Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/815730
8 | 28TH APRIL - 4TH MAY 2017 | UTILITY WEEK Interview Wright is unapologetic about his stance, arguing that pressure needs to be placed on Ofgem, the government and energy companies to sort out what he describes as the UK's "broken" energy market. The MP, whose hobbies include reading heavyweight political histories and going to Stone Roses gigs, sees the irony in a Conservative prime minister championing intervention in the energy market. "It's very odd that Theresa May's rhetoric is very simi- lar to Ed Miliband's. He was very clear about intervening when markets don't work: that was the whole rationale behind having an industrial strategy and was going to be behind his energy proposals." At time of our meeting, however, Wright is frustrated that government has been all talk and no action on energy prices. "As chair of the select committee I'll try to be as fair as I can. If the government need a kicking I'll give them a kicking and I am impatient with their lack of progress on this. "The government oen talks a very good game about this but there's very little action and huge price rises," he says, questioning why customers are still having to suffer price hikes that the regulator says are not justified. "We hear a lot of great words and nothing has hap- pened yet. The secretary of state hauls in the energy com- panies in November and says National Power's increase was not justified but these are just words: nothing's hap- pened. We need action now: I'm really impatient on this. "My constituents and every MPs' constituents are seeing increases in their prices. Why can't we have actual action?" What a difference a few short weeks can make. It was shorty aer Wright bowed out that the Conservatives finally confirmed an energy price cap will sit at the cen- tre of its election manifesto. Flaying big businesses plays handily to the populism that is much in vogue across the western world's politics today. But Wright insists he is not playing to the gallery with attacks on big six firms. The committee's work plays to a bigger transformation agenda, he says. "We have a huge amount of capacity coming offline combined with a huge opportunity to lead this new revo- lution in energy with decent smart meters, two-way con- nectors and new technology, which we have to be at the forefront of. I don't see it as an either/or." He is also mindful that price caps, unless they are carefully designed, can have unintended repercussions. "I don't want to see a price cap imposed that would increase everybody's energy bills," he says, but brushes off the suggestion that there needs to be further consul- tation such as a green paper, arguing that the issue has been the subject of years of deliberation. The report on the energy market, published by the Competition and Markets Authority (CMA) last summer, provides a good evidence base for action, he adds: "The CMA report seemed a competent piece of work and it said that in many respects the market is broken. Every bit of common sense shows that the market is not working in the interests of consumers." But isn't it too soon for a fresh intervention? And shouldn't the remedies proposed by the CMA, including putting greater pressure on energy suppliers to engage with their customers about tariffs, be given more time to work? Wright argues that relying on competition is not sufficient in the energy market. "Switching is an answer but it's not the full answer. Giving greater information to consumers is fair enough and the emphasis on switching is fair enough, but ultimately this market is not working," he says. "We have six big commercial players who have seen some erosion of market share but not a huge amount: their business model is predicated on the majority of customers staying on expensive tariffs. "It's a case of how we get a fairer market for all and not just for switchers. Trying to get a more dynamic mar- ket that works for everybody has to be the intention and that's not happening at the moment." While acknowledging that the rise in wholesale prices has contributed to price increases, Wright argues that hedging should blunt the impact of these increases on customers' bills. "Hedging means that energy prices don't fall as quickly as when wholesale prices fall and they certainly should mean that when wholesale prices rise those fluc- tuations should flatten out. At the moment, we are not getting that," he says. Equally, Wright has no truck with the notion that green levies are to blame for energy price rises. "The idea that energy bills are rising at a record rate because of green policies put in place by the government is just simply untrue. We need to move to a decarbonised economy. "They are going to have to replace their energy capa- city in the next decade anyway. The notion that it's just green crap is just utter rubbish, its replacing capacity." And Wright, whose Hartlepool constituency home overlooks an array of offshore wind turbines, reckons that the government was mistaken to pull the plug on planning support for onshore wind in 2015. "There are places where onshore wind could be used very effectively without detracting from the natural land- scape," he says. He is in favour of supporting relatively immature and more expensive renewable energy technologies, such as offshore wind and tidal. "Exploiting our island status is something we should definitely be doing." But this support should not be a blank cheque, Wright adds: "The idea that renewables should receive subsidy in perpetuity isn't a sign of a functioning market." And he agrees with the government that the "first principle" of energy policy should be security of supply by ensuring a level of baseload. Improving demand management should contribute too, says Wright, who backs the introduction of smart meters: "They will help drive consumer and behavioural change. They will provide more accountable bills, which will be a good thing." But he agrees that there are teething troubles with the smart meter rollout. "I'm not entirely convinced that it's gone well. I keep on hearing concerns that it's not going to hit its deadline. The question is whether people should work to meet that deadline or whether we are going to have to delay it for a year or two." Wright is optimistic that a win-win future of lower bills and greener generation is feasible as long as there is a "long horizon so that people can plan". But as Wright closes up shop while election campaigns escalate, helping to set that horizon and holding government accountable for maintaining it will now be someone else's trouble. "Switching is an answer but it's not the full answer… ultimately this market is not working."