and mean that readings can be made regularly, rather than there being estimated bills. Prepayment smart meters could be calibrated regularly and an accurate reading could be made of what is being paid. All that would make a big difference to how the energy is supplied and the consequences.
I hope that the programme enabled by the Energy Act 2008 to roll out smart meters is substantially truncated. As far as meters are concerned, we are living in a medieval world. There are still what are virtually wind-up meters in many houses, and a lot of the time those who clamber in to read the meters do not do so accurately. A lot of people are living in a world of estimates and possibly of substantial overpayments, whatever their tariff.
My hon. Friend mentioned truncating the programme, which is expected to take as long as until 2020 to be implemented. What does he consider a reasonable length of time for such a programme to be implemented nationwide? Does he agree that we need a programme such as the one that operated when there was household switchover from coal gas to natural gas?
Personally, I think it essential that smart meters are rolled out in the shortest time possible if we are to move into the new era of energy supply—particularly if we are to supply as little energy as we can, rather than as much as we can, to each household. Anything we can do to truncate the period as much as possible—perhaps by three to four years—is important. Measures suggesting that at any one stage the six major companies could visit the same street, to compete to put the smart meters in, are probably not the way to go. It is important for us to consider a roll-out area by area.
The change heralded in the recent pre-Budget report in how we look at energy is also important. There was £300 million for the community energy-saving programme—which, incidentally, is to be rolled out street by street and not as a patchy programme—and an additional £174 million for the Warm Front programme. There was also an increase in the carbon emissions reduction target over the next two years, a £3.7 million commitment. However, the process by which energy companies appear to have to search out the fuel-poor and vulnerable so that their properties can be made more energy-efficient will have to be considered again. Local authorities have a substantial role to play in that. If a further windfall tax on energy companies is being considered, such a levy needs to be placed firmly in the context of energy saving and controlling the use of energy. If we simply take a tax from energy companies that can be wholly recovered by them, we will not make any difference to what is happening to energy supply and we will have failed in terms of the imperatives that now exist as regards the energy market.
Does the hon. Gentleman agree that one of the fundamental changes that must one day take place is the breaking of the link between energy companies making greater profits and supplying more of the essential resource? Until that fundamental market link is broken, all these things will have a limited impact.
The hon. Gentleman uncannily anticipates what I am about to say.
A corollary of this change in how we deal with the energy market and energy supply is the extent to which the regulator has the ability to regulate structural changes in the energy market and ensure that it moves from a market in which energy companies are regulated on charging but not on supply, regardless of how much is supplied, to one where incentives and regulation are directed at the efficient supply of energy and efficient use of energy supply. I am not convinced that Ofgem, in its current incarnation, can perform that role. I remain concerned that its main weapon appears to be switching, yet more than 30 per cent. of people switch to a higher priced tariff in any event. Even if everybody switched, there would not be a lower supply of energy to any particular household as a result.
Will my hon. Friend condemn the practice of suppliers who impose a financial penalty on customers who want to switch tariff with them or to move to another supplier? Does not that militate against the ability of consumers, particularly low-income families, to operate the market in the way Ofgem suggests?
My hon. Friend makes an important point. There are a variety of problems with switching, in the extent to which evidence suggests that a number of impediments are put in the path of switching and the extent to which people have usable information about what switching means for their future tariffs. However, that has to sit with the overall point that switching is not the answer in its own right, by any stretch of the imagination. Although it may be an important element of how the current market operates, it is ultimately a zero sum game as regards the imperative of reducing the total amount of energy going roundthe system.
One small structural change that we might pursue is to consider the methods whereby we deliver insulation and renewable, sustainable devices into the domestic environment and into small and medium-sized enterprises. The Treasury rules about what one can and cannot lease could be changed very slightly to make it possible to align the leasing arrangements in SMEs or the ability of energy companies to supply renewable products and insulation to homes. That would enable devices to be leased rather than purchased and therefore enable those leases to be paid for by the savings that people make in the energy supply that the devices then supply to their homes and buildings. At the moment, the Treasury rules say, “If you can wheel it out of the door you can lease it; if you can’t, you can’t.” Even if it can be unbolted from the wall and moved away, it cannot be leased. A change in leasing arrangements, like other aspects we have discussed—smart meters, switching and other devices that do not look fundamentally significant in their own right—could make a substantial difference to how people manage their energy supplies and how energy companies deliver those devices and services to people. Over the next decade, we should try to achieve the aim of a low-carbon energy economy that nevertheless supplies energy at an affordable price.
In the limited time that we have available, I want to focus on fuel poverty and the role of Ofgem. I echo the comments made by the hon. Member for Mid-Worcestershire (Peter Luff); given the importance of the topic that we are debating, it is nonsense to have less than a couple of hours to do so. There clearly should have been some sort of injury time.
The official figures tell us that there are 3.5 million households in fuel poverty, that earlier this year there was an estimate of more than 4 million and that the latest estimate by the Government’s own Fuel Poverty Advisory Group puts the number at between 5 million and 5.5 million households. That is astonishing. Will the Minister discuss with his officials why we have official statistics on this subject that are two years out of date? I understand that the reason is partly that the English house conditions survey has to be done and processed, individual consumption has to be applied to that and the numbers crunched. However, we could surely have a broad estimate of what has happened since the survey was done. We know what has happened to the prices of the main suppliers and to benefit levels, and it would not be too difficult to get an up-to-date figure. That is important, because the changes that go on in the market have a different impact on different people. We are almost trying to make policy with a blindfold on. If we are using the fuel poverty statistics to inform policy, we should not be using two-year old statistics. If some estimate were made of what has happened since then, it could inform us as to whether, for example, people using the gas main, pensioners or people living in particular areas had been prejudiced.
The hon. Gentleman will understand in the light of current controversies why I might hesitate to rush out statistics without their going through the full and proper process.
I think that we will let the Minister off in this case. All I can say is that I strongly suspect that he would not be rushing out bad news early. To be serious, I point out that informed policy making needs up-to-date data, and that is a problem in this area.
I recently wrote to the big six energy companies and asked them for an up-to-date and comprehensive account of their social tariff structures. They all wrote back quickly and gave me a full account, which I will publish shortly. One or two interesting things came out of that, which I was not aware of and want to raise with the Minister. First, the Government have legislated to allow the companies to know which of their customers receive pension credit. The companies have told us in the past that one of the problems that they face is finding their poor customers—knowing who they are. The Government are now going to enable them to know who those customers are, at least as far as pension credit is concerned. The companies tell me that they are concerned about the assumption that once they know, they will have to do something about it. There are millions of people on pension credit, but only 600,000 people on social tariffs, and the Minister will know that there is a big difference between the two groups. What can he tell us about his expectations of the energy companies now that taxpayers’ money is going to be spent on telling them which of their customers are on pension credit? Does he expect them to do anything about it? It would be interesting to know what the Government’s position is on that.
