Energy Prices (Hansard, 6 July 1981)

§ 4. Mr. Cadbury
asked the Secretary of State for Energy what recent representations he has received about the level of energy prices to industry.

§ The Secretary of State for Energy (Mr. David Howell)
I continue to receive representations mainly from large energy users in energy-intensive sectors of industry, and their trade associations.

§ Mr. Cadbury
Is my hon. Friend aware that intensive energy users, particularly the steel industry, are still paying 25 to 30 per cent. more for electricity than their competitors in Europe? I recognise that, in the long run, cheaper electricity will come only as we bring our nuclear power stations on stream, but is my right hon. Friend prepared, in the short term, to exert his influence on the Electricity Council to bring about further concessions on bulk supply to intensive energy users?

§ Mr. Howell
My hon. Friend is right in saying that, in the longer term, the way to cheaper electricity lies through cheaper coal and more nuclear power. In the meantime, about 160 consumers, representing 25 per cent. of total electricity consumption in England and Wales, have benefited from the additional price flexibility introduced by the electricity area boards after the Budget. I recognise that this does not close the biggest gaps identified in the NEDC report at the beginning of the year, but to do so would mean selling electricity at well below even the variable cost of production. That would require a subsidy. I have to put it to my hon. Friend that that is what he requests.
In the meantime, the electricity supply industry is reviewing the bulk supply tariff. That review will come forward in the autumn. It is the longer-term problem that we have to overcome in the way I have described.

§ Mr. Rowlands
Did not the Secretary of State come back empty-handed from the recent meeting of the International Energy Agency, where none of his European colleagues was willing to follow him down the path of a purist energy pricing policy for industry? Is it not therefore true that over the past 12 months the right hon. Gentleman has consistently penalised British industry, particularly chemicals, steel and other high energy users, leading to losses of jobs and a large amount of output in those industries?

§ Mr. Howell
The hon. Gentleman is wrong on both points. There is a later question relating to the EEC Energy Council, on which I shall seek, Mr. Speaker, to catch your eye. The hon. Gentleman referred to the IEA meeting. There was a substantial commitment among IEA members to the principle of economic pricing. It is generally recognised that this is the sensible way to develop less oil-dependent economies. It is also recognised that the policies pursued by all member countries should reflect economic pricing and market pricing wherever possible.

§ Mr. Emery
In talking about variable costings will my right hon. Friend appreciate that these depend entirely on how the overhead structure of the industry is applied, and that there need not be a subsidy if one uses different accounting methods? Does he agree that Viscount Davignon, in Brussels, still considers that the British steel industry has to pay the highest electricity prices of any in Europe?

§ Mr. Howell
I shall take into account what my hon. Friend says. The basic problem concerns the short-run operating costs, which are now reflected closely in prices to bulk users. Bulk users' prices are down to short-run costs. To go below those short-run costs, whatever accounting practices are used, would involve a subsidy. We have to be careful before going over that boundary. It is possible that some of these matters can be sorted out in the review of the bulk supply tariff.