Energy Prices (Hansard, 3 November 1980)

§ 3. Mr. Hal Miller
asked the Secretary of State for Energy whether he is satisfied with the progress made by the United Kingdom's European Economic Community partners towards an economic price for energy.

§ The Secretary of State for Energy (Mr. David Howell)
European Community countries agreed at the Council of Energy Ministers on 13 May last on the pursuit of economic pricing for energy supplies. In practice most members have been allowing prices to climb to economic levels for some time past. Where there is evidence that other countries are unfairly subsidising their industries' energy prices, 936 the Government have not hesitated, and will not hesitate, to take this up with the Commission, as we have done in the case of Dutch gas to horticulture.

§ Mr. Miller
I thank my right hon. Friend for his efforts so far, but is he aware that industry is anxious because it is not competing on equal terms with its counterparts in the EEC as regards energy prices? Is he also aware that that anxiety is exacerbated because we have our own natural resources, whereas many of our EEC partners do not? Does my right hon. Friend further accept that during a recession it is nonsense to be required to pay more for fuel prices when demand is declining?

§ Mr. Howell
Having natural resources is one thing; achieving the maximum efficiency, extraction and distribution in our fuel supply industries is another. It is an aim to which the Government are dedicated. I recognise the widespread concern and complaints, and the Government have been looking into them in detail. In addition, we have asked the Confederation of British Industry to make comparisons, to examine them and to bring forward details. I keenly await those details.

Mr. J. Enoch Powell
Does economic pricing mean prices that cover production costs, or market prices? If so, which market?

§ Mr. Howell
Economic pricing for oil and gas means market prices, which are world market prices. As regards coal and electricity, it means pricing according to long-run marginal costs.

§ Mr. Adley
Although I welcome my right hon. Friend's point about the horticultural situation, is he aware that many horticulturists have been awaiting recognition of their particular problems vis-a-vis the Dutch, and that they earnestly hope that my right hon. Friend will recognise the exceptional circumstances in which they find themselves? Is my right hon. Friend further aware that they hope that he will make some arrangements to enable them to compete with Dutch producers while the argument with the Dutch is sorted out within the framework of the EEC? Has my right hon. Friend anything to say that will help them?

§ Mr. Howell
The difficulties of that industry are for my right hon. Friend the Minister of Agriculture, Fisheries and Food to consider. However, this issue has gone to the Commission for consideration, and the Commission has pressed the Dutch Government and Dutch industry. I understand that the matter will be considered by the European Court of Justice.

§ Dr. Owen
As the Government refuse to cut interest rates and to act on the exchange rate, how can they continue to justify the fact that our industry is paying much higher energy prices than are most other Community countries, that firms are going out of business and that people are being laid off work because our energy prices make our products uncompetitive? When will the right hon. Gentleman make a statement to the House about freeing the coal, electricity and gas boards so that they can negotiate much lower tariffs for our major industrial users?

§ Mr. Howell
The right hon. Gentleman has made some generalisations, which he must sustain. The coal industry is straining to be competitive within the existing strategy. As regards coal and electricity, I believe that it will succeed and that it is making great strides towards that end. Electricity costs depend greatly on coal costs, and on the efficiency of the industry. At present the industry is being referred to the Monopolies and Mergers Commission. Oil prices are world market prices, and are priced at competitive international prices throughout Europe. Earlier in the year, the British Gas Corporation increased prices to gas/oil levels at a faster rate than did some of our neighbours. However, in response to market changes it reduced the rate at which prices were being increased in the summer by about 25 per cent. for renewed firm contracts. Meanwhile, some continental gas suppliers have been putting up prices at a faster rate. to the same level and beyond. The right hon. Gentleman should examine the facts and bring forward specific details before making such generalisations.