HC Deb 05 December 2002 vol 395 cc1033-4
4. Mr. Bill O'Brien (Normanton)

What action she is taking with regard to energy prices for private households; and if she will make a statement. [83605]

The Secretary of State for Trade and Industry (Ms Patricia Hewitt)

Average domestic gas prices have fallen by 10 per cent. in real terms since 1997, and electricity prices by 19 per cent. Customers who switch supplier can, on average, save about £23 on their annual electricity bill and about £55 on their annual gas bill.

Mr. O'Brien

Does my right hon. Friend share my concern for families on low incomes who face a cold Christmas? The £200 winter fuel allowance for pensioners is appreciated by many elderly people, but my concern relates to the future cost and supply of energy. We are warned that gas prices will rise, that nuclear prices will rise and that supply will diminish. The only stable fuel for energy supply is coal. Will my right hon. Friend assure us that the coal industry will be maintained, and that future energy supply will be guaranteed?

Ms Hewitt

I share my hon. Friend's concern about the plight of elderly people, in particular, who face the prospect of a cold winter. The £200 winter f0uel bonus that he mentioned amounts to over a third of the annual average fuel bill. We all know from our constituencies how welcome it has been. We will shortly publish the first of the Government's annual reports on the progress of our fuel poverty strategy, but we already know that some 2 million households have been taken out of fuel poverty.

My hon. Friend raised extremely important points about security of supply, to which we will return in the energy White Paper.

Dr. Vincent Cable (Twickenham)

I believe that wholesale prices have fallen by 40 per cent. over four years and retail prices by less than 13 per cent. Does that not imply that very large windfall profits are now being earned by the electricity distributors? Whom does the right hon. Lady hold responsible? Has the regulator perhaps been rather naïve in lifting price-capping while competition is not fully effective? Or is the problem that the Government have given insufficient guidance to the regulator to attach priority to the protection of consumers, especially poor consumers?

Ms Hewitt

As I have said, retail prices for electricity as well as for gas have indeed been falling. Industrial electricity prices have fallen by between 20 and 25 per cent. in real terms since the beginning of the reform of the electricity market in 1998. As the hon. Gentleman will know, the actual cost of domestic electricity is a much smaller proportion of the total bill than is the case with industrial suppliers, but we have asked Ofgem to keep a close eye on the operation of the market, and we are already making amendments to the new electricity trading arrangements to ensure that they work more effectively in future.

Mr. Kevin Hughes (Doncaster, North)

If we continue to worship the guru who says that cheap is always best, how long will it be before most of our electricity is generated from imported sources? Will that not leave us vulnerable?

Ms Hewitt

That is an important point. As both my hon. Friend the Energy Minister and I have said many times recently, in the White Paper we will look for the best way of ensuring in the medium and long term that we have the diversity of supply in our electricity market on which security of supply for all our domestic as well as our industrial customers depends.

Mr. Tim Yeo (South Suffolk)

I congratulate the Secretary of State on having recently exceeded the average length of tenure achieved by previous occupants of her post over the past 20 years.

Does the right hon. Lady agree that energy prices would reflect the environmental costs of energy production more accurately if the arbitrary and burdensome climate change levy was replaced by an emissions trading system, and that such a system would allow both nuclear power and renewables to compete with fossil fuels on fairer terms?

Ms Hewitt

The climate change levy has a very specific function, which we set out clearly when we introduced it, and that is to improve the incentives for investment in new, high-quality renewables. The climate change levy, coupled with the renewables obligation, is indeed strengthening investment in renewables, while at the same time the climate change levy provides an effective and powerful incentive to industrial consumers to improve energy efficiency. I would remind the hon. Gentleman that the climate change levy was introduced following a report by Lord Marshall, the former president of the Confederation of British Industry. We are working with our European partners on the introduction of a European emissions trading system and we shall have more to say on that subject in the energy White Paper.