Alan Whitehead – 2022 Speech on Public Ownership of Energy Companies
The speech made by Alan Whitehead, the Labour MP for Southampton Test, in Westminster Hall on 31 October 2022.
Thank you, Mrs Murray.
Before we go any further in this debate, we ought to be clear about what the petition is calling for. I congratulate the petitioners on bringing forward the petition, which has received over 100,000 signatures, 500-plus of which are from my city of Southampton. I congratulate the petitioners on bringing it forward because it really underlines just what a dreadful state we are in at the moment with our energy provision and energy markets. I take the petition to mean that the Government should effectively expropriate all generation, all transmission, all distribution and all retail energy; place it, with compensation, in the public sphere; and then run a fully nationalised energy system, as was the case 30 to 40 years ago, before the privatisation experiment came into being.
I can see why many people consider that that is the brief solution to the awful mess that we are in the moment. They see that they are paying sky-high energy bills and that, at the same time, a number of energy companies are making sky-high profits not from their ingenuity in suddenly developing new ways of delivering energy, but from doing what they have always done: supply gas to the UK market for the production of power, for which retail customers are paying sky-high prices.
Those customers scratch their heads about why that has happened: “How is it that we are paying absolutely out-of-the-window high energy prices while companies are making such enormous windfall profits?” They scratch their heads when the Government spend such a long time deciding whether to alleviate some of the problems caused by those sky-high bills by introducing any form of windfall levy on those companies, and when the Government put an enormous loophole in the windfall tax so that the companies get back most of what they would have paid in windfall tax if they are, so they say, in a position to undertake further gas and oil exploration. The grotesque result is that Shell has not—
Mrs Sheryll Murray (in the Chair)
Order. I remind the hon. Gentleman that he should address the Chair.
Dr Whitehead
I apologise, Mrs Murray—I will face the right way from now on.
The grotesque result is that Shell has stated that it has not actually paid any windfall levy because it has got it all back through that loophole. Customers see that the regulation of the system is so dreadful that they are paying enormously high prices for their power as if all of it came from gas, even though half of it now comes from much cheaper renewables. That is because the market is regulated in such a way that the marginal cost of gas provides the whole of the price for the market, and it is a substantial part of the reason why prices are so high. In short, customers have seen for themselves a thoroughly broken energy system in operation. They have perhaps concluded that the privatised norm of the last 30 years has failed, and that placing energy back in state hands is the relatively straightforward answer.
What a delight it is to see so many Conservative Members in the Chamber to support their Government’s response, which states:
“The Government does not agree that nationalisation of energy assets is the right approach. Properly regulated markets provide the best outcome for consumers as a driver of efficiency and innovation.”
Wouldn’t it be nice if proper regulation did drive energy efficiency and innovation? We know that it simply does not; the failure of proper regulation is at the heart of the many problems in our energy markets. We also know that the Government themselves have recently resorted to measures that might be compared to nationalisation.
As my hon. Friend the Member for Wirral West (Margaret Greenwood) said, Bulb—the seventh largest retail energy company in the country—went bust a little while ago, along with 40 other retail energy companies. Bulb, however, was regarded as too large to fail and was effectively nationalised by Government. It was put into special administration and has sat there for quite a while, at a cost to taxpayers of about £3.5 billion. It has just been sold for scrap, as it were, with its customers being transferred to Octopus Energy for, we think, several hundred million pounds—far less than the amount that taxpayers put in as a result of the Government’s reaction to appallingly bad regulation. Does the Minister have further information on exactly how much Octopus paid for the remains of Bulb, so that we can get an accurate grip on how much money has been retrieved from that episode?
An energy Bill that was recently mysteriously withdrawn by the Government proposed that the operator of the national transmission system be fully detached from National Grid and placed in the public sector. That means that it would no longer be a part of National Grid, even at a distance. As set out in the Bill, the future system operator would have full power to plan the system, commission investments in it, and run and balance the system overall as a public sector organisation. However, as I say, that Bill has mysteriously disappeared, but I would be interested to know whether the Minister continues to support the idea that the future system operator be a company in the public sector, not the private sector. I would also be interested to hear when that energy Bill will return to Parliament, if at all. It contains a great deal of things that could lead to better regulation of the energy system, which is exactly what the Government are saying is the alternative to nationalising it.
Although it is true that part of the answer to the problems we face in the energy system at the moment is proper regulation—and the Government have an enormous amount of work to do get it properly regulated—we also have to give careful consideration to where our energy system is going now, because it will not be successful in reaching its targets, particularly in the low carbon context, if we simply continue the privatisation experiment of the past 30 years. Of course, the energy system is changing before our eyes. All the old considerations about 80 or so power stations providing power for the grid and then to customers through retail sales are effectively disappearing. We now have about 1.5 million inputs that are owned by all sorts of different people. Indeed, some of that input is from companies and bodies that are not in the private sector, but are community owned or locally owned. There are all sorts of generators providing a different form of input to the grid.
Of course, the grid itself is changing rapidly. National Grid Electricity System Operator, the forerunner of the future system operator set out in the energy Bill, considered in a recent holistic design plan that accommodating the new way in which the energy system is going to work, and making sure that it works well in future, would require a huge recalibration of the grid system, both onshore and offshore, at the probable cost of about £62 billion. An enormous amount of investment is needed to make the future energy system secure, and to get the green and low-carbon generators into it for the future. We will not sort that out by just hoping that somehow the market will come to the rescue and provide all the investment for the future based on our current regulation and system. My hon. Friends the Members for Wirral West, for Leeds East (Richard Burgon) and for Ilford South (Sam Tarry) both pointed to how that needs to be done. Perhaps we should not have to rely on the private sector to come to the rescue and sort out the future system.
The Labour party wants a Great British energy company —a publicly owned company at the heart of investment and driving forward, planning and managing that new energy system. As my hon. Friends have pointed out, that company would stand alongside companies elsewhere in Europe that have already started that energy revolution with investments not just in their own countries but on an international scale. Companies such as Vattenfall in Sweden, which owns the largest onshore wind farm in the UK, Ørsted in Denmark, Equinor in Norway and a number of others across Europe are making investments in the future system and, moreover, keeping the equity in those investments for the people of the countries on whose behalf they are working. Either individually or in partnership with the private sector, they are turning over those investments for those people, and keeping their equity in them.
In this country, as members of the public and customers we are spending enormous amounts of money each year on providing energy transmission and distribution companies with the means to invest in the grid system—the assets of which stay with those companies, even though we the public have paid for those assets. That is also the proposal for the new nuclear programme—we pay the money, they get the asset—but a Great British energy company would put a stop to all that. The assets would stay with the public and the money would come back to the public purse. That is the right approach. Our investment ought to go towards producing our future energy system.
I reject the Government’s idea that this will all happen via better regulation—though it would be nice if that did happen—and the operation of the market. We need to be much smarter than that. I do not agree that we should nationalise the energy system as it stands. Among other things, if a lot of the junk and clapped out stuff in the energy market were nationalised, the people who own those stranded assets would be delighted to have them put out to grass and taken off their hands as the energy system changes, so that they could run off with the compensation money.
We have to think smartly about the future of our systems. They will certainly not be funded, run or sorted out on the basis of the failed privatisation experiment of the last 30 years.
