HC Deb 14 May 1990 vol 172 cc579-80
1. Mr. John Evans

To ask the Secretary of State for Energy if he will make a statement on the Government's assessment of the effect of privatisation on price rises in the electricity industry.

The Parliamentary Under-Secretary of State for Energy (Mr. Tony Baldry)

I believe that the competition created by privatisation will bring benefits to all electricity consumers both in the price and in the quality of service.

Mr. Evans

Does the Minister agree that, now that inflation is climbing towards 10 per cent. and is likely to go even higher, although the price index that he has concocted will mean higher profits for the few, it will mean increased prices for domestic and industrial consumers, particularly in deprived areas such as Merseyside?

Mr. Baldry

The hon. Gentleman is mistaken. Customers consuming more than 1 MW are already benefiting from competition in the market and many have negotiated large price reductions. For those who need more time to negotiate longer-term arrangements, the industry has offered a real terms price freeze this year. For customers consuming less than 1 MW, the average increase this year will be about 9 per cent., but the price controls on the industry should prevent any further real increase until at least April 1993. That is good news for those consumers.

Mr. Hannam

Does my hon. Friend agree that, whereas privatisation usually brings down prices through competition, when new environmental protection mea-sures are to be introduced, they will incur extra costs, and the public must realise that they will add to prices?

Mr. Baldry

My hon. Friend, as ever, makes some very sound points. Of course, competition will be of benefit to the customer and the consumer. It will be for the generators to determine how best to meet the European Community large plant directive, but the capital costs of flue gas desulphurisation will be taken into account in setting the capital structures of National Power and PowerGen.

Mr. Dobson

Will the Minister confirm that, if a distribution company loses trade to other generators that supply power direct, its domestic consumers will find themselves making up the difference? Is not that why, under the new scheme, the Merseyside and north Wales company will be entitled in future to impose price increases of 2.5 per cent. above inflation?

Mr. Baldry

Price increases vary among the different companies, as they have in the past, reflecting the fact that they have different costs and earn different rates of return. Of course, it will be for the director general to monitor and enforce the licence conditions. The Opposition would do better to refrain from any comment on electricity prices, because during the last five years of the Labour Government, in real terms industrial prices rose by 1 per cent. and domestic prices by a staggering 22 per cent.

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