Secondly, I found out about how breathtakingly complex social tariffs are; perhaps that was already well known to everybody else. I discovered that depending on which company someone is with, their eligibility for a social tariff might depend on how many bedrooms they have, whether they are over 60 or over 80, which benefit they are on or how long they have been with the company, so that they may have to switch to a company and stay with it for a year before they are eligible. I find that most consumers do not have a clue; in fact, many do not even know that their company has anything called a social tariff. I recently contacted a power company because I had met a very elderly lady who was struggling financially; I said, “Can you help her?”, and it said, “Now we know that she is very elderly and struggling, we will switch her on to such and such a tariff, and that will save her a lot of money.” She did not know, and if I had not contacted the company it would never have happened. That is laughably—or it would be laughable if it were not so serious—hit and miss.
That raises a serious question about mandating national standards on social tariffs. Given that the fuel-poor are the least likely to switch anyway, we cannot rely on them to shop around between all these different companies, with all these totally confusing social tariffs, all of which have different and changing rules, names and eligibility criteria.
Does the hon. Gentleman not agree that there is actually a slightly worse problem, because all the companies’ tariffs are different? The tariff that someone is on might not be the best one, but that does not necessarily mean that they will switch to another company with a better tariff just because they are found to be fuel poor.
The hon. Gentleman is right. Not only might someone be better off with another company or on a different social tariff; they might not even be on the best tariff of the company that they are with. Fuel poverty is important. I do not know when the figures for excess winter deaths will next be published—the Minister might be able to tell us—but they are truly shocking. One excess winter death is truly shocking, especially when we think of the cold countries that do not have that problem. One can only fear that this winter will be a bad winter. The fact that consumers are not accessing the best prices for which they could qualify is simply unacceptable.
There is a danger of comparing the companies in an unfair way. One company will tell the House that it offers more social tariffs than any other by a long chalk. That company may have closed its social tariffs temporarily, however, because it is waiting for the others to catch up. However, it can turn out that when the company applies its social tariff, it charges more than some other companies charge on their normal tariffs. The consumer is baffled by all this. Again, that is an argument for regularising the situation and giving people an entitlement, rather than just hoping that everything will work out.
The role of Ofgem is important. I woke up this morning to the sound of Alistair Buchanan—a bad move that has coloured the rest of my day. I have no idea whether he timed his announcement because we are debating Ofgem today—I am not a cynic—but he was boasting about the hundreds of millions of pounds that Ofgem had saved consumers. I did a bit of mental arithmetic over my cornflakes and worked out that if he has saved, to take some round numbers, £200 million in 20 million households, that works out at £10 a year or 20p a week on average. His proud boast this morning, therefore, was of having achieved an average gain for households of perhaps 10 or 15p a week—I accept that that is not averaged out over everybody, but the figures are not that great if we put them in context.
Alistair Buchanan told Nicky Campbell that he would stamp his regulatory hobnailed boots all over the companies if they did not play ball, but what has he been doing all this time, while the companies have been leaving vulnerable customers in fuel poverty, failing to alert people to the social tariffs and overcharging on direct debits? In many cases the companies’ behaviour has been disgraceful, and the regulator has been pathetic. He wants us to think that he is a tiger, but he is a pussycat. Will the Minister tell us what he thinks of Ofgem’s performance? I hope that he will be candid and tell us whether he thinks the chief executive of Ofgem should still be in a job at Christmas.
Absolutely. As the Chairman of the Select Committee said, there is a litany of things on which the Committee has had to prompt Ofgem to do its job properly. That is totally unacceptable.
Ofgem identified three ways in which the companies were exploiting their market dominance. The first is through pre-payment meter premiums. I take the point that there has been some progress, but we have still not eliminated excessive penalties on prepayment meters. I also take the Chairman of the Committee’s point that there is no straight corollary between prepayment meter usage and fuel poverty. We need to ensure that the fuel poor in particular are not being overcharged for their energy. The second way relates to people who are off the gas main and who cannot access dual-fuel benefits. Some action there is necessary; indeed, it is good to see some.
The third way in which the companies exploiting their market dominance, on which I have seen no evidence of progress, is through local monopolies. It has been put to me that companies such as—I do not mean to single this company out specifically—London Electricity, which became EDF, make all their profits from their legacy customers; that is, from inertia and from the people who have not swapped to an out-of-area supplier. That is a classic example of a market not working. Where a company has a huge base of inherited customers, many of whom would be better off switching, but who have stuck it out because they do not know how to switch, cannot be bothered to switch or whatever, that company can cream off millions. Ofgem says that there is a problem, but does not seem to be changing much. We need to give a kick—with a hobnailed boot, I suppose—up the backside of Ofgem, so that it really gets serious with the companies.
The House would not expect me to reserve all my criticisms for Ofgem, and the Minister would be disappointed if I did not direct some at the Government, so I will balance things up. Ofgem and the Government are like Tweedledum and Tweedledee, because they both say exactly the same thing: “If you don’t behave, we’ll get tough.” I have noticed that when I threaten my children with discipline but then fail to deliver it, they continue to misbehave. If the Minister thinks of himself as a slightly grumpy parent, I hope that he will realise that when he threatens discipline but does not deliver it, the children will go on misbehaving. My children have learnt—such behaviour is called learnt behaviour—and I am afraid that the energy companies have also continued to behave as they do. They have been told that they are in the last-chance saloon, but they have been ordering extra rounds over and over again.
Somebody has to draw a line. Somebody—I do not much care whether it is the Government, Ofgem or both—has to tell the energy companies. The fuel-poor and our constituents more broadly are fed up with people threatening to get tough. That has gone on long enough. The fuel companies have been given enough rope to hang themselves and that is what they have done. Now someone has to pull it a bit tighter. Of course they have a right to trade and make a profit. Indeed, we need them to make a profit to invest. I understand all those things. However, the energy companies are not making a profit through economic efficiency in a dynamic market; they are exploiting a quasi-monopoly, and the most vulnerable people in our society are losing out as a result. That has gone on for too long; it has to stop.
