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Energy Prices

Volume 576: debated on Thursday 27 February 2014

We announced in the annual energy statement that Ofgem would work with the Office of Fair Trading and the new Competition and Markets Authority to deliver the first annual competition assessment in late March, early April. These independent competition authorities have set out the remit for this assessment. They have said that they will look at prices, as well as profits and other relevant matters.

I recently wrote to those competition authorities, drawing to their attention three specific matters that have received little attention in the energy price debate but which I consider are of strategic importance, including profits, prices and market share in the domestic gas supply market. It is for the regulators to decide what steps they now wish to take in light of all the evidence.

Given that 31,000 winter deaths were caused by the cold during last winter and that there will be further rises in energy bills this year, why does the coalition give a higher priority to maintaining the energy cartel’s 77% increase in profits and shareholder dividends than to the lives of vulnerable people?

We do not; I am afraid that the hon. Lady is wrong on many counts. First, the structure she describes as a cartel was created by the previous Government. The big six were created during the consolidation under Labour, so they are Labour’s big six. It is under this coalition Government that we have seen a massive increase in the number of entrants to the market; we now have 20 independent suppliers taking on Labour’s big six. That is good competition that will help people. Secondly, we take winter deaths extremely seriously. If she looks at the data, she will see that winter deaths have gone up and down over a period of years and that the highest figure over the past decade was actually when the Leader of the Opposition was doing my job. The reason they go up and down is that they are related not simply to energy costs, but to health matters such as flu epidemics. We need to ensure that we have a cross-Government approach to tackling winter deaths, which is what we are doing.

I am grateful to the Secretary of State for visiting Norwich recently to listen to my constituents about energy bills and for attacking the high profits made by suppliers on gas bills. Will he explain the analysis that led him to send a letter to Ofgem and the CMA concerning prices and profits in the supply of domestic gas?

I pay tribute to my hon. Friend for his sterling work in this area. When Ofgem published segmental accounts in November, combined with figures on market share and other data, we saw for the first time a four-year time series showing some real concerns. It was that analysis that led me to write to the competition authorities, drawing their attention to the problems in the domestic gas supply market, which were never raised by the Labour party.

The Secretary of State knows that the big six were set up in the way they were because, after the introduction of the new electricity trading arrangements and then the British electricity trading and transmission arrangements, that spread competition in the market. However, Which? has now said that vertical integration has skewed the market, penalised new entrants and impaired competition. Does he not accept that Which? is right and that the Opposition are absolutely right to seek to break up that vertical integration?

I accept that we need to look at the electricity generating market. One of the reasons we support Ofgem’s proposals, which this week it was announced will go forward on 31 March, is that they will contest the vertical integration model for the first time. Again, it is this Government who are challenging the structures we inherited from the previous Government. We are allowing the competition authorities and regulators to take that contest forward, but the Labour party is saying that it must be against the consumer interest, yet it has no real evidence for that.

Does the Secretary of State agree that the high prices we see are not purely the result of the oligopoly set up by the previous Government, and that policy and energy mix are also important? To that extent, has he compared prices in Germany with those in the UK?

There are a number of international comparisons on that basis, and the UK performs very well, by and large, particularly on post-tax analysis of domestic gas and electricity prices. But we should not be complacent; we should do everything we can to help customers and businesses with high energy bills.