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Energy Prices

3. Mr. David Amess (Southend, West) (Con): If he will make a statement on recent increases in energy prices. [51998]

The Secretary of State for Trade and Industry (Alan Johnson): The recent increases in energy prices are causing great concern, particularly in relation to their impact on industrial competitiveness and fuel poverty. Prices are rising mainly as a result of increasing oil prices, leading to higher wholesale gas prices, and higher international coal prices. I can assure the House of our determination to reduce the impact on those least able to cope.

Mr. Amess: As the sponsor of the Warm Homes and Energy Conservation Bill, now enacted, which committed the Government to eliminating fuel poverty within a set period, does the Secretary of State share my concern that gas prices have increased by 38 per cent. and electricity prices by 30 per cent. since October 2003, pushing another 200,000 people into fuel poverty? What does he intend to do to address that very worrying trend?

Alan Johnson: The hon. Gentleman is absolutely right to raise this issue. I congratulate him on his sponsorship of the Warm Homes and Energy Conservation Bill in 2000. Fuel poverty is the most serious consequence of rising gas prices. We have had great success in pulling more than 4 million people out of fuel poverty, but the fact that it is defined as fuel taking up more than 10 per cent. of one's income automatically means that people on fixed incomes, particularly pensioners, will get pushed back into fuel poverty, so those figures are bound to rise.
 
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We have to put more money into the projects that help people to tackle those problems. My right hon. Friend the Chancellor of the Exchequer announced in the pre-Budget report an extra £300 million for this area, £250 million of which will be dedicated to the Warm Front campaign in England. There will be a total of more than £800 million. We need to ensure that elderly people use the helplines that are set up to give them advice on what to do. We also need to give them the confidence to switch suppliers, because doing that, in our competitive environment, can save up to £60 per year, which is significant for the kinds of people who are particularly affected. We have to consider those and a whole range of other measures, including the winter fuel allowance, which my right hon. Friend the Chancellor has announced will be in existence for the whole of this Parliament. Those are all crucial issues. The hon. Gentleman is absolutely right to raise the matter and to try to ensure that we tackle this difficult problem.

Paddy Tipping (Sherwood) (Lab): Reliable indigenous affordable fuel supplies can reduce costs. What steps is my right hon. Friend taking to support UK Coal? In particular, when will he make an announcement on the loan guarantee application at Harworth colliery?

Alan Johnson: We are helping UK Coal inasmuch as it is private company that makes its own commercial decisions. In relation to Harworth, we are in discussions, as my hon. Friend knows. I congratulate him and other hon. Friends on raising this important issue. We are hoping to find a solution, providing that it does not breach state aid rules and is consistent with the need to ensure that there is a proper economic outcome for the taxpayer. We will announce the result of our deliberations as soon as we can.

Norman Lamb (North Norfolk) (LD): Does the Secretary of State agree with this morning's statement by the chairman of Ofgem, Sir John Mogg, that British consumers are paying nearly £1 billion more for gas this winter as a result of the failure of the interconnector to import at the full rate and the lack of effective competition in the European energy markets? Does he accept the Energy Watch estimate that by the end of this year 3 million households will be in fuel poverty compared with just 1.2 million in 2003? We have a combination of a lack of liberalisation of markets and a failure of Government policy to eradicate fuel poverty. Energy Watch points to myriad different schemes—

Mr. Speaker: Order. That is enough supplementaries—the hon. Gentleman must finish.

Alan Johnson: I agree with the comment made by the chairman of Ofgem this morning. Opposition Members claim that Government policy on fuel poverty has failed, but our record is excellent, and hon. Members on both sides of the House should commend our taking 4 million pensioners and disabled people out of fuel poverty. May I put the increase in prices in context, Mr. Speaker? The issue involves not only the UK, but Germany, where wholesale gas prices have increased by 75 per cent., and Denmark, where they have increased by 50 per cent. The central questions are how we help the fuel poor tackle
 
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the problem and how we liberalise the EU market, which, as the hon. Gentleman has rightly said, is a major factor in the problems that we face this winter and next.

Mr. Anthony Wright (Great Yarmouth) (Lab): The Government should be proud of having eradicated fuel poverty for 4 million households. However, there are particular problems, and security of supply is also an issue. Will the Langeled pipeline, which will come on stream in 18 months' time, affect the price of gas? What talks has the Secretary of State held with industry on that development and on eradicating fuel poverty in households across the country?

Alan Johnson: My hon. Friend is right to raise that issue. Langeled will lead to a 16 per cent. increase in our gas supplies. Next year, we will have the gas pipeline from Easington to Norway and the new BBL interconnector with the Netherlands, so the problem should ease. If we are to have a mature debate, however, we must accept that the days of plentiful, cheap, indigenous energy are gone—we can probably wave goodbye to the prices that we enjoyed for many years. Our position is the same as that of almost every other G7 country—only Canada has sufficient indigenous supplies to be a net exporter of energy, and, like every other major economy, we will become a net importer of energy. Perhaps reflection on the days of cheap, indigenous energy being gone for good will focus us on energy efficiency, on which we can do a lot more.