I have been involved in the oil industry since 1973, first working in it and from 1992 representing Milford Haven, the largest UK oil port. When I saw crude oil prices starting to rise in the middle of 2007, peaking at $147 a barrel in July 2008, I scratched my bald head and thought, “What on earth is going on?” Since 1973, I have seen middle east crises, the straits of Hormuz closed, the Iran-Iraq war, problems in Nigeria and hurricanes in the gulf of Mexico that have taken out significant proportions of the American refining industry. However, I have never seen the price of crude oil double, as it did between the summer of 2007 and the summer of 2008, or fall to around $40 a barrel, as it then did in the space of six months.
The effect of that has been catastrophic. We have been talking about fuel poverty and the fact that since around the beginning of 2007, 2 million more people are likely to be in fuel poverty than before. We have seen riots around the world and the beginning of a huge global downturn, the like of which the Chancellor of the Exchequer believes we have not seen for 60 years. We have seen a huge hike in energy prices, coupled with the credit crunch—I want to link the two, because I believe that they are absolutely interconnected—and now we are facing a severe downturn.
When I undertook some research in February and March on why the price of crude oil was doing what it was doing, I discovered that the US Congress was conducting exactly the same sort of investigation and taking evidence, so I have used quite a bit of that research. It appears that approximately five years ago, commodity index funds started to grow quite substantially. Between 2003 and July 2008, trade in commodity index funds in a range of commodities, not just oil, grew from $13 billion to $317 billion. Taking into account not just trading on the exchanges, but all the over-the-counter trading taking place, the Bank for International Settlements believes that there is some $9 trillion involved in commodity futures and speculation.
In the summer of 2007, when the credit crunch began, investors abandoned stocks and shares—certainly banks’ stocks and shares—and sought an investment market that appeared to them to be safe and profitable. They alighted on commodity index funds for understandable reasons: these were pension funds, university endowments and the funds of insurance companies. The investors needed a safe income, and, believing that commodity index funds would provide it, they piled into them. As a result, we saw a huge growth in the market for commodity index funds. I am certain that the link exists—that the consequence of that huge influx of funds was the remarkable speculative spike that has caused so much damage.
It is interesting to learn the views of people who would be expected to know something about such matters. In April 2008, in a report, Citigroup spoke of
“A Tidal Wave of Fund Flow—Despite the economic gloom many commodity prices hit new highs in recent weeks, driven largely by investment inflows.”
George Soros, who certainly knows all about these matters, said in April 2008:
“You have a generalized commodity bubble due to commodities having become an asset class that institutions use to an increasing extent.”
Goldman Sachs, one of the biggest players in the commodity index funds market, said:
“Without question increased fund flow into commodities has boosted prices.”
An even more famous organisation, Lehman Brothers, said:
“We have argued recently that some of the price buoyancy during Q1 reflected financial flows and investments in oil and other commodities… Our study indicated that for every $100 million in new inflows, WTI”
—this was a reference to West Texas Intermediate oil—
“prices increase by 1.6 per cent… Our conclusion for this study is that we are seeing the classic ingredients of an asset bubble.”
The financiers were saying “We have now spotted what is happening. We are in an asset bubble.”
At the same time, on the other side of the coin, the oil industry—certainly the Saudi energy Minister, and many other energy Ministers in OPEC—were saying “Don’t blame us, guv. We do not envisage a fundamental problem between supply and demand.” In fact, Members may recall that Saudi Arabia was prepared to increase its output by 500,000 barrels a day back in May and June. There was not really a problem of tight supply. I have concluded that while China and India were certainly playing a role in increasing demand, that did not justify the level of increase that we saw between the summer of 2007 and the summer of 2008.
Another factor that had an impact, according to pundits, was the fluctuation in exchange rates—the weakness of the dollar in relation to the euro, and so on. Again, that will have been a factor, but it does not account for the huge spike that we saw. That is true not only of oil but of many other commodities. Once the impact of high energy prices had had its effect on the global economy and we started to see the beginning of the downturn, the fundamentals kicked in, and we saw the collapse of not only crude oil prices but metal prices, and even food prices, as people withdrew from commodity index funds.
A number of Members have said that we will come out of the present situation, and that the days of cheap oil will never return. What we must prevent is a recurrence of what we saw in 2008. I think that the only way in which to do that is to ensure proper regulation of vital markets, not just in oil—important though that is—but in metal and other commodities. We need full transparency, not only in relation to commodities traded on the exchanges but in all the over-the-counter deals which are, in effect, unregulated and have a huge impact on the prices of commodities. We also need to return to the situation that existed probably 10 years ago, and had certainly existed since the 1930s, in which position limits were placed on those in the market.
Ten years ago, producers and suppliers of oil were the main players in the exchanges. Perhaps 60 per cent. of trading was carried out by people who had a direct impact; the other 40 per cent. was carried out by those who provided liquidity. Their trading involved speculation, but it was necessary to provide the opportunity to hedge prices on those exchanges. Now the ratio has reversed. The majority of traders do not want to buy a pork belly, a bushel of grain or a barrel of oil. They are there to make money, from their pension funds, their university endowments or their insurance companies. I believe that until we return that ratio to where it was, the risk will remain that we will face yet another speculative spike in the future, and the only way in which to deal with that is through global regulation.
I am very pleased that the Prime Minister is considering all those issues. It is clear that not just the financial sector but the commodity markets need global regulation. I understand that the United States Congress is beginning to consider the matter seriously, and we need to persuade our regulator—the Financial Services Authority, which looks after the ISAs futures market—that it should take it seriously as well. The Treasury Committee, of which I am a member, is looking at the issue, although we currently have other problems on our hands involving the banking crisis. I should like to know what my hon. and learned Friend the Minister thinks about the need for greater regulation of the commodity markets to prevent a repeat of what happened this year.
My second point relates to rural energy customers. I wrote to my hon. and learned Friend enclosing two letters forwarded to me by constituents. Both were customers of Flogas, from which they had bought liquefied petroleum gas. One of the letters, dated 1 October 2008, began
Price fix for the winter”.
The first constituent was offered a guarantee that the price of his LPG would be increased by 3p per litre, but that it would be fixed until 31 March 2009. Flogas wrote a similar letter to his neighbour on 2 October offering to increase his tariff by not 3p but 5p per litre.
That suggests two things to me. First, on 1 October we had experienced nearly four months—certainly three months—of dramatic falls in the price of oil. LPG is tied directly to the price of oil: it is almost like a by-product of the refining process. Yet the company was telling its customers that despite those three or four months of dramatic falls, its price would increase and would be fixed until 31 March next year. I think that that is outrageous. It is clear that no proper market is operating in the LPG sector in rural areas. Furthermore, those two neighbours knew each other and were able to determine that they were being charged different tariffs even though they lived 100 yd apart.
