Annual Energy Statement 2013
Oral statement to Parliament by Edward Davey.
Mr Speaker, today I am laying before the House the Annual Energy Statement, alongside the Statutory Security of Supply Report.
This coalition government is putting in place the most coherent, sustainable energy policy the United Kingdom has ever had:
Creating one of the most competitive and attractive electricity investment markets in the world;
And improving our energy security; boosting home-grown clean energy and providing jobs and economic growth in the process;
Investment in energy security
Mr Speaker, this ambitious energy and climate change policy is vital so Britain can meet our significant challenges.
The coalition government inherited from the previous administration, an energy future with a huge, multi-billion pound, black hole at its heart - the result of years of under-investment, dithering and delay.
So this government is having to take the tough decisions others ducked, to make sure Britain’s lights do stay on.
Everything we are doing has to ensure we drive investment into the system – not scare it off – or freeze it out.
But as I will make clear in this statement, energy security must go hand in hand with affordability.
Energy security measures
So Mr Speaker, let me set out the robust plans we have to deliver affordable energy security.
To deal with the problem of tightening electricity margins up to 2018, the government has been working with National Grid and Ofgem to develop existing safeguards to have more electricity available for the grid at peak times, including, if needed, the use of power plants currently mothballed. We are introducing to Britain a Capacity Market to ensure we attract the investment we need in new power stations. The first Capacity Market auction will take place next year - for delivery from the winter of 2018.
And in addition to these measures to keep the lights on, Britain now has a long term strategy encapsulated in the Energy Bill.
Over the summer we published draft strike prices for renewable electricity under Contracts for Difference.
Detailed proposals for the implementation of Electricity Market Reform were published this month.
And Mr Speaker, the fruits of bringing this greater predictability and certainty to investment are already showing.
Latest estimates suggest that at least £35bn has been invested in new electricity infrastructure since 2010.
And much more is in the pipeline.
In the last 12 months alone, we have provided consent for seven major energy infrastructure applications worth around £20bn with the capacity to generate electricity to over six million homes;
Including, of course, last week’s announcement that we have reached key commercial terms with EDF for the first new nuclear power station in a generation at Hinkley Point C.
And there’s more. Through the Energy Bill’s Final Investment Decision Enabling programme, 23 applications for 26 investment contracts are currently being evaluated by DECC for a broad range of renewable technologies, including onshore wind, offshore wind, and biomass projects.
Energy security for consumers
Mr Speaker, even though British households pay some of the lowest prices for gas and electricity in Europe, such facts are scant comfort to those who have seen prices rise considerably over the last 10 years.
The main driver of these energy price rises has been rising wholesale energy costs, not social and environmental policy.
But apportioning blame is also scant comfort to people who are struggling to make ends meet.
That is why we’ve been taking action to help people and businesses struggling with their energy bills.
We have already introduced some help that’s immediate.
Two million vulnerable households will get £135 off their energy bill this winter - thanks to the government’s Warm Home Discount.
Around twelve and a half million pensioners will get the Winter Fuel Payment - £200 for the under eighties and £300 for those over.
And of course there are Cold Weather Payments if needed, which last year delivered over £146 million to help cut bills for the most vulnerable.
And this year we have added to these policies - with more direct action. Our new Big Energy Saving Network is training 500 volunteers to go out into communities to help people get better deals from energy suppliers and reduce their energy bills.
And these volunteers will be fully supported. We know how much people in communities across the country rely on the Post Office network. So we’ll be working with the Post Office to raise the profile of the Big Energy Saving Network - so they can make the links with the elderly, vulnerable and other cost conscious families trying to make their budgets go further.
We have also brought together all the advice from across government - from DECC, from DWP and from charities such as Age UK and the Citizens Advice Bureau into one place. Today, I’m writing to all members of this house with information about this new guide so they can share it with their constituents, to make sure they are getting all the help they’re entitled to.
But Mr Speaker, while such immediate help for consumers and companies is important, we need more permanent change if we are to keep bills down, not just for 20 months, but for 20 years - and beyond.
The Energy Company Obligation is delivering such permanent change -by modernising our housing stock and making it cheaper to heat our homes.
230,000 low income households will be warmer this winter thanks to energy efficiency measures already installed through the ECO.
Energy efficiency remains a central part of our strategy both to help the fuel poor and to deliver permanent energy savings.
But the permanent energy change we seek also needs more competitive markets.
Retail market reform
This however is not something the party opposite understands.
For, Mr Speaker, the last government created the Big Six – and their irresponsible policies would only help the Big Six.
