Gas Prices and Energy Suppliers

(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy if he will make a statement on rising gas prices and the collapse of energy suppliers.

I came before the House on Monday to update colleagues on the action we are taking, and I appeared before the Business, Energy and Industrial Strategy Committee yesterday to discuss the matter in greater depth. The Government have been clear that protecting consumers is our primary focus and shapes our entire approach to this issue. We will continue to protect consumers with the energy price cap.

The global gas situation has had an impact on some energy suppliers, and I have been in touch daily with Ofgem. As it set out yesterday, there are more than 50 suppliers in the domestic market, and we may, unfortunately, see more suppliers exit the market in the coming weeks. However, it is not unusual for energy suppliers to leave the market, for various reasons, particularly when wholesale global prices are rising. Ofgem and the Government have clear, well-rehearsed processes in place to make sure that all customers are supplied with energy.

Our approach will be informed by the following principles: protecting customers, especially vulnerable ones, from price spikes. The solution to this crisis will be found from the industry and the market, as is already happening, and I repeat that the Government will not be bailing out failed energy companies. We would like to see a competitive energy market that can deliver choice and lower prices. The energy price cap, which continues to protect millions of customers, will remain in place. Consumers come first, and that has always been the centrepiece of our approach.

On Monday, I said to the Secretary of State that he was being far too complacent about the situation we are facing. Events since have, unfortunately, borne that out: complacent about the crisis in the market; complacent about the impact on families; and complacent about the cost of living crisis. He pretended on Monday and again today that it was normal for a number of suppliers to go down each winter, but what we are dealing with is far from normal: 800,000 customers losing their suppliers yesterday alone and 1.5 million in the last six weeks. So will he now answer the question he has so far failed to answer: does he believe taxpayers’ money will be necessary to stabilise the market? If so, how will he ensure value for money and that we do not simply end up with greater concentration of the big six suppliers?

Next, I have a letter here that Ofgem wrote to the Secretary of State when he was the Energy Minister 18 months ago during covid, warning about

“systemic risk to the energy supply sector as a whole”.

It said the usual Ofgem mechanism, the supplier of last resort, may not be possible. It went on:

“The failure of medium and large suppliers would need to be handled via a special administration regime placing significant burden and costs on government.”

So will he answer the question of what planning was done for this eventuality following that letter? Surely the Government should be in a position now to know exactly what needs to be done where there is systemic risk to suppliers. Have they not left the country dangerously exposed, with them scrabbling around for solutions?

Finally, we are seven days from the cut to universal credit. This is the last time a Government Minister will be in the House explaining to millions of families why they are plunging them further into fuel poverty. Instead of warm words or platitudes, can the Secretary of State now tell the British people how he can possibly justify this attack on their living standards? Is it not the truth that there can be no defence of it, and that the only right, proper and fair thing to do is to cancel the cut?

Obviously, as usual, the right hon. Gentleman raises a number of issues. We have not been complacent. The whole point about the supplier of last resort process, which was interrogated last year, is that it is an organised, well-established process that can allow existing strong companies to absorb customers and failure. [Interruption.] If he would desist from chuntering from a sedentary position, he might actually hear my answer.

I remember the letter last year. We interrogated, all through the covid process, the systems we had in place. During that period, the supplier of last resort was found to work. So far this year, it has been found to work, so I am not going to try to talk ourselves into exacerbating the crisis.

With regard to the special administration regime, that is something that is in place. Thankfully, we have not had to use that, but the right hon. Gentleman knows as well as many people in this House that it is there should the case arise.

With respect to universal credit, I will say what I said earlier in the week. That is a matter across Government in terms of budgetary responsibility. There will be a Budget at the end of October and there will be plenty of time to discuss that then.

May I press the Business Secretary a little on the Government assumptions on pricing? In his evidence to the Business, Energy and Industrial Strategy Committee yesterday, the head of Ofgem appeared to suggest that he expected these high prices to continue for some time. I accept that the Government do not have a crystal ball, but in making policy choices the Government must be making some assumptions about what they think is the most likely path for prices. Can the Business Secretary set those out for the House please?