My hon. and learned Friend the Minister gave me an excellent response on what is being done to try to increase competition, not only in the LPG market but in the heating oil market. Heating oil is actually kerosene; it is jet fuel, in effect. It is used to heat a very large number of rural homes that cannot get a connection to the gas main. I am certain that British Airways and other airlines have seen dramatic reductions in the price of jet fuel—that is, kerosene—recently, but I am also pretty certain that domestic users of kerosene have seen nowhere near that level of reduction.
This comes back to the suppliers. I am not talking about the relatively small businesses that deliver the kerosene. I mean the larger suppliers—the energy companies and the oil companies. I do not believe that there is genuine competition in relation to the delivery of heating oil and LPG. Many of the distribution companies that I have spoken to tell me that the price to the consumer for both those products goes up immediately when the price of crude goes up, but that there is an awfully long time lag before any reductions are passed on. That should not be the case. I can understand it happening in the gas and electricity supply markets, but not in the LPG and heating oil markets. The price should fall as quickly as it rises, if it is keeping pace with the price of crude oil. Ofgem—or perhaps the Department itself—needs to look into what can be done to achieve proper competition in the supply of heating oil and LPG in rural areas.
The hon. Gentleman is making an important point. Some 5 million households are not on the gas network, and this is an important issue for many of our constituents. The trouble is that, in this respect, Ofgem does not have powers. I still think that the Government are wrong to imagine that the Office of Fair Trading can handle the matter, and I believe that Ofgem needs more powers in this regard.
I totally agree. There is blatant abuse going on, and there is no genuine competition in either of those so-called markets. Members who represent rural constituencies have heard about real problems that have been encountered. For example, many elderly people retire or move to a rural area, perhaps to a home that is not particularly fuel efficient—although we can help them with that—only to find that their outgoings are being hammered. The price can depend on the time of year at which they fill their tank up, which is also an abuse of the market. An 80-year-old man came to my constituency surgery on Saturday and told me that he was spending 20 per cent. of his income on heating oil, which I found quite incredible. There is a real issue that needs to be addressed.
I support other Members’ comments about the need for far more Government action to tackle fuel poverty. The main reason for 2.5 million people being classified as in fuel poverty over the past two years is undoubtedly the huge hike in the unit cost of energy, and the Government are absolutely right to make significant investments to enable people to have more efficient systems, to start to tackle the problem of prepayment meters, and to make investments so that homes can be much warmer. In the short term, however, we will definitely fail to reach our 2010 energy target unless we can get the energy companies to pass on the substantial reductions in the wholesale cost of energy. I look forward to hearing my hon. and learned Friend’s comments on this later.
The evidence session that the Committee heard when we were preparing this report was among the most interesting that I have been involved in, covering a huge number of issues, from the markets and the impact on industry to fuel poverty. The Chairman, the hon. Member for Mid-Worcestershire (Peter Luff), gave the House a very good resumé of those issues, so I will not dwell on them further. I agree with everything that he said, apart from his enthusiasm for nuclear power, which I do not share. In the time available to me, I would like to comment on a few of the recommendations in the report.
Clearly, the most pressing issues for households up and down the country are the price of energy and fuel poverty. The complex nature of this problem is reflected in the number of recommendations on those subjects. Some of those recommendations have already produced action, and I am now going to break the habit of a lifetime by saying something almost nice about Ofgem. Its action was prompted by the Committee’s inquiry, and I share the Chairman’s reservations about its needing to be prompted in that way. None the less, the report has produced some welcome changes, even if they are somewhat overdue.
However, I would urge the Government, Ofgem and, indeed, the companies to go much further, particularly in relation to prepayment meters. I agree with what many others have said about the difficulties that they present. Under the current proposals, there would still be an opportunity for companies to charge more for such meters, due to what they call opportunity costs—namely, the fact that the meters cost more to service. There might be something in that, but I do not believe that we should accept that argument in respect of people who are on such meters because they are fuel poor. I deliberately make that point because not everybody who is on a prepayment meter is actually fuel poor. We should bear that in mind.
For the fuel poor, prepayment meters are an example of people being penalised for paying in advance in cash. They are often used when people are in arrears and they bring with them the serious worry—for me, at least—that people will simply self-disconnect when they cannot afford the tokens to feed the meter. We collected data on disconnections relating to other methods of payment to the energy companies, but there are no reliable data on the number of people who simply self-disconnect by not feeding their meter. That can present as many problems as there are for people who are disconnected for other reasons, and they might be disconnected for quite long periods of time because they are unable to afford to feed their meter. That risk needs to be tackled, because if we do not know that it is happening, we cannot take action to help people in that position.
That is absolutely right. I have asked the energy companies to look into this, and they have told me that they do not know how to do it. The answer, however, is smart meters, and the sooner we can get on with installing them, the sooner we will know what people are consuming.
Indeed, and smart meters will also need to be interchangeable, so that everyone will know what the meter does and so that it can be easily looked at. It might also be possible to track instances of meters not being fed.
The report also tackles the difficult subject of social tariffs. I would particularly like to draw the House’s attention to recommendation 38, which states in part:
“We do not accept the view that a mandatory and comprehensible definition of what constitutes a social tariff would create a ‘race to the bottom’ for all suppliers—rather, it would provide a minimum level above which they can compete, not only on tariffs, but also on other schemes to assist the fuel-poor.”
I strongly endorse that recommendation, and I cannot for the life of me understand why the Government and the companies are so against the idea of a mandatory, statutory minimum tariff. The current tariffs are contradictory and confusing and it is difficult to determine what is in fact the best social tariff.
Nothing sums up the situation so eloquently as the disputes among the energy companies as to which offers the best social tariff. British Gas claims that it does, as it has more customers on the tariff, but I would like to quote from a briefing from Scottish and Southern Energy that I received in the past few days. It says:
“The Essentials Tariff (the BG social tariff used in their standard analysis) is set at their direct debit level. This is particularly significant as SSE’s standard direct debit tariff has actually been cheaper than the British Gas so-called ‘social’ tariff. Therefore, British Gas Essentials Tariff is not actually helping fuel poverty; it is just helping some of their poorer customers get a slightly better deal than some of their other customers—all within the generally higher British Gas pricing policy. The SSE approach, on the other hand, discounts heavily from our, already low, baseline.”
