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Mr. Martin O'Neill (Ochil): On disconnection, is it not the case that just as many people are being disconnected as ever before, but that they are doing so themselves through their inability to pay their bills or to purchase charge cards and the like?
Mr. Byers: My hon. Friend makes an important point. By its nature, pre-payment means that many people who cannot afford it in the first place do not get access to energy. That is reflected in the figures as well.
The previous Government failed to introduce effective competition and created a system that was unstable. The result was that prices were higher than they needed to be and consumers were regarded as second-class citizens. Directors could end up getting vast amounts of money simply from being in the right place at the right time.
Furthermore, as regards energy in particular, the system that was set up paid almost no attention to environmental or social issues. Under the previous Government, the utility companies were allowed to put profits before service. They were generally sold as monopolies, with no provision for additional competition, making it difficult for new entrants to enter the market.
We need only look at the knock-down prices for which those national assets were sold. Vickers and Yarrow calculate that British Telecom and British Gas were undersold by £2.5 billion each, and Ernst estimated that the water and electricity privatisations were underpriced by £3.4 billion each--a total of £11.8 billion lost to the taxpayer because dogma was allowed to triumph over reason.
Mr. Patrick McLoughlin (West Derbyshire):
Does the Minister accept that one of the reasons why the prices obtained for those privatisations were not as great as we might have wanted was that in the prospectus a clause had to be inserted stating that the Opposition were totally opposed to the privatisation and might well reverse it? What effect does the Secretary of State think that had on the share price?
Mr. Byers:
Absolutely none. Anyone who looked at the opinion polls in 1985-86 would have guessed the result of a 1987 general election.
Mr. Alan Duncan (Rutland and Melton):
Over the past few years, most of the privatised utilities have faced new entrants and new competition. Which utilities does the Secretary of State consider remain monopolies facing no competition?
Mr. Byers:
As a result of the measures that we are introducing, there will be none. Telecommunications is a good example. Through the auction for the third- generation mobile telephones, new entrants will enter the market because of the way in which the auction is operated. British telecommunications is one of the sectors that will be affected by the Bill.
Not only was there an underselling of the assets contained in the utilities, but the electricity trading arrangements made by the Conservative Government put
in place a system that has failed to give consumers the benefits of effective competition. I shall give the House an example of the way in which the present arrangements work and why we need to change them.
Let us assume that the generators want to put in bids for up to 1,000 MW of power. Through the pool, the National Grid Company stacks up the bids, with the lowest at the bottom and the highest at the top. If it decides that only 500 MW is needed, the price in the middle that achieves 500 MW is the price paid to that generator, and to all other generators as well. Even though they may have put in lower bids, they are paid at the level of the generator that could deliver 500 MW.
As a result, we are paying over the odds for electricity because of the way in which it is traded. The regulator has calculated that the complicated pool bidding arrangements allow companies to manipulate the price. For example, he believes that last July, the generators were able to raise the price by more than £155 million over two weeks. That is the equivalent of £6 for every household in the country. The Bill will end those abuses.
Mr. Lindsay Hoyle (Chorley):
I hope that my right hon. Friend will address another problem. Companies knock on people's doors to offer the so-called cheapest electricity and gas, but there are no clear guidelines about which company is the cheapest. Can he ensure openness about the cheapest product on the market and that there will be no misleading salesmen on the doorstep?
Mr. Byers:
My hon. Friend raises two important issues. First, it is important to ensure that the domestic consumer in particular receives clear information. Our consumer legislation will introduce provisions to help consumers, and to ensure that companies are under an obligation to prevent mis-selling. We are all worried that mis-selling has occurred, and the regulator will be able to levy financial penalties for it in future.
Mr. Duncan:
The hon. Member for Chorley (Mr. Hoyle) pointed out that most utilities face competition, and that people knock on doors to offer alternative sources of supply. Apart from water, which utility does not face such competition?
Mr. Byers:
I do not believe that effective competition exists in the telecommunications market. My hon. Friend the Member for Chorley (Mr. Hoyle) made an important point about mis-selling. Many consumers do not transfer from one provider to another; there is resistance to doing that. We need to consider ways in which we can encourage people to benefit from competition. We want to introduce effective competition. The hon. Member for Rutland and Melton (Mr. Duncan) is terribly complacent if he believes that it currently exists. We can, and should, try to do better. The Bill tries to achieve that objective. Introducing effective competition is the best way of putting consumers' interests first.
Mr. John Bercow (Buckingham):
Will the Secretary of State give way?
Mr. Byers:
I have given way often, and I want to make progress. I should like to give way to the hon. Gentleman later. I am sure that there will be many occasions on which he will want to intervene.
We inherited a fundamentally flawed system. Our first action was not to rush into legislating, but to consult widely on the structures that would fulfil the needs of consumers, be good for business and provide a stable framework for utility companies. Extensive and wide-ranging consultation has taken place.
In March 1998, we published the Green Paper, "A Fair Deal for Consumers--Modernising the Framework for Utility Regulation". In July 1998, we published a "Response to Consultation", which set out our conclusions about the way forward. Two further consultation documents were published in autumn 1998. One covered the detailed arrangements for establishing independent consumer councils; the other dealt with the future of gas and electricity regulation. The Government published responses for consultation on those further documents. At each stage, we have tried to explain our thinking fully and to engage the sector in a debate, a dialogue and a discussion about the way forward.
Consequently, we have built and maintained support for the Bill from a broad cross-section of interested parties. We have the support of consumer groups, the regulators and the utility companies. The Electricity Association welcomed our commitment to
In addition to the measures that apply to all four sectors, part I contains significant sector-specific reforms to modernise and align gas and electricity regulation. Part III contains a more limited number of water-specific provisions and part IV deals with the Competition Commission as an effective appeals body.
Mr. Bercow:
Did an accidental oversight lead the right hon. Gentleman to fail to mention the observation of the outgoing Director General of the Office of Water Services, Mr. Ian Byatt, who has damned the Bill as over-complicated and over-prescriptive with too little left
"ensure . . . stability, which is in the interests of companies and customers alike".
Callum McCarthy, the energy regulator, welcomed the Bill as laying down
"a framework for future regulation that will reinforce competition, which has led to lower prices and better services for gas and electricity customers".
He welcomed provisions,
"which will underpin changes in the electricity market needed to bring the full benefits of competition to electricity customers".
The National Consumer Council said that the Bill
"has the makings of a significant landmark for consumers . . . Giving the regulators of these industries a primary duty to protect consumers is an enormous and welcome change."
I have a few words about the Bill's format. I appreciate that it is quite complex and rather technical in many areas, but it is set out sector by sector. For example, reforms to gas and electricity regulation are in part I and reforms to telecommunications regulation in part II. However, a significant number of the provisions are identical or very similar for each sector--that has been done on purpose to achieve consistency across regulation--and they include the establishment of consumer councils, the new powers for regulators to impose financial penalties on companies and the improvements to the transparency and consistency of regulatory procedures. Where it is appropriate to adopt similar measures for each of the utility sectors, that is exactly what we have done.
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