HC Deb 27 April 1981 vol 3 cc514-6
Mr. Moate

asked the Secretary of State for Energy what is the estimated benefit in percentage terms of the recent changes in energy pricing for heavy energy industrial users.

Mr. Michael Morris

asked the Secretary of State for Energy what is the estimated benefit in percentage terms of the recent changes in energy pricing for heavy energy industrial consumers.

Mr. David Howell

Under the measures announced in the Budget the benefit to some 200 larger industrial electricity consumers will range up to about 8 per cent, for those able to take full advantage of the new arrangements.

For customers on firm gas contracts prices will be some 10 per cent. lower by next December than they otherwise would have been. For interruptible gas supplies, prices have in the past been set close to those of heavy fuel oil. Now the interruptible gas renewal price is about 10 per cent. below the heavy fuel oil price.

Mr. Moate

Does my right hon. Friend accept that those percentage figures can be misleading, particularly for the heaviest energy users which have experienced nothing like such a saving in energy costs? Will he accept that the benefit in relation to electricity goes only to those who are prepared to and can accept interruptibility? Why does he arrange the measures to penalise consumers on continuous processes who cannot take advantage of the savings? Will the Secretary of State take a further look at the package to see whether it can by operated more efficiently to help industries which are really in trouble?

Mr. Howell

I acknowledge that all statistics can be misleading. The arrangements were made by the electricity supply industry. They were aimed at a particular category of consumers taking electricity in a manner when there could be interruption at short notice. I recognise that the arrangements do not meet the problems of all heavy users, particularly those with a high load factor and a large maximum demand. There are major problems vis-a-vis a country such as France which has succeeded in operating a lower cost structure. I shall keep the matter under review. I recognise the difficulties, particularly for firms in my hon. Friend's constituency. He has written to me about them and I promise an early reply.

Mr. Stoddart

Is not the Government's policy of long run marginal pricing the real culprit in forcing up prices, particularly for industry, which cannot afford to embark on such pricing because inflation would go through the roof? Will the Minister reconsider his policy on long run marginal pricing?

Mr. Howell

The policy is not new. It has been followed by successive Governments. The product is sold at the cost which will recover its replacement and renewal in the long run. That must make sense. Nevertheless, in the short-term, particularly in a recession, the Government constantly urge the fuel supply industries in both the nationalised and the private sectors to be sensitive to their customers' needs. In the case of gas and electricity—and particularly gas—pricing policy is considerably less rigid and much more sensitive to the short-term needs of customers than it was under the previous Government, when it was glued closely to the full price of heavy fuel oil or gas. There has been a great improvement.

Mr. Cormack

Why cannot we serve our industry as well as the French serve their industry?

Mr. Howell

In relation to security of supply, many oil products and electricity supply to 95 per cent. of consumers, we do. The advantage that the French have in relation to electricity supplied to large bulk consumers is that France made brave decisions in the 1970s to build nuclear. Alas, under the British Government of the day there was neither decision nor bravery.

Mr. Allen McKay

Is the Minister aware that the cry from both private and public industry is about energy prices? Does he accept that management claims that it cannot compete in a competitive world with such energy prices? Did not the Minister give an ideological reply when he spoke about subsidising energy prices since he accepts that it costs £6,000 to keep a person out of work?

Mr. Howell

That is not right. Perhaps the hon. Gentleman wishes to raise interest rates and taxation which will, in turn, drive even more people out of jobs. It is important for industries to cover their costs. In the short term it is equally important that, like all good suppliers of basic commodities, they should modify their charges to keep their customers in business. The fuel industries have sought in the last year—not only through the Budget measures—to provide more sensitive pricing and to shape their prices to their major customers' needs. The industries should be more competitive and supply competitive fuel to British industry with a security of supply which is not available to other countries. Those objectives are within our grasp, but the electricity comparisons are distorted by the high price of sterling, which make the figures look larger—

Mr. Rowlands

The Secretary of State is not making a statement.

Mr. Howell

I have been asked a question and I am trying to give a full answer. Perhaps the hon. Gentleman has had enough.