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Energy bosses boost Tory tortoise in energy row with green taxes pledge

29 October 2013

6:12 PM

29 October 2013

6:12 PM

Like all good select committee hearings where MPs are grilling some unsuspecting witnesses on something they’ve decided to be very angry about, this hearing of the Energy and Climate Change committee took a very long time. It has been cut off for the time being from Ofgem’s evidence by a series of votes in the Commons, but here’s what we’ve learned from this first mammoth hearing in any case.

The first is that the MPs clearly read Iain Martin’s memo in the Telegraph about show trial-style select committee hearings. Only Ian Lavery managed the kind of fury that all members of these committees normally feel it necessary to manufacture, and even that was just a bit of a lecture rather than a rage. But perhaps the MPs mis-read Iain’s piece: he was advising them to not show off, rather than to not ask useful questions. The only incisive questions have really come from Peter Lilley, which is perhaps reassuring because he is a member of the Number 10 policy board, but the energy companies have hardly had the grilling they were expecting: more of a gentle warming.

In fact, the person who has done the most to make the big six witnesses uncomfortable is himself a witness: Stephen Fitzpatrick, the managing director of Ovo Energy. He took apart those sitting next to him in the Thatcher Room, saying that Ovo couldn’t see the prices on the wholesale market that would lead to the sort of rises that the Big Six have been announcing recently. ‘I’ve been confused by the explanations for the price rises from our competitors,’ he said.

Fitzpatrick later dismissed his colleagues as the ‘best filibusters’ in the business. In the second session, Ramsay Dunning, group general manager of Co-operative Energy, told the MPs that ‘from the outside… it looks a bit like a cartel’.

The witnesses’ answers on whether the market is competitive made a classic case study in the law of ‘they would say that, wouldn’t they?’. The tiny heel-snapping terrier Ovo had this assessment of the problems with the market:

‘I think the biggest problem is the lack of competition. If I tell you that one in five of customers that are joining today are immediately leaving to go back to the previous supplier because of a win-back inducement that can be up to 15% of the bill, meaning that when a customer leaves, I’m not going to name any names but when a customer leaves a supplier, and calls up and says I’m going to leave you today, I’m going to switch to Ovo energy or another competitor, they say, oh hold on a moment, we’ve just found out we can save you £160. In fact, we have heard, significantly, I mean I’m sure you’ll get a chance to investigate some of the answers in the people coming next but British Gas seems to be the most active with a dedicated win-back team whose sole job it is to call people up and say, oh, there’s been a terrible mistake, we’ve been overcharging you all of this time and we can cut your bill. And when this kind of behaviour is allowed to go unchallenged and a monopoly advantage that the Big Six have is allowed to go unchallenged by Ofgem, who I know you’re seeing later on… you will never get effective competition and if you don’t have effective competition in a retail market then you’re always going to be trying to find out where the money is going and time and time again you will get very clever, very complex, very confusing answers and you’ll never get to the bottom of it. Effective competition is really the only solution to lower bills.’

But funnily enough, this wasn’t how the others saw it. E.ON’s chief executive Tony Cocker said:

‘I fundamentally believe that this market is competitive, but as Mr Robertson has said several times, and I acknowledge, we are not trusted, and therefore I believe we need to have a very thorough Competition Commission investigation, supported by Ofgem, because they are the experts, they’ve been involved in the industry for a decade, but led by the Competition Commission, who have the deep insight into competition law and into general competition across industries.’

At least Cocker thinks his assessment of the market would stand up to scrutiny by the Competition Commission (although it’s interesting how many people are keen to sideline Ofgem in all this). npower later joined these calls, although Centrica (the owner of British Gas) was rather less enthusiastic.

Perhaps the MPs on the committee felt unusually bashful about laying into these energy bosses because many of them can remember voting for the green taxes and levies that put more money on energy bills. The bosses were keen for those taxes to go, funnily enough, because they felt consumers blamed them for the money on their bills (and because they serve as a useful distraction). They told the committee that they could pass back the savings created by a ‘roll back’ of those green charges to consumers ‘in a matter of weeks’.

So who wins from this afternoon’s interrogation? Well, oddly, given this was supposed to be some kind of ritual savaging from MPs, the Big Six companies certainly haven’t lost. There was a moment at the start when Peter Lilley started questioning William Morris of SSE when it seemed he might be the big loser from the hearing, but that didn’t continue. The bosses even had an opportunity to talk about their great ‘regret’ about their rising prices, and about their ‘passion’ for keeping the lights on, which almost made the energy market sound like a lovely, cuddly episode of Pet Rescue. Certainly Ovo’s boss Stephen Fitzpatrick might find rather a lot more interest in his business.

But they’ll be pretty happy in Number 10, too: the energy companies have given David Cameron a reasonably good-sounding ‘retail offer’: if the government does ‘roll back’ those green taxes, consumers now have a promise that they’ll see the savings on their energy bills within weeks. Which could mean that the Conservative tortoise wins out in the energy row after all.

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