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Energy: Security and Prices

Volume 713: debated on Wednesday 28 October 2009


Asked By

To ask Her Majesty’s Government what are their forecasts for the security and prices of energy supplies during the coming winter.

My Lords, National Grid’s winter energy outlook indicates that forecast gas demand will be 2.5 per cent lower than the weather-corrected demand for winter 2008-09. Overall, gas supplies will be comparable to last winter. Peak electricity demand is forecast to be down by about 1 per cent. The Government do not forecast energy prices.

I thank the Minister for that Answer. This is the fifth year in succession that I have asked this Question, and I believe it is particularly justified on this occasion because we are due to import more than 50 per cent and rising of our gas supplies. I have two questions to put to the Minister. First, if, in spite of expectations, there should be interruptions in supply for climatic or geopolitical reasons, what emergency measures do the Government have in mind to offset that development? Secondly, as retail prices remain high and are likely to get higher, what additional measures do the Government have in mind to help households in fuel poverty, now estimated to exceed 4,000?

My Lords, I congratulate the noble Lord on his energy and consistency of purpose in this area. On the second point about prices, he will know that a recent quarterly report by Ofgem identified that margins have increased. We hope that we will see further price reductions. The Government are very active in relation to fuel poverty programmes. On the first point, it is true that as North Sea production and reserves decline, more gas will be imported. However, I am confident that we will have the gas supplies we require. We have seen a big increase in our import facilities, and we have many commercial projects in relation to storage facilities. In the very unlikely circumstances the noble Lord raised, the Government can take contingency measures. However, I very much hope that that will not be necessary.

My Lords, I have the honour of following the noble Lord, Lord Ezra. May I press the Minister a little harder? The National Association of Citizens Advice Bureaux estimates that 5 million households will be in fuel poverty. There has been an increase of 20 per cent in the fuel price in the past six months, so will the Minister say more clearly how the Government will deliver support to those households?

My Lords, the Government have shown themselves to be consistently active on fuel poverty. We have spent £20 billion on benefits and programmes, and we have a strong package of measures. We estimate that, without that package of measures, there would have been around 400,000 to 800,000 more fuel-poor households. We have a fuel poverty review, and we intend through legislation to make the current voluntary social tariffs mandatory; so we are very active in this area.

My Lords, it is now possible to convert the world’s oil shale deposits outside Russia into enough natural gas to meet energy needs for the next 200 years. Will the Government increase gas storage facilities to switch more coal-fired power stations to gas to maintain stable energy prices, and will the Government’s team for the Copenhagen conference ask attending IPCC scientists why they have not suggested methods of seeding the stratosphere with sulphur dioxide from the world’s 8,000 coal-fired power stations as the only practical solution to reducing temperatures by 2020?

My Lords, I can assure the House on the latter point. We can depend on the world’s scientists to take great care and note of what the noble Lord has suggested. On shale gas, he is right to suggest, as I think he does, that the availability of gas supplies has changed and is much more liquid as a result of activities in the US. In a sense, this country is in a good position because of the increased possibility of LNG coming to this country and the increase in our import facilities. Again, I am confident—one can never be complacent—that we are in a good position in relation to energy supplies at the moment.

My Lords, is my noble friend aware that emerging countries such as Ecuador are producing oil and retaining the operations underground? They will not damage their forests and will contribute to preventing their carbon footprint destroying the environment, but they require compensation to build an infrastructure. We must recognise that the price of oil will have to go up.

My Lords, it is clear that there will be rises in energy prices, and that there are elements of cost in moving to a low-carbon energy supply. Global investment in energy is down at the moment, and there are worries that, as the world moves out of recession in a few years’ time, the lack of investment now may have an impact on availability and price in the next few years. However, I agree that sustainability is very important. Of course, funding and technology transfer go to the core of what will be discussed and decided in Copenhagen.

My Lords, this year, wholesale energy prices have more or less halved; yet the price of energy to households—to families—has gone down by only 4 per cent or so. Is this acceptable, and is it acceptable that some 6.5 million families will remain in fuel poverty over the winter, or should the Competition Commission be brought in to investigate the big six energy companies?

My Lords, this is a matter of great concern to many people. The noble Lord is right to suggest that the reduction in domestic retail prices is much less than the reduction in forward wholesale prices. He will know that these matters have been reported on by Ofgem. It has said that margins in electricity have risen, although they are still within historical average, while margins in gas and dual fuel are at the upper end of historical range. We continue to be concerned about those issues. We will do everything we can to encourage Ofgem to use the powers it has and we have promised to look at legislation to give Ofgem more powers.