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Session 2007 - 08
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General Committee Debates

Energy Bill

The Committee consisted of the following Members:

Chairmen: Mr. David Amess, Mrs. Joan Humble
Baron, Mr. John (Billericay) (Con)
Binley, Mr. Brian (Northampton, South) (Con)
Hendry, Charles (Wealden) (Con)
Horwood, Martin (Cheltenham) (LD)
Iddon, Dr. Brian (Bolton, South-East) (Lab)
Ladyman, Dr. Stephen (South Thanet) (Lab)
Main, Anne (St. Albans) (Con)
Owen, Albert (Ynys Môn) (Lab)
Palmer, Dr. Nick (Broxtowe) (Lab)
Reed, Mr. Jamie (Copeland) (Lab)
Robertson, John (Glasgow, North-West) (Lab)
Seabeck, Alison (Plymouth, Devonport) (Lab)
Swire, Mr. Hugo (East Devon) (Con)
Tipping, Paddy (Sherwood) (Lab)
Webb, Steve (Northavon) (LD)
Whitehead, Dr. Alan (Southampton, Test) (Lab)
Wicks, Malcolm (Minister for Energy)
Chris Shaw, Committee Clerk
† attended the Committee


Nick Winser, Executive Director, National Grid
David Smith, Acting Chief Executive, Energy Networks Association
Alistair Buchanan, Chief Executive, Ofgem
Allan Asher, Chief Executive Officer, energywatch
Paul Spence, Director of Strategy and Business Development, British Energy
Keith Parker, Chief Executive, Nuclear Industry Association
Dr. Mike Weightman, Chief Inspector, Nuclear Installations Inspectorate
Dr. Ian Roxburgh, Chief Executive, Nuclear Decommissioning Authority
Tom Burke
Benet Northcote, Chief Policy Adviser, Greenpeace
Miss Robin Webster, Friends of the Earth
Russell Marsh, Head of Policy, Green Alliance

Public Bill Committee

Tuesday 5 February 2008


[Mr. David Amess in the Chair]