Make of that what you will, Madam Deputy Speaker, but what is the consumer supposed to make of it? How is the consumer able to determine what is actually the best tariff? Even at this late stage, I urge the Minister to look again at the issue of mandatory social tariffs. Let us have a clear, transparent system so that people know what they are getting.
That brings me on to question of switching. It has already been noted that a lot of people switch suppliers, but end up worse off—further evidence of the lack of clarity about pricing. I was very pleased yesterday when Scottish Power announced an improved tariff for vulnerable customers aged over 60 who receive benefits, but I make the point again that that does nothing for many vulnerable customers who are not over 60. Our Committee made a clear recommendation for more to be done to target the fuel poor who are not pensioners, particularly the disabled. We returned to that issue in our supplementary report, which was issued the other day and in which we said:
“We also reiterate our frequent recommendation”—
it is not just us, as the predecessor Committee also made the same point—
“that much more attention must be paid to groups in fuel poverty other than pensioners, particularly disabled people under 60”,
because they suffer just as much as many pensioners. Something must be done to tackle that problem.
To mention a point that the hon. Member for Carmarthen, West and South Pembrokeshire (Nick Ainger) touched on, I was particularly pleased with the recommendation on off-network consumers—an issue that I have pursued for some time, including through the hearings that are mentioned in the report. It became clear that neither of the consumer bodies—Energywatch previously or Ofgem now—had any remit whatever in that respect. These people had simply fallen off the radar of fuel poverty.
Many of my constituents in rural Angus do not have access to the gas network—and, with the best will in the world, they never will. There are good renewable energy schemes that can help, but at the moment many of my constituents use LPG or home fuel oil. I am pleased that, following our recommendation, Consumer Focus has said that it will take this issue into account, which is progress. I nevertheless agree with both the hon. Members for Carmarthen, West and South Pembrokeshire and for Mid-Worcestershire that Ofgem needs to be involved as well. The point that the hon. Member for Carmarthen, West and South Pembrokeshire made about LPG also applies to coal and fuel oil prices.
Let me ask the Minister to give consideration to this issue: we always pay the winter fuel allowance in the winter, but it may well be cheaper for someone to fill up a tank or buy coal in the summer months. I would like the Minister to reflect on whether, in certain circumstances, the winter fuel allowance could be paid to some people earlier in the year to allow them to take advantage of the lower prices. I appreciate the difficulties that that may cause, but it is worth considering, as it would help some people. There is no magic bullet to deal with fuel poverty and, as the report states, there are many other things to be done to combat it—home insulation, for example. Many homes need to be retro-fitted with good insulation to save energy.
The Scottish Government have launched an ambitious programme to help tackle fuel poverty and, unlike with Warm Front in England, they have maintained spend on fuel poverty programmes through the year. They have allocated an additional £10 million for the central heating programme, which is about installing such heating in vulnerable homes, and for giving more help to fuel-poor households. A record number of central heating installations were completed last year. The Scottish Government have also proposed increased help beyond basic insulation, which is being provided UK-wide, to families on income support with children under five or with disabled children under 16, as well as to pensioners. The Minister should look into extending those measures to other vulnerable groups in the rest of the UK. Those existing programmes reveal the wide range of issues that need to be addressed in tackling fuel poverty. With all that going on, I have to tell the Minister that it is a scandal for the UK Government at this time to slash the budget of the Scottish Government by £1 billion, which is bound to impact on many necessary programmes.
I promised that I would not speak for much more than 10 minutes, so I will start to conclude. The report is not only about fuel poverty and energy prices, but about the security of our future energy supply. The Select Committee Chairman made many of the points that I would make so I will not dwell on the issue, other than to say that when we think about the big six energy companies we have to take into account the fact that we are asking them to do two contradictory things—to reduce prices, but at the same time also to make the huge investments needed for future energy generation of whatever type. The Government need to look further into how to deal with such contradictory priorities. A bankrupt company cannot invest in generation and we need to consider whether the current market provides the best means of meeting those priorities.
The profits of the energy companies were mentioned, so I should like to return to a point I raised in an intervention. Because four of the big six are multinational companies, it is difficult to ascertain how much profit they are making from generation, how much profit comes from sales and how much of it is actually made in the UK. In some ways, British Gas and Scottish Power and Southern are disadvantaged in that we can see how much profit comes from the UK, but the Government need to look further into the matter, perhaps in tandem with the European Union. We need more clarity and we need real thought about how to get the energy companies to meet the two contradictory objectives—to invest in generation and to deal with climate change as well as with prices, particularly for vulnerable customers.
In the remaining time available, I shall ask a couple of questions, as some points in the report will have to be followed up and progress made. Having heard the issues raised in the debate about Ofgem, does the Minister believe that its terms of reference need to be revised in the light of market changes and current pressures? The electricity and gas companies, for example, have asked for an enormous increase in contributions to monthly payments. Is that justified and is Ofgem adequate to protect people from those demands? Although there is no doubt that the deregulation of the market brought about a fall in prices for consumers, is the Minister satisfied that the market is working adequately now—and not just for domestic consumers, who are very important, but for business consumers? I represent a constituency in Scunthorpe that has much energy-intensive industry, so I am concerned to ensure that there is fair competition in respect of energy prices for companies in this country as compared with prices in the rest of Europe.
My final point is about carbon capture and storage, which was mentioned earlier. Yorkshire Forward presented a proposal for a carbon capture pipeline in the south Humber bank, leading to the gas fields and allowing energy-intensive industry to connect to them. I declare an interest here, because the installation of a carbon capture blast furnace in Scunthorpe is under active consideration and having that sort of infrastructure would make the project all the easier. I am very keen to see such new technology implemented in our own country. I believe that this represents one way forward for the low-carbon economy. I understand that, at the European Council, the EU agreed to make a sum of about €6 billion or €7 billion available. Given the existence of that European funding, is the Minister open to thinking again about a bid from Yorkshire Forward, perhaps in partnership with some of the energy-intensive companies in that area, as a means of providing such important infrastructure investment?
I begin by congratulating my hon. Friend the Member for Mid-Worcestershire (Peter Luff) and his Select Committee on its work in preparing these reports. As the Select Committee starts to lose its responsibility for looking into energy matters, these reports will provide a lasting and important testament to the diligence and expertise of its members in studying the energy challenges that our country faces.
The reports have given rise to a thoughtful and constructive debate and I hope that you, Madam Deputy Speaker, will make strenuous representations to the business managers of the House about the fact that so many outstandingly able right hon. and hon. Members who have tremendous expertise have been denied the opportunity to speak in the debate because of the lack of time.