In contrast, from day one, this coalition government has been determined to take on the Big Six for consumers, with the stick of competition. We’ve done a lot, but as I will set out, we need to do more.
Already our measures to deregulate have seen a major growth in the number and size of independent energy suppliers. In 2011 there were no independent suppliers with a customer base greater than 50,000. Now we have three independents with over 100,000 customers. And a further 8 companies have entered the market since May 2010.
We have delivered a doubling of the number of independent energy suppliers offering competition to Labour’s Big 6 – and already hundreds of thousands of people are benefitting.
But we’re doing more. We are backing Ofgem’s reforms to help consumers get better deals. Market reforms to make sure customers are on the lowest tariffs for them, are moved off poor-value dead tariffs, and no longer face the complex web of hundreds of tariffs designed more to confuse than to compete.
Mr Speaker, our reforms are making sure people are given clearer, more personalised information on their energy bills. So they can compare tariffs more easily and switch more easily to save money.
And we are promoting collective switching, particularly aiming to ensure the more vulnerable get to benefit from the best deals on the market.
But Mr Speaker, today I am challenging the industry to deliver faster switching.
If you can change your broadband provider with a few clicks of the mouse - why shouldn’t you be able to do the same with your gas or electric? It shouldn’t take 5 weeks for the change to take effect, 24 hour switching is my ambition.
First Utility has been out in front with their target of reaching 24 hour switching. Now EON, SSE and Scottish Power and a number of independent suppliers, including Good Energy, Ovo and Co-op, have accepted my invitation for urgent talks over the next month on how we can dramatically speed up switching.
I want five week switching to come down to one week switching, and then I want to go faster still. Let us be clear that it will not happen overnight – we could announce 24 hour switching and then suppliers would say “OK, we will put our prices up to cover the cost”. That cannot – will not happen.
So, I want to talk to suppliers who can agree and deliver a plan to speed up switching down to 24 hours, without increasing bills.
Any company interested in making things easier for customers to switch is invited to come and see me. Our preference is to do this jointly with suppliers, building on the good work of Energy UK, who have raised the ambition on this issue across the industry. But we are prepared to take action, if required, to compel those who drag their heels.
Mr Speaker, I have also written to energy companies about direct debits. I share concerns they may be holding onto significant credit balances where customers have overpaid through direct debits.
I expect all suppliers to make every effort to return money to customers with closed accounts. I accept that sometimes that won’t be possible, but when it isn’t, my strong view is that credits should be directly applied to help the fuel poor and other vulnerable customers.
My hon friend the Member for Bexhill and Battle will be meeting energy suppliers next week to discuss this question – and the question of the level of credit balances energy companies are holding on to.
Mr Speaker, in our debates on energy bills, many have understandably been asking whether competition is working in our energy markets.
And while this coalition has already done a great deal to promote competition, we are ready to do more.
As the Prime Minister announced last week, we now propose to introduce annual reviews of the state of competition in the energy markets.
And the first of these new competition assessments will be delivered by Spring next year.
The assessment will be undertaken by Ofgem working closely with the Office of Fair Trading and the Competition and Markets Authority, when it comes into being.
The exact metrics for the review will be a matter for the regulators but I will be asking them to look in depth and across the energy sector at profits and prices, barriers to entry and consumer engagement.
This government has equipped the regulators with strong powers to deal with unjustified barriers to competition. If abuses are found they must be addressed.
We also need to make sure the energy suppliers are open and honest about the profits they are making.
So I have also asked Ofgem to deliver, again by Spring next year, a full report on the transparency of financial accounts of the energy companies and ways this could be improved - building on the work already completed from accountancy firm BDO.
Ofgem will be publishing their consultation on financial transparency this afternoon.
But the public need to know that our reforms will have teeth – that companies that play outside the rules will be penalised and fined.
With our Energy Bill, Ofgem now have powers to require energy companies to make compensation payments directly to consumers who have lost out.
But today I want to go further.
That is why I intend to consult on the introduction of criminal sanctions for anyone found manipulating energy markets and harming the consumer interest.
So, Mr Speaker, ours is a record of action and delivery.
As set out in the Annual Energy Statement, the government is acting to help those most in need to keep warm this winter – and to make sure everybody will get a better deal from the energy companies.
And we are acting to deal with the energy crunch, filling in their energy black hole with more cleaner, home-grown energy, bringing stability and certainty to drive investment.
Mr Speaker, this is our strategy for affordable energy security.
A strategy to power the country and protect the planet, and to help keep bills affordable.
And I commend this statement to the House.