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Energy Market Competition

Volume 576: debated on Thursday 27 February 2014

We have taken a large number of steps to increase competition in the energy market after the consolidation under the last Government that created the big six. We have deregulated the market to encourage the entry of smaller suppliers and more than 20 independents are now competing with the big six on retail energy. We have supported Ofgem in its reforms of bills and tariffs to make them easier and simpler, including through the ending of so-called dead tariffs. We have also supported Ofgem’s reform of the wholesale electricity market which, as has been confirmed this week, will be introduced on 31 March this year. We are also making it easier and quicker to switch.

On privatisation, some 27 companies were involved in the generation, supply and distribution of electricity, and of course gas. The market was set up to allow new entrants, but under Labour it shrunk to the big six. What action will my right hon. Friend take to allow new entrants to all three aspects of the market?

My hon. Friend is right that we saw consolidation in the energy market under the previous Government, which is when the big six were created. We have acted since day one through deregulation, which has enabled more independent suppliers to come to the market, and through making it easier to switch to the simpler and easier tariffs and bills that Ofgem has promoted. This week’s announcement in the wholesale market will see much greater transparency in forward markets, which will reduce barriers to entry to take on the electricity generation side of the big six.

Thomas Docherty: not here. I do not know what is going on; the fellow was here earlier and he has now beetled out of the Chamber. How very unfortunate. I call Tessa Munt.

Given the complaints figures uncovered by Which? recently, which showed that the big six received more than 5.5 million complaints in 2013 alone, does the Secretary of State think the time has come to have a full overhaul of the broken energy market, starting with a full competition inquiry to increase competition after the market assessment has been completed?

It would be wrong of me to anticipate what the annual competition assessment will conclude. We provided evidence for that, which was the right thing to do, but it is for that independent competition authority to decide what the problem is—that is why we have asked it to do it. It is doing detailed work, and when it has analysed the problem, it will decide what remedies are required.

The Secretary of State asserted in answer to an oral question on 16 January that Labour’s proposals to introduce a ring fence between generation and supply would cause “real problems” and push up prices. The Procedure Committee has ruled that the Secretary of State should provide me with evidence for that claim by 26 February, which was yesterday. Can he tell me today what the evidence says and whether he will publish it?

First, the annual competition assessment will, of course, look at that issue in detail. As the right hon. Lady will know if she has read the details of Ofgem’s wholesale market reforms, for example, there is a lot of work to suggest that it is not at all clear that vertical integration is bad for consumers; it may be in some cases, but it will not be in others. The theory behind this is pretty clear: vertical integration was adopted so that people could hedge the risks between generation and supply. That can lower the cost of capital and lower prices for consumers.

The Secretary of State has asserted his own view in the House and in the media before Ofgem has even made its assessment, so I think my question stands. Even Government Members think that the Secretary of State is wrong. The hon. Member for Harlow (Robert Halfon) wrote on “ConservativeHome” on 18 February that if companies had separate licences for generation and supply, as Labour has proposed, it would

“shine a light in some of the murky areas”

of the energy market. Apart from some of the big six, can the Secretary of State name a single organisation that opposes a ring fence, and will he confirm that he is ruling out the introduction of a ring fence while he is Secretary of State?

No, I will not do that for the simple reason that we have asked the independent competition authorities to look at the evidence. Unlike the right hon. Lady, I am not prejudging the outcome of independent competition regulators. We provide the evidence and we allow independent authorities to make judgments on that. It is quite odd that the Labour party is now turning its back on independent competition authorities.