Energy Prices — House of Commons, 2017-03-16
Topic: Energy
Iain David Wright (Labour, Centre-left): I congratulate the hon. Member for Weston-super-Mare (John Penrose); it is an honour to follow his speech. He set out the arguments incredibly well. He is passionate and knowledgeable, and his points about the energy market were incredibly measured. I pay tribute to him, my right hon. Friend the Member for Don Valley (Caroline Flint) and the hon. Member for North Ayrshire and Arran (Patricia Gibson) for securing this important debate. The issue affects all our constituents—millions of people up and down the country—and I thank the Backbench Business Committee for agreeing to the debate The excellent opening address of the hon. Member for Weston-super-Mare made it very clear that the energy market is not working in the best interests of customers. That is not to say that there is any collusion whatever between the energy companies—far from it. Ofgem told us on the Select Committee on Business, Energy and Industrial Strategy that the major energy companies have quite different price strategies; there can be a difference of about £140 a year between what the major energy suppliers charge dual fuel customers. In addition, as the hon. Gentleman said, there have been welcome new entrants to the energy market, which have disrupted, in a very positive way, the energy oligopoly that has been in place for far too long. There are more innovative companies offering better choice, service, and value to the energy customer. Ten years ago, the big six companies dominated the entire market, with a 100% market share. Last year, that had moved to 85%, which is great. That is positive news. New entrants are taking market share and offering quite competitive fixed-term deals I said that there was no evidence of collusion between energy companies, but there are marked similarities between the major energy companies’ business models, and they do not act in the best interests of customers; in fact, as the hon. Gentleman said, they actually punish customer loyalty. Their business models are predicated on a sizeable proportion, if not the majority, of their customer base being, and continuing indefinitely, on their standard variable tariff. Looking at the big six companies, 74% of British Gas customers are on its SVT; for EDF, it is 56%; for E.ON, 73%; for npower, 59%; and for ScottishPower, 50%; and an astonishing 91% of SSE’s customer base is on the SVT SVTs are, in the main, the most expensive of all the energy tariffs available, yet almost half of all customers have been with the same supplier for five years or more, and 44% of customers have never changed tariff. It is almost guaranteed that those households are overpaying for their energy. The Competition and Markets Authority estimates that, due to a lack of competition in the market, collectively customers are overpaying for their energy to the tune of £1.4 billion. Despite all that, and the very clear evidence that the market is not working in the interests of customers, energy companies continue to penalise customers for their loyalty. The longer a person is with a company, the more they are likely to pay. In a modern, customer services-oriented economy, what other market could possibly say that? When npower raised its prices by 14% last month, Ofgem stated to the Select Committee quite categorically that it did not see a case for such a significant rise. Ofgem’s chief executive told our Committee that wholesale costs had risen by about 15% in the past year. However, the overall cost of energy was marginally below what it had been three years ago.