Energy Prices, Profits and Poverty - Energy and Climate Change Contents

1  Introduction

1. The UK's energy system will be subject to significant changes in the next few years in order to deliver the form of capacity required in future. Our recent report, Consumer Engagement with Energy Markets found that public trust in energy companies was low and there was a clear sense of a lack of transparency around energy company prices and profits.[1] If changes in the energy system are to be successful, the Government and energy companies will need to strengthen public confidence and trust in their ability to deliver a fair deal to consumers and protect the most vulnerable, fuel-poor households. DECC's latest fuel poverty statistics showed that in 2011, 4.5 million households were in fuel poverty in the UK. Energy price rises in 2012 and 2013 will have exacerbated the situation for low-income households.[2]

2. We launched our inquiry on the Floor of the House on 20 December 2012.[3] We received 37 pieces of written evidence.[4] We held four oral evidence sessions during our inquiry. A full list of witnesses can be found at the end of this report.[5] We would like to express our thanks to all those who contributed to our evidence-gathering. As part of our work on this inquiry we visited Centrica's trading floor and head office in Slough and also held a Parliament Talks outreach event in Glasgow where we heard local people's concerns about energy price rises and fuel costs (see transcript at Annex 1). We are grateful to those who took the time to meet us and provide us with this first-hand experience of the concerns people have about energy prices. We were also supported by two specialist advisers, Marc Ozawa and Dr Anthony White. We are very grateful for their time and for helping to explain what is a very complicated topic.

3. In this report, we consider, through an analysis of energy prices, energy company profits and fuel poverty, what is being done to ensure consumer protection and fairness in the energy market. Chapter two looks at the energy price rises since the middle of the last decade, the factors other than profits (which we consider in chapter three) which are contributing to this trend and how energy companies and the Government communicate this to customers. It also discusses how the retail market could be made more competitive. Chapter three evaluates whether rising energy company profits are linked to rising energy prices. It explores the difficulties in determining this link and assesses current mechanisms which try to increase transparency. It also discusses how the wholesale market could be made more competitive. Chapter four assesses how rising energy prices could exacerbate fuel poverty, the implications of the proposed new definition of fuel poverty, and the delivery of fuel poverty policy.

1   Energy and Climate Change Committee, Fifth Report of Session 2012-13, Consumer Engagement with Energy Markets, HC 554-I Back

2   DECC, Annual report on fuel poverty statistics 2013, May 2013 Back

3   HC Deb, 20 December 2012, col 1015 Back

4   List of written evidence, p 73 Back

5   Witnesses, p 73 Back

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Prepared 29 July 2013