I want to focus on the issues of fuel poverty and this country’s future energy supply. Today has been a bad day for consumers. I think that they had hoped for relief from the Ofgem announcement, but they have not received it. That is why this morning’s announcement has received a poor response from organisations such as Age Concern, Help the Aged and the National Housing Federation.
Of course we welcome the progress that has been made on prepayment meters and in relation to those who are not on the gas grid, but more is clearly needed. Now that it has been recognised that people in those categories had a bad deal in the past, I hope that the Minister will say whether he will seek compensation for the way in which they lost their income.
There is little here for consumers more generally. We know now that there are probably 5.5 million households in fuel poverty, and every 10 per cent. increase in fuel prices pushes another 400,000 people into fuel poverty. We know that here in the UK energy prices are rising twice as fast as the EU average. We know as well that many people face a raw deal from how the direct debits operate. We also know that this is about not only those who are defined as being fuel-poor—millions of households across the country will struggle to pay their bills this winter. Worst of all, knowing that 25,000 people died last winter because of cold-related illnesses, it is likely that that figure will be higher this year.
We must recognise that more should have been done earlier. In October, we were told by the Secretary of State that he would give the energy companies four weeks to take urgent action. In November, he said that he would give them another four weeks. Today, he is saying that he will think about consulting on having a review to discuss what more should be done if they do not do something now.
The time for action has passed and we should have seen more. We should now be seeing the Government taking action to make excessive profiteering on prepayment meters illegal. There should be legislation to provide social tariffs for vulnerable households. There should be a requirement that the companies from which people get their energy should say on their bills what would be the cheapest tariff. There should be an extension of the Post Office card account to enable those who do not have bank accounts to get the best tariffs available.
We think that the time has come for the Government to ask the Competition Commission to look into how the companies operate. So, while the Government have said that affordability is a priority, it must be a matter of great concern that we have not seen that achieved.
The report also considers how Warm Front works. A couple of weeks ago, I raised that matter with the Prime Minister at Question Time. I received a letter from him today and he says:
“In addition to the £74 million of new money announced on 11 September, a further £100 million of new funding has been made available to Warm Front through the Pre Budget Report... The additional £100 million brings the total spent on Warm Front to over £950 million for the 3 year period to March 2011.”
That is a very partial reply, because he does not say that new money is simply reinstating some of the funds that have been taken out. For those three years, we are still left with a Warm Front budget of £100 million less than originally intended for that period. We need to know whether the Prime Minister is aware of the fact that the budget has been cut, or has he deliberately chosen to hide that? The bald fact is that the Warm Front budget has been cut, but because some of the cut has been restored, he seeks to portray that as an increase.
Moving on to security of supply, which is so crucial to the debate because of its impact on future energy prices, there is recognition across the House that we need investment in new capacity. Paragraph 17 of the Select Committee’s first report of the 2008-09 Session puts it well:
“The situation is now very serious and we believe that a simple trust in the market’s ability to deliver without any intervention will see us facing an ‘energy crunch’ in the medium term. The social and economic consequences of such a ‘crunch’ would be disastrous.”
Although I recognise that the Minister is relatively new to his brief, I am afraid that he is showing complacency in how that is being addressed. On the “Today” programme a few weeks ago, he said that the lights would be burning even more brightly in 2015 because there would be 37 per cent. more generating capacity on stream by then. He must be the only person in the country who thinks that is true.
The Minister took the figures from the national grid’s seven-year statement, but he knows that they do not take account of planning consents, financing or the cost of commodities, which will determine whether some projects will be built. Crucially, they do not take account of the facilities, particularly in coal and nuclear, which will come off stream, or indeed the variability of wind power: 8 GW of that figure will come from onshore and offshore wind, but he treats wind power as providing the same reliability of supply as would come from gas.
We also need to recognise that this situation is getting worse. The return on equity required by companies, according to Alistair Buchanan, will be 15 per cent. or more, rather than 10 per cent., which it has been. He says as well that there will be significant refinancing needs across the industry.
If we need any more warning, we should heed the words of Wulf Bernotat, chief executive of E.ON, who, writing about Britain in The Sunday Times, said:
“You have old nuclear plants, old coal, expensive gas, a need to invest in renewables to reach unrealistic targets, and a slow”
“process. Doesn’t that sound like a problem to you? The situation in the UK is more difficult than a number of other countries in Europe, without people fully realising it.”
We have to be realistic because many of the things that we are looking to are simply not likely to happen. We have a problem here with people wanting to invest in coal: because of the Government’s lacklustre approach to carbon capture and storage, they are questioning whether they can make those investments. We are seeing issues even in gas, with RWE in Pembroke saying that it needs an urgent decision on the 2 GW plant for it to go ahead. If that does not happen in the next few months, the financing of it may change.
Day by day, people in the renewables sector, and particularly those in offshore wind, are saying that they need more funding if their schemes are to come on stream. Centrica has put one of its plants on hold, Shell is pulling out of London Array, and Eclipse and AMEC’s wind business have been taken over. RWE says that it needs more support. Projects that looked to be developed in round 2 are struggling, let alone those needed in round 3. They are all saying that the moves towards banded renewables obligation certificates, which we have supported, do not give them enough support.
The UK has 11,000 miles of coastline and should be a natural place to lead the world in marine renewables sector technologies, but the marine renewables deployment fund cannot be accessed. As Ministers have said, that is because they are not at the deployment stage. Well, the rules should be changed and that funding should be got through to the companies, the brilliant schemes and the brilliant academics so that Britain can lead the world in the sector, rather than seeing that lead heading off towards Portugal and elsewhere.
I come finally to the issues of gas storage and the role that it plays. The Minister has again shown disturbing complacency and when he gave evidence to the Select Committee, his own hon. Friends said that he did not seem to recognise what was happening. They pointed out the fact that we have moved from being an energy exporter to being an energy importer, so the need for gas storage is greater than ever.
We have about 4 billion cu m of gas storage and National Grid suggests that we might have 6 billion cu m by 2013. The Minister thinks that we might have 18 billion cu m by 2015. Nobody thinks that that, realistically, will happen because we are finding that projects on the list—the Minister has referred to them—are dropping off it.
Yesterday, National Grid issued a 10-year statement based on the report that the Minister is relying on, but that report says that 2.5 billion cu m of storage capacity will not proceed as planned, 0.7 billion cu m has been rejected in planning in relation to the Saltfleetby application, 1 billion cu m at Portland has been put on hold because of the investment climate, and a proposal for a further 1 billion cu m has been rejected by the Secretary of State, although it is still showing in the figures as something that might happen.
