Energy White Paper

HC Deb 03 December 1998 vol 321 cc1024-6

2. Mr. James Gray (North Wiltshire)

If he will make a statement about the impact on electricity prices of the measures announced in the Government's energy White Paper. [61293]

The Minister for Energy and Industry (Mr. John Battle)

As we set out in the White Paper, "The Review of Energy Sources for Power Generation", that was published in October, the existing distortions in the electricity market make prices higher than they should be. We consider that as the market is refornied, wholesale price falls of at least 10 per cent. in real terms and possibly more can be expected in the medium term. That, of course, cannot be a guarantee, as the Government do not have power to set prices in open and competitive markets.

Mr. Gray

Is the Minister aware that electricity prices fell consistently from privatisation onwards? Whereas gas-fired electricity cost 2.5p per kWh, coal-fired electricity cost 4p per kWh. Is he not concerned that his ending of the dash for gas on behalf of his friends in the trades unions will result in higher electricity prices, as well as greater environmental damage?

Mr. Battle

The answer is no. We are working to reform a totally flawed wholesale market structure set up by the hon. Gentleman's party in government. I recall that it was my predecessor as Energy Minister, the noble Lord Fraser of Carmyllie, who was responsible. I am tempted to say that to lose one leader of the Lords is unfortunate, as the great wit would put it, but to lose two in a day seems downright incompetent. However, the entire country now realises that that lot opposite are not capable even of joined-up opposition.

Mr. Bill O'Brien (Normanton)

I thank my hon. Friend for his reply, which demonstrates the Government's fair approach to the concerns of many of my constituents about employment in the electricity-generating industry and in the mining industry. I challenge the figures given by the hon. Member for North Wiltshire (Mr. Gray) for the price of electricity generated from coal. There are examples of it being much cheaper than gas, and I hope that my hon. Friend will ensure that that pressure on the gas-generating industry to reduce its prices continues, so that we can have the benefit of the full generating of electricity from coal.

Mr. Battle

I am grateful to my hon. Friend, who has championed a fair market in power generation throughout his time as a Member of the House. That is what the review was about. It is up to the coal industry to make its output commercially attractive to generators, but there was not a level playing field for coal to compete in that flawed market. That is the whole point, and why we will keep up the pressure to ensure that the pool is properly reformed and there is a level playing field on which one fuel is not unfairly stacked against another.

Mr. Ian Bruce (South Dorset)

But the Department of Trade and industry decided that it would reform the pool price—surely the Minister has left the market wondering what is going on. Cannot we have some decisions from the Government, rather than yet another bit of consultation and another hit of spinning? Clearly the energy industry wants to know what will happen with the pool, and any reform—which would be welcome, if it brought down the price of electricity to consumers—should be carried out now.

Mr. Battle

The energy industry asked us to work at reforming the flawed structure of the pool. For example, it pressed for a challenge to the dominance within the pool of two major generators. What have we done'? We have taken action and suggested that power companies divest plant: PowerGen has agreed to divest 4 Gw of plant and National Power is looking at divestment opportunities. We have taken action—[Interruption.] That is within the pool, if the hon. Member for South Dorset (Mr. Bruce) does not understand the pool. The power stations come on line to sell their energy, but they are being dominated by one or two generators. We are tackling that, and sorting it out now. We are not hanging about; we are mopping up the mess that we were left by the Conservative Government.

Mr. Roy Beggs (East Antrim)

Does the Minister agree that all those involved in generating electricity have responsibility to be more efficient and to ensure that electricity is produced at the cheapest possible price? Will he join me in congratulating NIGEN in Northern Ireland, which is introducing proposals to reduce electricity costs, in co-operation with the regulator'?

Mr. Battle

Yes. Those Conservative Members who seem to think that prices are going up should consider time-weighted pool prices in the period from April to November when prices were about 1 per cent. lower than in the same period last year. Of course summer and winter prices cannot be compared, so we should look at the winter period. There has been a 3 per cent. fall in real terms in prices, and we hope that that will continue. We think that there is space for that to happen—through working with the regulators, as the hon. Gentleman suggested.

Mr. Denis MacShane (Rotherham)

But is my hon. Friend the Minister aware of the great damage being done to the steel industry by the warped system of electricity prices inherited from the previous Government? Is he aware that the increase in prices charged to the steel industry allowed by the regulator are higher than the windfall tax paid to the Treasury by the electricity industry? The steel industry cannot wait until 2000, 2001 or 2002 for the review. Will he look urgently at what can be done now to allow our steel companies to have energy prices at a European level, not the high Tory prices that we inherited?

Mr. Battle

I share my hon. Friend's concern. Electricity contracts are financial contracts, often outside the pool. It depends what contracts the companies have, but there is concern in the steel industry about rising energy and electricity prices. In the new trading arrangements, we will change the relationship between the generators and their customers.

I have asked the Director General of Electricity Supply, who is responsible for prices, to keep a close eye on progress as it affects heavy industry to ensure that our industry is not priced out during the restructuring of the pool. In the light of my hon. Friend's question, I shall ask the Director General for a progress report on his views.