HC Deb 28 June 1982 vol 26 cc599-600
10. Mr. Greenway

asked the Secretary of State for Energy if he will estimate the yield to British Gas and the Central Electricity Generating Board of receipts from standing charges in the last financial year.

Mr. Mellor

According to the British Gas Corporation and area electricity boards in England and Wales, whose sole responsibility the level of standing charges is, the total revenue raised by standing charges in 1981–82 is estimated to be about £850 million.

Mr. Greenway

I thank my hon. Friend for that reply. Is he considering pensioners separately in the review of standing charges, which is not yet complete, particularly in cases of proven hardship?

Mr. Mellor

The question of pensioners has exercised us a great deal. More than 1 million pensioners are in receipt of the supplements that have been paid during the lifetime of this Government. We are concerned about pensioners, but my hon. Friend should understand, first, that not all pensioners are poor and, secondly, that not all poor pensioners are small consumers. Therefore, adjusting the standing charges might not help in that respect. The cost of removing the standing charges for all pensioners would be about £300 million which is an enormous amount for anyone to contemplate.

Mr. Palmer

Does the Minister agree that, irrespective of the social arguments, it is in the nature of the economics of electricity supply, where demands must be met instantly, that electricity cannot be sold like little apples, and that, if the standing charges are removed, the revenue must be made up from some other source?

Mr. Mellor

I am grateful, as I often am on matters relating to electricity, to the hon. Member for Bristol, North-East (Mr. Palmer) for what he said. It is necessary for that view to be put forward to counterbalance other views that are equally sincerely held. Successive investigations of the standing charges theory have shown that there is a justified division between the standing charge and the unit charge. As neither of the industries makes a profit on domestic sales, if the standing charges were abolished the unit charges would have to be increased correspondingly.

Mr. Michael Morris

Is my hon. Friend confident that he has taken fully into account the proportion represented by the standing charge of a pensioner's quarterly bill? Does he agree that that relationship has changed over time? We want it pulled back, and the evidence supports a pulling back of that proportion.

Mr. Mellor

In the past, the standing charge, although justified theoretically to be a certain proportion of the industry's costs, was artificially held down. The industries, of their own motion, decided during the past two to three years to bring the standing charge up to a level that more appropriately reflected the costs involved. We recognise that, but not one area electricity board has a standing charge which truly reflects the underlying costs. Indeed, one board has a standing charge which is 29 per cent. below the underlying costs that should theoretically be attributed to the standing charge.

Mr. Stoddart

Is the Minister aware that there is much anger and concern about standing charges and that electricity boards are becoming more and more out of line every day? Does he realise that the Southern Electricity Board, which serves my area, has just increased the standing charges for credit meters by 16.5 per cent. for pre-payment meters by 17.5 per cent., and for current by only 9.5 per cent? Will he instruct area board chairmen to bring standing charges into line? I do not accept what the hon. Gentleman said in answer to the previous question.

Mr. Mellor

Whether or not the hon. Gentle man accepts what I said, the law is the law. We do not have the power—neither did the Labour Government—to make such directions. That is why every answer that we give to questions makes it clear that the matter is exclusively one for the area boards concerned. I think that the hon. Gentleman is saying that people are concerned about the overall cost of electricity. In the dreadful decade 1970 to 1980, the cost of electricity went up by over 500 per cent. I am happy to say that his year's tariff increases overall have been at about 10 per cent. That is the lowest increase for some years. The way to make people happy is to ensure that electricity prices do not increase out of all proportion to the overall rise in the RPI.