We face formidable energy challenges and that will be the key issue of the winter for people who cannot pay their bills because they simply cannot afford the prices out there. They have been looking urgently for support and they deserve support because these problems are not of their own making, but the Government have delayed. As a result, people face a more challenging time this winter than was necessary.
As the Select Committee report points out, damage has been caused not just to those short-term issues, but to the long-term energy security needs of this country, because the Government have not put in place the steps to secure the necessary investment.
I join the general congratulation of the Select Committee on its report. The report that it published over the summer was a professional and impressive piece of work, and I said so when I met the Committee. The latest report on future challenges involves a little bit of crystal-ball gazing, and when gazing into the future it seems to see things a little darkly, but a lot of challenges need to be met, and the Government are determined to meet them.
I can hardly think of any justification for the claim of Government complacency made by the hon. Member for Wealden (Charles Hendry). We have just enacted the biggest legislative programme on energy that has ever been carried through by this Parliament. The Energy Act 2008, the Climate Change Act 2008 and the Planning Act 2008, are a major set of policy initiatives that the Government have undertaken to meet some of the key challenges. The formation of a Department of Energy and Climate Change shows that the Government treat seriously the key challenges of energy sustainability, security of supply and the ensuring of affordability. The Government aim to cut emissions, hit our climate change targets, defend consumers and ensure diversity of supply of energy.
I welcome the breadth of the debate. A number of serious points were made by hon. Members. My hon. Friend the Member for Southampton, Test (Dr. Whitehead) gave an excellent analysis of fuel poverty issues and my hon. Friend the Member for Carmarthen, West and South Pembrokeshire (Nick Ainger), with his knowledge of the oil industry, made interesting points about the commodity market. My right hon. Friend the Member for Scunthorpe (Mr. Morley), with his knowledge of intensive energy users, made some important points, as have other Members, and I hope to deal with some of them.
We need to deal with the key issue of affordability. Consumers must be able to get the energy they need at the lowest sustainable prices possible. Beyond that, they need to be confident that the prices that they pay are fair, and they are not at the moment. Healthy competition and fairness should be the hallmark of our independently regulated energy markets, and if there is any suggestion that consumers are being ripped off, we should not hesitate to take action by rooting out unfair practices. The Government want to ensure that that happens.
I will, but before I do so, I say to my hon. Friend that he used very provocative descriptions of the energy companies, and I have one point to make to him. We are looking to those energy companies, their shareholders and their foreign boards to make about £100 billion of investment in the coming months and years, and to refer to them as he did is hardly likely to encourage that investment, much of which will come from abroad.
That may well be. I was going to defend the Government in one respect because until 1997 there was no winter fuel allowance at all. However, despite what my hon. and learned Friend said, everyone knows that the wholesale price of energy has substantially reduced, and he has said so on previous occasions. Are we to take it that the Government will use the utmost pressure to bring prices down, and if the energy companies refuse to do so, what action will the Government take?
The Government want to ensure that people pay fair prices. As my hon. Friend knows, the energy companies buy much of their gas, the price of which feeds into electricity prices, on the forward market. The energy chief executives tell us that that operates about six months ahead, so the prices that we are paying this winter tend to be based on the ones that they paid a few months ago. Changes, therefore, take time to feed through. That is a problem for us, but when he asks whether we are determined to do everything we can to ensure that we get energy prices down to a fair level, the straight answer is yes, we will.
We will ensure, too, that Ofgem does everything it can. This has been a hard year for householders and businesses, with price rises and dramatic fluctuations in energy costs. Earlier in 2008, there were dramatic price rises in oil, gas and electricity, and more recently, some of the wholesale prices have fallen, and oil prices have fallen from $147 a barrel to about $40 a barrel—it varies. Petrol and diesel prices have now fallen below £1 a litre in most places. This Friday in London, Energy Ministers will meet to discuss the oil market and how to stabilise prices and improve transparency, and I was fascinated to hear what my hon. Friend the Member for Carmarthen, West and South Pembrokeshire had to say. He raised some interesting points about the commodity market, and I would like to look at those in more detail.
I mentioned prices falling, but that cannot be said yet about electricity and gas retail prices. Wholesale prices have fallen, but as I said, it is the forward price that is important. That is starting to go down, and I have met the chief executives and most of the main energy companies in the last week and clearly told them that we want them to bring down prices as soon as possible. They were able to give notice of price rises, and we want some notice of when they are going to bring down prices. We want a greater degree of transparency in the wholesale market because it feeds into the retail market. The pre-Budget report asks Ofgem to provide quarterly reports showing the relationship between wholesale, hedged-wholesale and average retail prices. That will make it clearer whether companies are passing on the benefits of downward price changes or not. It is important that falling wholesale prices are passed on to retail customers, particularly when they are under so many financial pressures.
From the discussions that the Minister is having with the energy company chief executives, he will be aware that their profits in the last year have doubled from £2.1 billion to £4.6 billion, while their contributions to fuel poverty have reduced from 2.1 per cent. to 1.2 per cent. The energy company executives whom I have spoken to about fuel poverty targets and obligations on social tariffs have said that they would move on these issues if instructed to, but so far neither Ofgem nor the Government have been willing to issue such instructions. Will the Minister at least consider doing that?
If my hon. Friend speaks to chief executives, he will find that different ones give very different messages. Some of them favour a statutory or agreed basis for the licensed system of social tariffs, and others do not. Some of the energy companies did not have a social tariff, such as Scottish Power last year. The energy companies adopt different policies. I am anxious to ensure that we bring about a more sensible regime on social tariffs, because at the moment it is difficult for those on low incomes to work out who is the best person to go to. People claim to have large discounts, but as the hon. Member for Northavon (Steve Webb) rightly said, some of those with the apparently biggest social tariffs charge the biggest prices. The deduction comes out of such prices and people end up paying more. It is a very complex matter. We have to ensure, however, that the energy companies are not making false profits and that they are not ripping off the consumer, and we intend to do so.
Ofgem has received a lot of criticism, and I understand that this House holds a critical view of Ofgem, and I think that Ofgem now understands that. If it had not before, it will as a result of the debate. I understand it, and I want to ensure that confidence in Ofgem is resumed. It has recently announced that it wants to eradicate unreasonable premiums, and that it will change some of the licensing rules to prevent such premiums from recurring. It has given companies until February to respond on licence changes, and to implement some of the changes in full. It tells us that there have already been £300 million of reductions in prices for consumers, and that a further £200 million need to be made by February.