As I have said repeatedly, I do not have a crystal ball, as my right hon. Friend has suggested, and I do not make predictions about the price but clearly, we prepare for every eventuality. The biggest help for consumers and customers at this current time is the energy price cap, which I have repeatedly stated is staying in place.

This is not market failure; it is Government and regulator failure. Ofgem all along had the financial and hedging information to know which companies were at risk, so why are we now in crisis management phase?

The Tories promised us cheaper energy bills post Brexit, but right now electricity wholesale prices in the UK are the highest in the whole of Europe. Meanwhile, as gas prices increase, the Treasury gets extra VAT receipts and increased oil and gas revenues. Surely, there must be a redistribution of that increased Treasury income to help hard-pressed bill payers. At the moment, it is those bill payers who cover the additional cost of transferring customers to other energy suppliers. They cover the credit of customers with failed companies and then have to pay increased tariffs when transferred. The cap might stay but the cap does not stop energy bills going up, so why should bill payers pay even more money when the Treasury is getting increased revenue out of this? What is the additional estimated cost for bill payers?

A quarter of our electricity bills consist of levies, so as we move away from our reliance on fossil fuels, we need a fundamental shift in how that concession is paid for. That is something that the Treasury needs to address. It means ending the grid charging regime so that Scotland does not have the highest charges in Europe, and it means giving the go-ahead to pumped hydro storage in wave and tidal.

Finally, is the Secretary of State happy to sit by while the cost of living crisis is ongoing? Is he happy to plunge 500,000 extra people into fuel poverty, or will he fight the Treasury to end the universal credit cut and release extra money to help hard-pressed bill payers?

Clearly there was a lot in that question and statement. I will deal with a couple of issues, if I may.

With respect to universal credit and wider budgetary considerations, I have repeatedly said that they are matters for my right hon. Friend the Chancellor. We will have ample opportunity to discuss these things in the House. With respect to the move away from fossil fuels, the hon. Gentleman and I are in agreement: I think that we need a diverse supply of decarbonised sources of energy.

Finally, I dispute the idea that we are ill-prepared. We have the SOLR and SAR processes in place and we stress-tested them throughout the whole covid period, when I was in constant contact with the industry. I feel that so far we have managed to accommodate such supplier failure as we have seen with existing structures.

Will my right hon. Friend confirm that the cold weather payment scheme will remain in place?

Again, there are further budgetary issues, but I have always said that we are absolutely focused on customers, particularly the most vulnerable customers. The warm home discount is staying and we are looking to protect the most vulnerable customers, particularly prepaid customers, from the worst effects of the energy price spike.

On Monday, the Secretary of State dismissed our lack of gas storage as “not…relevant”. It has clearly left us vulnerable, so will he now admit that the closure of the Rough storage facility was a mistake?

I do not think that it is relevant, because there is no way that any storage in the world will mitigate the effect of a quadrupling of the gas price in four months, as we have seen. The answer is actually getting more diverse sources of supply and electricity through non-carbon sources—through nuclear, on which I am still very unclear as to the Opposition’s view, and through other sources of decarbonised energy.

Why do we not reduce VAT on fuel as a temporary measure? We did it for the hospitality industry, which was badly affected by covid-19. Why do we not abolish VAT for consumers on fuel now?

My hon. Friend is quite right: we did a whole range of interventions to alleviate the burden on consumers and on businesses. Those were fiscal interventions that the Chancellor pursued last year, and I am sure that he is looking at a range of things this year, but that is a matter for him to decide ahead of the Budget.

What are the implications of the situation for the exploitation and extraction of gas within the UK continental shelf?

The right hon. Member will know that, in 2020, 48% of our natural gas came from the UK continental shelf, so that is clearly a strong, sustainable source of gas to this country. However, I suggest to him that gas is a transition fuel: in our pursuit of net zero by 2050, we want to transition away from it. That is why we are developing carbon capture and hydrogen, as he knows very well.