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Energy: Electricity

Volume 723: debated on Tuesday 11 January 2011


Asked by

To ask Her Majesty’s Government what will be the financial impact on consumers of the changes proposed to the United Kingdom’s private electricity networks.

My Lords, the provision of third-party access to unlicensed networks will enable customers of those networks to take advantage of the competitive energy market by having the right to choose their energy supplier. As such, where alternative suppliers can offer a more competitive price than the incumbent supplier, customers will be able to make savings on their energy costs.

I am grateful to the Minister for that reply, but is he aware that in the solution that he has just set out, it will require all the operators—the landlords of these private networks—to upgrade their supplies to grid standards at the cost of many millions? This applies to railways, airports, ports, sports centres—anywhere where there is subcontracted electricity. Does he agree that the Government should look at an alternative, which would be for the landlord to get competitive quotes, and so avoid this enormous cost on British business?

My Lords, this is a complicated issue, and we have been in consultation with all the ports, airports and railways. That has been an extensive consultation. If the noble Lord wishes to meet with officials for further explanation and briefing on the consultation, I will, as always, make my officials available. I agree with him: it would be perfectly acceptable, if private network customers are satisfied with their private network suppliers, to go out to tender to obtain cheaper electricity. The fundamental point, however, is that in these difficult times, it is important that the customer has the cheapest and fairest electricity supply that is available.

My Lords, it is welcome that the proposed changes will help people switch suppliers and potentially save money on their energy bills. Does my noble friend agree that more market competition and greater transparency in wholesale costs and retail prices would assure consumers that they were paying a fair price for their energy?

I totally agree with the noble Baroness, but in fairness, it is the role of Ofgem to ensure that electricity prices remain competitive. We strongly encourage Ofgem to be transparent and to challenge the fairness of prices. As noble Lords know, we are reviewing the role of Ofgem and ensuring that it is carrying out those methods so that we end up with a competitive electricity market in these very difficult times.

My Lords, at Question Time after Question Time we keep hearing Ministers speak about competition and reducing prices. The facts are that prices still keep going up. Electricity has gone up by 9 per cent. How can 9 per cent on people’s bills be justified?

The noble Lord is completely right that electricity bills are going up and have been going up. This is very regrettable, but let us look at the facts. In the past five years, oil prices have gone up by 60 per cent and gas prices by nearly 60 per cent. Electricity prices have also gone up by nearly that much in that time. It is incumbent on us to get a competitive situation in the market and I can assure your Lordships that this Government are trying everything that they can to achieve that.

My Lords, is it not the case that owners of wind farms are to be paid a so-called facilitation fee, apparently to contribute to the costs of their facilities, even when there is no wind and they are not producing any electricity? What sort of a contribution does that make to these competitive policies?

With all due respect, the noble Lord is slightly wrong in his sweeping judgment that there is no wind activity from wind farms. There is of course wind; we live in a windy country. Wind farms are seen to be an appropriate way for this country to generate electricity. However, his broader point is very well made: in order to achieve by 2050 probably twice the amount of electricity that we need now, we have to get on with obtaining it from a portfolio of ventures. That means new nuclear, wind farms, renewables such as anaerobic digesters and biomass, et cetera. We have to have a portfolio of ventures and this Government have set about achieving that.

My Lords, with the announcement today of yet another energy company increasing its charges, I know that the Minister understands how worried people are about paying their bills, particularly as we have seen a spate of very cold weather. The noble Lord will be aware that his own department has forecast that the shift towards greener energy and a greener economy will increase the cost of electricity by 33 per cent and the cost of gas by 18 per cent. We welcome and support the move to greener energy, but what action will the Government take to ensure that the energy companies do not continue to make excessive profits while the costs fall on the consumers?

The noble Baroness raises a very apposite question. As she says, E.ON has today raised its energy prices, which is absolutely regrettable in the current circumstances. We are very concerned about the margin that electricity companies are making in the current environment. As I said earlier, ensuring competitiveness is the role of Ofgem but let us make no mistake: we have to invest £110 billion in the next 10 years to upgrade our very redundant network. Therefore, I am afraid that electricity prices are going to go up because we have done nothing for a very long period.

Why are those who produce their own electricity—from photovoltaic panels, for instance—paid by the grid only a fraction of what they have to pay to the grid if they wish to draw electricity from it?

The whole idea of incentivising people to produce electricity is for the Government to pump-prime alternative electricity uses. Photovoltaic energy is developing into a maturing market. We are reviewing whether it is mature enough and whether some of the benefits that that market has so far received should be reviewed.

My Lords, will the Minister ask his officials to reopen the file on rising block tariffs and the benefits that that would bring to consumers?

Thank you. I appreciate the response from the opposition Benches—I fished for that compliment beautifully. The answer is no.