Ministers have met the main energy companies’ CEOs and emphasised our determination to legislate unless they show that they have acted to end discrimination against prepayment meter payers and standard payment customers, as well as to deal with some of the other anomalies that have crept into their pricing programme.
Legislation does not happen overnight in this place, but we are preparing to legislate should we need to do so. A referral to the Competition Commission, as suggested by the Conservatives, is an option, but it would involve a lengthy wait. CC reports can take 12 months to two years, so that would not help customers by February. It is a slow-lane response and it is not a sensible approach at present. Let us see if we can get this done; let us see if we can get some action from the energy companies and make sure that Ofgem keeps the pressure on them—with the hobnailed boots that Alistair Buchanan talked about on the radio this morning. We want to get this done without referring the matter to the CC, which may take two years. Ofgem has clearly said that it wants all these changes to be in place by February and we want that, too. Ofgem wants to get these reasonable results by February, but it also wants to sort out some of the licensing conditions and I want to be very clear on this: we will legislate if Ofgem does not get the changes it needs through.
I am today placing in the House of Commons Library a comparative annual bill for each of the six energy companies based on a departmental analysis of the premiums they are charging for different kinds of payment based around the comparator of dual-use payments. For example, for average annual usage of electricity and gas, the highest annual dual-use bill is £1,240 from British Gas and the lowest appears to be EDF Energy at £1,168. On premiums paid for prepayment meters, British Gas came out the highest again at £158 and EDF was again the lowest at £78.80. On premiums above the cost for dual use on direct debit, customers paying by standard credit—those whom some people, including the Select Committee Chairman, the hon. Member for Mid-Worcestershire (Peter Luff), have indicated are a major issue—are likely to be paying more by between £109 with Scottish Power and £27 with E.ON. These are significant premiums and I want to be sure that they are justifiable. At present I am not entirely sure that they are; Ofgem seems to some extent to be sure, but I want to be sure that we are also happy with the figures.
There are different ways of cutting these figures, and as there is competition they change regularly. When Members look at them, they will be comparing prices as of this week, and in many cases the sums are lower than they were some weeks ago when premiums were higher. However, although some of the companies have changed their prices in the past few weeks, Ofgem is still looking at them to ascertain if they are justifiable. The main justification for the expense of prepayment meters has been that they must be checked regularly. That was certainly true in the past when they were mostly coin meters, but nowadays they are often prepayment cards and the customer pays in advance, which brings a benefit to the company. Although Ofgem seems to some extent to be content with this, I am not convinced. Having seen today’s Ofgem announcement, I want to drill down further into the justification for such a premium, which often falls on low-income people, and I have asked officials in the Department and Ofgem to look at this as a matter of urgency.
I am conscious of the time, but I have not had an opportunity to deal with some of the key issues raised. We want to ensure that direct debit payments are looked at properly. I have some concerns and I have raised them with the chairman of each of the companies I have met. I have said I want them to justify some of the changes.
In terms of our keeping the lights on, there is another energy gap—that which is in Opposition policy. I will not go into that now; we can leave for another day discussion of their failure to support the renewables obligation, and their opposition to coal-fired power stations, planning legislation and a number of international initiatives. Before they start criticising us for an energy gap, let me say that as far as we are concerned there are 10 GW of consents in process and 7.5 GW in planning. Even if the energy crunch does create some delays—we are looking at this with concern and I say to the Select Committee Chairman that since I gave evidence we have had some indications from some chairmen that a tightness is now developing in the market—we believe that there will continue to be investment. We are getting reassurances from the chairmen on that, too.
On gas storage, the National Grid has as of yesterday updated its figures; its 2008 report indicates there is likely to be substantial new storage. I can go through some of the figures, but I am conscious of the time: 4.4 billion cu m existing; 1 billion cu m in construction; 3.3 billion cu m with planning consent; 1 billion cu m awaiting planning consent; and 12 billion cu m proposed, but planning not yet applied for. We therefore have quite a lot of interest in developing our gas storage.
I would want to test some of the points raised by the Opposition spokesman if I had the time. The Government are committed to dealing with fuel poverty, to ensuring we keep the lights on, and to ensuring we have sufficient capacity to do so. The Government have every intention of delivering on that.
Question deferred (Standing Order No. 54(4)).
On a point of order, Mr. Deputy Speaker. In the past 30 minutes the Metropolitan police have issued a statement as a result of their receiving the report of the Chief Constable of the British Transport police into the matter relating to the hon. Member for Ashford (Damian Green). However, I have tried to get hold of a copy of the report, but they say they are not publishing it. I then asked for a copy of their statement to be e-mailed to me, and by the time I came to the Chamber that had still not been forthcoming. Clearly, it is essential to Members that we have at least a copy of their statement, bearing in mind the clock is ticking and the recess is approaching, so time is short for Mr. Speaker to consider applications or submissions on whether this is a matter of privilege. Between now and 10 o’clock would it be possible for the Speaker’s Office or the Clerk, perhaps, to use their good offices of leverage on the Metropolitan police to cede two things, the first of which is that there is available in the Vote Office or on the internet a copy of the Metropolitan police statement that is being issued to journalists as we speak? We need to have this tonight, not tomorrow. It is a matter of discourtesy that it is not being made available. I ask if there is any way in which you, Mr. Deputy Speaker, can help in this matter because we should have it available now.
Further to that point of order, Mr. Deputy Speaker. I, too, am aware of the circumstances that the hon. Gentleman has just raised. At 7.45 pm I wrote to the Speaker because I believe this matter pertains to the privileges of this House, and the complaint I have issued in respect of the matter concerning my hon. Friend the Member for Ashford (Damian Green) is a matter of privilege. I, too, endorse the idea that we should ask for and/or demand a copy of this report forthwith and that it should be placed in the Library, and I have been asking the Library—as has the hon. Gentleman—for the last half hour to make provision for it to be supplied in the Vote Office or the Library. First, however, it seems to me that it might be appropriate for the Speaker to make inquiries and to insist it is made available to us because of the short time before the House rises.
I say to both hon. Gentlemen that I have no knowledge of the matter they have raised. Clearly, this is an important issue and the House will want to study the statement. Both hon. Gentlemen can make their inquiries in the usual way, and their points of order are clearly on the record. Front Benchers of both main parties are present, so I trust the usual channels will take note of what they say.
department of Health