Charles Hendry (Wealden) (Con): To pick up on the Chinese proverb, the Secretary of State sounds dissatisfied, but he is not making much progress. Eighteen months ago, British small businesses paid 12 per cent. less than French small businesses for their energy, but now they are paying 15 per cent. more. Companies renewing their energy contracts this spring are being told to get ready for price increases between 60 and 100 per cent. The Government wasted a unique opportunity during their EU presidency to make European energy markets more efficient. Now that businesses and consumers are paying the price, does the Secretary of State understand why they are so angry?

Alan Johnson: I hope that we are not going to get a series of displays of superficial anger from Opposition Front Benchers. If the hon. Gentleman wants knockabout, I have got all the figures: in the nine years since 1997, the average price for energy was 23 per cent. lower than in the nine years before 1997, and UK domestic gas prices have only just returned to their 1990 level. We have a good record on energy and climate change. On the problems that companies face now, it would be disastrous if we were to interfere in the market, and we must ensure that we have the proper liberalisation of the EU energy market. The hon. Gentleman has said that we wasted the six months of our presidency, but it is a bizarre idea that having the presidency allowed us to click our fingers and make everything change. We have put in place mechanisms to change the situation, and I hope to provide further details later in answering the question tabled by the hon. Member for Banbury (Tony Baldry).
 
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Gas Supplies

4. Huw Irranca-Davies (Ogmore) (Lab): What measures are in place to increase capacity for gas supply and storage in the UK. [51999]

The Minister for Energy (Malcolm Wicks): By 2010, Britain's gas market will have received some £10 billion of investment in new gas storage and import projects. In addition, we intend to bring forward legislation to facilitate innovative new offshore storage and supply projects. We are also working to ensure that there are no unnecessary non-commercial barriers in the existing regulations to new onshore gas storage projects.

Huw Irranca-Davies: The Minister knows that we are playing our part in Wales with the new Pembrokeshire facility. He will recognise that we need a much wider, balanced portfolio of energy products. What future does he envisage in the energy review for marine tidal energy off Wales, coal production in Wales and clean coal technology? We have a great part to play but it must be wider than one confined to imported gas.

Malcolm Wicks: The Government are investing heavily in research and development for marine tidal, which is part of a new range of technologies that we need to take seriously. On clean coal technology, we have a fund of some £35 million for carbon abatement projects. We have, in principle, much indigenous British coal and, with clean coal technology, there should be a future for it. That is a feature of our energy review.

John Hemming (Birmingham, Yardley) (LD): The Minister has been rescued by the Atlantic from any further problems of gas supply this winter. However, does he have any proposals to ensure that perverse market actions, whereby gas is taken out of storage rather than imported on the interconnector, do not occur in future?

Malcolm Wicks: I do not believe that the Secretary of State or I have been rescued by the mighty Atlantic. There were always Jeremiahs about this winter, who will want to look at what they said come April. Supply is plentiful but we recognise the problem of prices for intensive users. As we speak, there is plenty of gas in storage. Although we are not complacent, with the Langeled pipeline and the rest coming on stream later this year and more storage projects, we face a better future than our experience this winter suggested.

Mr. Eric Illsley (Barnsley, Central) (Lab): My hon. Friend said that gas supplies are plentiful and that we have plenty of gas storage, which tends to suggest that problems of supply were not the cause of the quadrupling of industrial short-term gas prices in November, which continues to affect the market. Heren Energy forecasts a short-term gas price of around 70p per therm this summer compared with 40p in the same period last year. Will my hon. Friend examine gas trading, bearing in mind that the biggest buyer of industrial gas in this country is Barclays bank? He must investigate the trading aspects of gas.

Malcolm Wicks: We need to understand better what happened this winter. Although there was a plentiful
 
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supply and the Jeremiahs were wrong, intensive users, usually buying short term and often on the daily spot market, paid very high prices. The commercial sector needs to reflect on that and so do we. As the Secretary of State said, things are changing and the days of cheap prices are probably gone for ever but there is more supply capacity into Great Britain and that should ease the position, albeit in the context of a huge global demand, not least from China, for the world's energy.

Mr. Alan Duncan (Rutland and Melton) (Con): After eight years in office, what is the Government's policy for establishing onshore strategic energy stocks that stand a chance of lasting more than 11 days?

Malcolm Wicks: We have not only a policy but practice. Next winter, Britain's import capacity will be double today's figure. By winter 2009–10, it could be trebled. Investment in new gas stocks is increasing all the time. We will have more capacity for storage next winter and the following winter than previously. The issue that the hon. Gentleman raises is a feature of the energy review.


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