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Energy: Costs

Volume 739: debated on Tuesday 16 October 2012

Question

Asked By

To ask Her Majesty’s Government, in the light of the announcement of price rises by British Gas, what action they will take to protect consumers from rising energy costs.

My Lords, protecting consumers from rising energy costs is a priority for this Government. Programmes such as the Carbon Emissions Reduction Target, Warm Front, Green Deal and the Energy Company Obligation make or will make homes more energy efficient. The Warm Home discount provides £1.1 billion of support until 2015 and helps around 2 million low-income and vulnerable households. The Government have also instigated the Big Energy Saving Week, to be held the week of 22 October, when there will be up to 400 events across the country providing direct advice on reducing energy bills.

Whenever energy companies announce their price hikes they always blame wholesale price increases. However, when wholesale prices fall, customers rarely see their bills fall. When are the Government going to stand up for hard-working families, the grafters and people struggling to make ends meet who are suffering at the hands of these companies?

My Lords, this Government do stand up for hard-working families, the grafters and the strivers. What we cannot do, of course, is tell big energy companies what prices they should set. Artificially reducing retail prices to levels below competitive levels would be unsustainable and discourage investment in new infrastructure. We need to make sure that energy companies are doing more by making them make their bills easier for consumers to understand and, where they can, by directing consumers to cheaper tariffs.

My Lords, between 2003 and 2011 the retail price index went up 30 per cent but the index relating to the energy price per household went up 120 per cent—four times more. Over that time, from 2003 to 2010, the number of households in poverty went up from 2 million to 5 million. Can the Minister explain how this Government are tackling that blemish on our society, inherited by us from the previous Government?

I thank my noble friend for affording me the opportunity to show our commitment in helping low-income and vulnerable households to keep their homes warm at an affordable cost. We have in place a strong package of measures to help the most vulnerable through the Warm Home discount scheme, which I have mentioned, which will help 2 million households receive support during 2012-13. This will include more than 1 million of the poorest pensioners, who will receive an automatic discount of £130 off their electricity bills by December this year.

My Lords, would not the simple way to reduce consumers’ electricity costs be to stop paying huge subsidies to wind farms? The cost of those subsidies falls directly on to the consumer, particularly, as the noble Lord, Lord Teverson, mentioned, those in fuel poverty.

My Lords, this country needs a mix of different energy sources. Wind happens to be one of them and is carbon free. However, we recognise that we need to look at all sources and the subsidies we are providing to them, and we have taken it upon ourselves to reduce wind subsidies by 10 per cent.

My Lords, as regards the excellent house insulation scheme, can my noble friend persuade the department concerned to inform those who are installing the insulation that they are allowed to go up portable ladders and not to claim health and safety regulations to refuse?

My noble friend raises a very important point. I need to direct it to the department to which his question belongs.

I congratulate the noble Baroness on her new ministerial position. I am sure that she will be able to keep her boots dry and need neither wellies nor huskies. Against last year’s downward trend in wholesale prices between 2011 and 2012, the energy companies are passing on price rises over a two-year period, claiming that that is when they last purchased their supplies. If a company makes a mistake on its forward buying policy, why is it that the consumer suffers and not the company? Does this look like a competitive market to the noble Baroness, especially when all energy companies seem to coalesce around similar price hikes and coincide with the timing of price rises?

My Lords, the noble Lord raises an important point, but in anticipation of someone asking this question, I have looked at the net margins of energy companies. By and large, their net margins have remained at around 3.4%, so they are not working with huge margins. Perhaps I may say once again that I want energy companies to direct people towards better tariffs if they are available or make it much easier for consumers to change suppliers. That gives consumers choice and puts energy companies in competition.

My Lords, can we go back to these ghastly wind farms? They produce indeterminate amounts of energy, they cost a great deal of money and they shut down when the wind blows too hard. What real justification is there for onshore wind farms?

My Lords, I know that my noble friend is greatly concerned about wind farms, but perhaps I can reassure him that on 20 September last we called for evidence to see how well we are doing in terms of our targets on wind farms. I can also assure him that, by and large, we have reached our capacity for onshore farms through what we have already done and what is in the pipeline. My noble friend can rest assured that there will not be a burst of wind farms across the landscape. We are taking wind farms as part of the energy mix that this country needs.

My Lords, I am sure that the noble Baroness would agree that surety of supply of gas is an important part of keeping costs down. Some 14% of our energy comes from Qatar through to Milford Haven, and that is set to rise to 30%. Does she further agree that 19 destroyers and frigates might be a little too few to ensure the security of that supply?

My Lords, that is a very important question to which I know the noble Lord will want a fuller answer.