Energy Bill

Written evidence to be reported to the House

EN 01 Barnardo’s and Save the Children
EN 02 Greenpeace
EN 03 Friends of the Earth
EN 04 Energy Networks Association
EN 05 Energy Retail Association
EN 06 energywatch
4 pm
The Committee deliberated in private.
4.4 pm
On resuming—
The Chairman: We will now hear oral evidence from our first set of witnesses, and I welcome them to the meeting. As members of the Committee will fully understand, witnesses are not always experienced in these matters, so if anyone is nervous, they should take deep breaths, relax and enjoy the sitting. May I ask the witnesses to introduce themselves to the Committee from left to right as I look at you?
Nick Winser: I am Nick Winser, director of transmission at National Grid.
David Smith: I am David Smith, acting chief executive for the Energy Networks Association.
Alistair Buchanan: I am Alistair Buchanan, chief executive at Ofgem.
Allan Asher: I am Allan Asher, from energywatch.
The Chairman: Before calling a Member to ask the first question, I remind all Members that questions are to be limited to matters within the scope of the Bill, and in view of time constraints, both questions and answers should be brief—I know that Committee Chairmen say that at the start of all proceedings, but I do mean it.
Q 81The Minister for Energy (Malcolm Wicks): Having asked questions in the past and more recently answered them, I am well aware which is the easier role and am pleased to be undertaking it, unusually, at the moment. When I discuss the energy market with parliamentary colleagues, as I did this morning in a Westminster Hall debate, I find that there seems to be a sharp divide of opinion between those who feel that we have an energy market that is not only competitive, but probably the best in Europe, to the benefit of consumers, and those who are doubtful about that and who feel that there is a lack of competition and that it is more like an oligopoly than a competitive market. I would be grateful if the witnesses could give their opinion on that issue.
The Chairman: Who would like to respond?
Alistair Buchanan: I am happy to start by picking up the point raised by the Minister with regard to comparisons with Europe. Certainly, at the wholesale end of the market, we have seen a very exciting development in the last three to four years, particularly in gas infrastructure. We have seen 21 companies from around the world invest £10 billion in our liquefied natural gas storage pipeline infrastructure, thereby taking the UK from around 105 BCMs of demand and 105 BCMs of supply to potentially 180 BCMs of supply by the end of this year. With regard to Europe, we still see profound delays in the development of some of their LNG facilities, such as in Wilhelmshaven in Germany and Rotterdam in the Netherlands.
Perhaps what matters more to consumers is what is happening in prices and in terms of choice. With regard to choice, the experience of the UK—I would expand this comparison beyond Europe—is that about 50 per cent. of customers have taken the opportunity to choose their supplier. We are clearly very keen to access the 50 per cent. who have not. By contrast, in Germany that figure has been about 4.5 per cent. The best country to compare us with would be Spain, which has hit levels of around 20 per cent. of choice, and the Nordic region, which has around 10 to 15 per cent. There is genuinely no other country that provides the degree of choice or has encouraged and led customers to feel confident enough to choose. As far as price is concerned, on domestic gas prices today, we remain among the lowest of the 27 member states, and on electricity prices, we are around the average.
To answer your question, Minister, with regard to investment coming into the UK, domestic choice and prices and industrial benefits, which for the decade between 1994 and 2004 were extraordinary by contrast to European industrial counterparts, we think that the market works and has been very good for the UK.
The Chairman: Does anyone else want to respond?
Allan Asher: There are some really good features of the competitive market in Great Britain, and energywatch is keen to make them work even better. That includes switching and things like that. However, I think that it is too much to think that it is as good as it could and should be. With regard to some of these key metrics, such as prices, I was looking just yesterday at the Department for Business, Enterprise and Regulatory Reform’s website, which publishes very detailed statistics on European prices every quarter. Complicated 80-page reports are published every quarter, and many of the comparisons are quite favourable. However, what really leapt out at me was that the Department’s figures show that domestic electricity consumers around Great Britain are currently paying 15 per cent. above the EU average price, and on this report, we are the seventh cheapest out of 15 countries in Europe. I use that to show that this is with a market that is most vigorously competitive, yet in Europe they are not; Governments still use their utilities as secret stealth tax officers and things like that.
On prices and on switching, as Alistair rightly says, just over 50 per cent. of people have switched—I think it is 52 per cent., which is great—but 48 per cent. have not. The efforts that we have gone to over seven years have been drawing less and less fruit. Only a third of people over 60 have switched, and our efforts to get more are not going anywhere. Many features of the market are just not working. Six million consumers on prepayment meters are paying £200 a year more than they could get on the same company’s direct debit tariff. It goes up worst of all in the north; it is £480 more if you have a direct debit in the north than on the company’s best tariffs.
I guess that, with some of those elements, there are some features of the market—not all, but some—that are clearly not working for consumers, and we should understand that and be prepared in the Bill to do something about it.
The Chairman: Does anyone else wish so speak, or are we all done?
Q 82Charles Hendry (Wealden) (Con): May I start with a specific question, primarily to Ofgem, after which I shall broaden it to a slightly larger issue? Suggestions have been made that Ofgem’s remit should be changed, specifically to give it an environmental role or to deal with social tariffs. Would you let us know how you think that would work? Is it possible to have two primary duties, or do you think that there should be only one primary duty and a range of secondary duties?
Alistair Buchanan: Yes, I can take that further. You probably do not want to hear this, but I think that broadly there are five models that you might want to look at. I should say at the outset that we feel that we can do our job with the remit that we were given in 2003. In that year, we were given social and environmental guidance by Ministers. Importantly, however, remember that any significant financial matter has to be dealt with by the Secretary of State—by the Department for Environment, Food and Rural Affairs or the Department for Business, Enterprise and Regulatory Reform. We were given guidance in 2003. In 2004, Parliament gave us a sustainability duty. Helpfully, under the Lazarowicz Bill last year, there were significant improvements in administration—for example, of the renewables obligation certificates scheme.
The five options that have been raised over the past few months are these. The first route is a sustainability duty, which is primary to an economic duty. The second route is the concept that Ofcom has, which is that you have a citizens duty, as well as your consumer one. Ofcom appears to manage that very well; it appears to understand how it would handle conflicts between the citizen and the consumer, and it has a route march setting out how conflicts should be resolved. The third route would be to use additional guidance. That may be something that the Government may want to consider.
I think those are your five models. I believe that Ofgem currently can carry out its functions with the duties and roles that you have given us; but clearly, it is going to be something that you want to debate quite actively in the next few months.
Nick Winser: Our view is that the current provisions are probably there or thereabouts. There might be a question about interpretation of them. Certainly, Ofgem has moved towards taking forward the responsibilities for sustainability, and we applaud that. That may have a bit to go, considering the scale of the task ahead of us.
There is also a question about the interpretation in terms of time. Looking a long way ahead, we would quite like to see Ofgem—we are working closely with Alistair’s people on this—take a long view and think about where the carbon and renewables targets might be leading us and ensure that we are together and making the right regulatory changes to ensure that we can get to those targets in the long term. It is about looking a long way ahead.
Q 83Paddy Tipping (Sherwood) (Lab): Mr. Buchanan, you gave a curtain-raiser to your appearance before the Committee today in an interview with the Daily Record—I think that it is headlined “Power to the People”—in which you said that customers in Scotland could save £200 million by switching, which you advocate. You also advocate better targeting and identification of customers at risk and better welfare rights advice. By contrast, Mr. Asher, you are keen to see social tariffs, which already exist on a voluntary basis, put on a mandatory footing. Which is the better way to go forward?
Allan Asher: From my point of view, I should like to praise companies such as British Energy—Scottish Energy, as it trades as in Scotland—and EDF Energy that are doing some really excellent things in social tariffs. Scottish Power has announced that it is introducing a social tariff, although, sadly, it is for only those over 60, but the rest of the companies are doing not very much at all. Some are spending a tiny sum: npower, for example, is spending less than 4 per cent. of all the money that is going into social tariffs. It has said plainly and publicly that it just will not do it unless it is required to.
Indeed, until now, even British Gas and EDF have said, “We just can’t stick at these voluntary contributions. If the other companies are going to undercut us in the market, we will have to withdraw these really good social tariffs.” I fear that for the Committee, this is one of the last chances. If Parliament says to suppliers, “We think that two doing something and one doing a little bit is enough”, the good social tariffs that we see in the market will soon disappear. Companies will get the view that all is okay, and they can go home until next time. However, if the Committee were to insert just an enabling power—not to impose anything, but just so that Parliament has the power if the companies start to pull out and leave consumers in the lurch—that would make all the difference.
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Prepared 6 February 2008