Interview: Iain Wright MP, chair of the Business, Energy and Industrial Strategy Committee
In the political frenzy caused by the snap general election, Iain Wright has announced he will not run again for parliament, bringing an end to his chairmanship of the BEIS committee. Shortly before these events, he spoke to Utility Week about price intervention and what a transforming energy system should deliver for consumers.
Iain Wright’s brief stint as chair of the BEIS committee has not been low profile. He has pinned his colours to the flag of energy retail intervention in no uncertain terms and grilled some of the biggest names in the industry.
Following the prime minister’s shock announcement of a snap general election, Wright has advertised his intention to bow out of the political circus. He will not run again for his Hartlepool seat and, consequently, will also soon relinquish his committee positions – the most prominent role he has landed since he entered Parliament in a by-election in 2004.
When Utility Week meets with Wright however, this development is in an unimagined future. It is less than a week after Khalid Masood’s attack on Parliament, but normality has nonetheless return to the halls of power. The security staff are cheerful and unflustered and waiting for Wright in the lobby, Parliament has its usual, if slightly surreal atmosphere. Sir Andrew Bailey chief executive of the Financial Conduct Authority, is followed through the security gates by a brace of less portly and much more casually dressed TV historians, Tom Holland and Dan Snow.
Wright’s own attitude reflects the wider determination to minimise disruption following 22 March’s tragic events. He is keen to get down to business.
Some worry that energy has been sidelined within the now sprawling BEIS department, leading to delays on key policy announcements, notably on the emissions reduction plan.
But Wright, who previously chaired the BIS (business innovation and skills committee) says the prime minister has created a “great opportunity” for a more “coherent approach” by bringing the energy and business briefs under one roof.
As for the policy delays, Wright believes that these have more to do with wider hold-ups across government as it contends with the challenge of Brexit – and now a snap general election – than with any lack of commitment to tackling climate change.
One of the options, following the departmental shake-up, had been to retain a dedicated energy and climate change sub-committee that would report to the main BEIS committee.
Forty-five year old Wright feels he made the right decision not to pursue that road, but his committee has now stated picking up where its Decc predecessor left off. It has continued the inquiry into the implications of Brexit for energy and climate change policy, which the Decc committee began last summer, and Wright is full of praise for its 2016 report on investor confidence in the energy market.
Insisting that both topics are still ‘key priorities’ for the BEIS committee, Wright says: “We are our own committee with our own priorities but I was clear that I wanted energy and climate change to be central to what we do. I wanted to give out a very clear message that this is going to be front and centre. The role of us as a committee is to keep pressure on all of these fronts.”
Some energy bosses might have welcomed a little less scrutiny from the committee over the last few months, particularly over the vexed issue of energy prices.
The diminutive Wright laid down his marker on this issue when he kicked off his committee’s grilling of utilities by describing the relationship between their big energy suppliers and their customers as an ‘abusive’ one.
Such comments have contributed to an increasingly hostile political mood towards the energy companies with even the prime minister signalling that price caps were on the cards for gas and electricity customers.
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 as well as 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 similar 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 writing 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 often 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 which the regulator says are not justified.
“We hear a lot of great words and nothing has happened yet. The secretary of state hauls in the energy companies in November and says National Power’s increase was not justified but these are just words: nothing’s happened. 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?”
Wright may find his wishes answered in the run up to the June general election. On 19 April he extracted a commitment from BEIS secretary Greg Clark to take “decisive action” against “damaging” energy prices.
Flaying big businesses plays handily the populism which 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 revolution in energy with decent smart meters, two way connectors and new technology, which we have to be at the forefront of. I don’t see it as an either or.”
And the Stone Roses fan 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 consultation, 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 Market 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 market 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 rises, 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 fluctuations 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 capacity 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 landscape,” he says.
He is in favour of supporting relatively immature and more expensive renewable energy technologies, like 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 roll out.
“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.