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Energy Prices: Electricity Bills

Volume 814: debated on Wednesday 13 October 2021


Asked by

To ask Her Majesty’s Government what assessment they have made of the rising costs of wholesale energy prices, and of their impact on household electricity bills.

I beg leave to ask the Question standing in my name on the Order Paper and declare my interest as president of National Energy Action.

My Lords, the largest element of gas and electricity bills, which is wholesale costs, has increased significantly. The Government are committed to protecting customers, especially the most vulnerable. Households will continue to be protected throughout the winter by the price cap and through the warm Home discount and the winter fuel payment and cold weather payment schemes. A new £500 million household support fund has also been made available to councils to help the most in need over the winter.

Given the record rise in wholesale gas prices and the fact that many fuels such as heating oil, coal and LPG, on which many rural dwellers depend, are not covered by the price cap, will the Government immediately lift the green levies on household bills, which account for 25% of the total, but ensure that energy companies pay for the green infrastructure from which they will ultimately profit, while targeting all available financial resources on those on the lowest incomes with the least efficient homes, to ensure that a further 1.5 million are not forced into fuel poverty?

Heating oil and LPG are of course not covered by any of the levies that my noble friend refers to—that is, they are separately controlled. There is a free market in them and they have not gone up nearly as much as gas prices. But as with every other utility, the energy companies pass through the cost of investment in the sector’s networks to end consumers, as well as the cost of additional energy infrastructure investment and environmental and social policies.

I declare my interest as chairman of Balfour Beatty and my other interests as in the register. When, back in July, I raised the issue of the high energy costs affecting the competitiveness of our steel industry, the Minister appeared to agree. Yet since then, the Government have offered no support when energy costs have gone through the roof. This will impact on jobs and people’s lives throughout the country. As Gareth Stace put it well the other day, according to the newspapers, the energy crisis of today will be the steel industry crisis of tomorrow. What assistance are the Government currently giving to the steel sector and others that are highly dependent on energy consumption? More importantly, what are they planning to do not next year or next month but in the coming weeks to address this crisis?

Many of these energy-intensive industries are already freed from the cost of the emissions trading scheme by being issued with free permits but, beyond that, the noble Lord makes a good point. My colleague the Secretary of State is regularly in urgent discussions with all these industries and, of course, we are urgently seeking a solution across government as to how we can do something to help.

The Minister will be aware of the bitter irony at this time of energy crisis that some £1 billion was spent in the last 12 months on paying wind generators not to generate energy. We need a proper energy policy that builds storage. When will the Government come forward with storage solutions that mean that this energy is generated and directed to green hydrogen, battery storage, compressed air or other forms or storage?

Of course, we do have a comprehensive energy policy. Many of the technologies that the noble Lord refers to are difficult and expensive, but we are funding research into a lot of them. The problem with electricity, as the noble Lord will be aware, is that it is very difficult and expensive to store on a large scale.

My Lords, it is obvious that in the short term, with soaring international gas prices, what can be done is understandably limited. Rescue support for heavy energy users obviously will help if it comes quickly, but should we not also consider temporarily suspending some of the heavy green surcharges, carbon penalties and the latest, rather poor idea, of taxing gas even further? For the medium term, have the real lessons been learned, namely that for an orderly and sustainable energy transition, we need more gas and electricity storage for back-up and swing supplies, a rapid sort-out of our faltering nuclear replacement programme, some coal-fired stations in reserve, and low rather than high home fuel prices to ease widespread hardship and prevent backlash?

We are taking a range of important steps to decarbonise the electricity system and to provide more homegrown electricity generation as our supplies from the North Sea dwindle. The problem with my noble friend’s argument is that providing more storage does not alleviate the high prices. Many European countries have much greater levels of gas storage, but their prices are even higher than those in the UK.

My Lords, will the Government redouble their efforts to persuade our European partners to resist the siren voices from the Kremlin over Nord Stream 2, in the knowledge that President Putin’s regime will only try to exacerbate this cost-of-living crisis and not bring benefit to our or European citizens?

The noble Lord makes an extremely good point. We remain very concerned about the impact of Nord Stream 2 on European energy security and particularly on the interests of Ukraine. We will continue to raise our significant concerns about the project, defend the interests of Ukraine, support future arrangements and give a significant transit role to them.

My Lords, Labour will make Brexit work. Can the Minister confirm that he believes that the measures of support are sufficient this winter to help those in fuel-poor households and those with poorly insulated homes?

We always keep these things under review, but I outlined the many steps that we are taking and if necessary, we will look further at what we can do to help.

My Lords, does the Minister agree that the foolhardy thing is that universal benefit has been completely demolished just when the poorest, most vulnerable people will be fighting to keep warm this winter? Will the Government not reverse that decision, and can they give us something fresh that will help the most vulnerable in a very harsh winter?

I outlined earlier the support mechanism that we already have in place: the warm home discount, the winter fuel payment, cold weather payments and an additional £500 million household support fund, which has been available to councils to help the most in need over the winter.

It has committed £1.8 billion to home energy efficiency measures. Given that this Government want to be world leading and they have a bit of a gap to fill, will they commit a proportionate amount—bearing in mind that there are 10 times more homes in England—of £18 billion?

I have not had a chance to meet the noble Baroness’s colleague yet. I was supposed to meet him a couple of weeks ago, but the meeting was cancelled. I look forward to discussing these important matters with him. As the noble Baroness will be aware, we are already spending considerable sums on home insulation and heating upgrade measures—some £1.3 billion over the last year. Of course, I cannot predict what might happen in the Chancellor’s spending review, but we are already investing considerably in home insulation measures.

The noble and learned Lord is tempting me. Gas is traded in international markets, so the biggest factors influencing prices are global trends in supply and demand. Higher wholesale gas prices have been seen internationally since 2021.

My Lords, is there a correlation between consistency of supply from certain national gas producers and the state of some bilateral relations, with the EU generally and indeed further afield, that might be inhibiting the continuity of supply? If so, are ambassadors exploring strategy options with this in mind, and would the Minister care to give us some specific examples?

Security of supply is of course absolutely vital. The UK derives this through its diversity of suppliers and by reducing reliance on any single source. In addition to our considerable domestic production, we import gas from Norway, Belgium, the Netherlands and further afield, via LNG terminals. Of course, through our ambassadors we are in regular contact with our energy partners, including Norway, the EU Commission and the International Energy Agency.

My Lords, for several years a number of us have been banging on about the looming national shortage of electricity. My concerns are that our present nuclear power stations are going out of service at an increasing rate and that no nuclear sites are being built or planned, yet they are absolutely crucial for the provision of round-the-clock, weather-independent, low-carbon electricity. We have all seen, as we expected, that renewables alone do not cut the mustard when we really need it. Does the Minister agree that there is an urgent need to complete Hinkley Point C and to get the final investment decision for Sizewell C? When will the decision to go ahead be made?

I agree with the noble Lord. It has been a mistake and, indeed, it was a mistake for his party to announce a moratorium from 1997 on any new nuclear development, which lasted for 10 years. We need to get on fast with building new nuclear capacity, and we are doing just that. It will form a vital part of our baseload electricity demand.