20130716_NP

Source: BBC Radio 4: Today Programme

URL: N/A

Date: 16/07/2013

Event: RWE npower CEO Paul Massara on energy prices

Credit: BBC Radio 4

People:

• Greg Barker: Minister of State for Energy and Climate Change (UK)
• Paul Massara: CEO of RWE npower
• Justin Webb: Presenter, BBC Radio 4: Today Programme

Justin Webb: Why do you pay what you pay, for energy? Why are bills going up? Is it wholesale costs? Is it energy company investment? Is it energy company greed? Or is it government action - costs imposed as taxes or measures to combat climate change? An energy company lays it all out today - the unvarnished truth, they suggest. Npower is the company - they're publishing a report called "Energy Explained". Their Chief Executive is Paul Massara and he's on the line. Good morning to you.

Paul Massara: Good morning.

Justin Webb: And you're accusing the government of being less than straight with us, on the subject of how much we as households can save in the future through energy efficiency.

Paul Massara: No, I don't think we're accusing anybody of anything. I think what we're trying to say to consumers, and make people aware, that effectively there's a transition to a low-carbon economy, and that means that we're going to have a balanced mix in our generation portfolio of onshore and offshore wind, biomass, nuclear. But the result of that is that prices are going to go up. And I think it's really important that consumers are aware of that, so they can make choices to cut energy and make sure that they are as energy-efficient as they can be.

Justin Webb: But is it your case, then, that what the government is saying currently, about the extent to which we can cap those rises, by doing the things that they're encouraging us to do around the home, that that is realistic?

Paul Massara: Well, I think they assume that, effectively, there's going to be a significant cut in energy usage, and what we've -

Justin Webb: And that's right?

Paul Massara: Well, we think that there's a potential to do that. The question is: that will only happen if people are engaged in the energy market, and realise that unless they do that, bills will be going up.

Justin Webb: And do you think they are? I mean, do you think they will?

Paul Massara: I think - I think we are working very hard with them, as part of suppliers' agreements, part of the government's desire to effectively inform consumers about costs and to encourage them. And that's why things like the Green Deal and other things are so important, to encourage consumers to actually save energy.

Justin Webb: If we - if we ditched all of the government's green deal effort, if we decided that that was the right thing to do, would we save money?

Paul Massara: I think the Green Deal is specifically aimed at insulating, and helping people to reduce their actual consumption in their homes, which in the UK we have some of the worst-insulated homes in Europe. I think the question you're really asking is: if we didn't really move to some of the green technologies, like onshore and offshore wind -

Justin Webb: Well, it's sort of both, isn't it, yeah. But I mean, the Green Deal is obviously just the insulating of our homes and the costs involved in that - you're saying obviously that is worth doing, we should do it, we need to do it, whatever.

Paul Massara: Absolutely.

Justin Webb: And then, so, to move on, then, from that to the wider issue of subsidies for green energy - and we're thinking, obviously, of wind power, and all the rest - when it comes to that, and the money we're spending on that, again - save us money in the longer term?

Paul Massara: Well, I think it depends on your view of where you think commodity prices are going, and global warming. And I think Ed Davey has been very clear on this, that effectively this is like an insurance premium that we have to pay, to protect the economy and protect our environment from global warming.

Justin Webb: But it is a premium, because sometimes there's the suggestion from government that somehow that anyway, even if we didn't do this, costs would go up. I mean, we are paying more, and we should be clear about the fact that we're paying more, in order to subsidise green energy, which we think in the future will be a good thing for us.

Paul Massara: That's absolutely right. And I think the argument the government make is to say that, in the long run, will be cheaper than staying with hydrocarbons, because hydrocarbons will move up significantly.

Justin Webb: And you think they're right.

Paul Massara: We think that there is a scenario in which they are right. But the reality is that under any of the scenarios, energy bills are going up, because of the mix that we've chosen. And therefore consumers need to be aware of that, so that they can take control and they can make choices about their energy usage.

Justin Webb: And what many consumers see is energy bills going up because of profiteering by energy companies and a lack of openness about energy charging. It's interesting, your company's been - come worst in a study of the time it takes the customer service department to respond to telephone calls. That's part of this problem, isn't it, it's a lack of openness.

Paul Massara: Well, I think there has been, traditionally, a lack of openness between the big utility companies, and partly that's because we've kind of structured it around engineers and about making sure megawatts flow, as opposed to being as customer-focussed as we should be. But that's changing, and I think all the energy companies now are very focussed on getting customer service where it needs to be.

Justin Webb: But obviously yours rather less than others.

Paul Massara: Well, I mean, we could debate that survey, it was done -

Justin Webb: It's just interesting that you're coming out with this great thing, and, you know, you're introducing us to the idea that you as a company are being very open and honest and wanting an honest and open debate, and yet on the same day your own customer service people don't answer the phone.

Paul Massara: I think that survey was taken back prior when we were actually migrating a major systems change, and therefore, effectively, we were down for part of the time, so we can debate that. I think the important thing is that we are open and honest with our consumers. I don't think it's viable for the big energy suppliers - and the small energy suppliers - to know that energy prices are likely to go up because of the transition to a low-carbon economy without being open and honest with consumers to explain why and what's happening to their bills.

Justin Webb: Paul Massara, thank you very much.

* * *

Justin Webb: The company - the electricity, well, energy company - npower has entered the debate about energy prices today, issuing a document which they're encouraging people to read, which is a document based really on their view of where energy prices are going, not why they are what they are at the moment. And earlier in the programme, their Chief Executive, Paul Massara, had this to say.

Paul Massara: I think the important thing is that we are open and honest with our consumers. I don't think it's viable for the big energy suppliers - and the small energy suppliers - to know that energy prices are likely to go up because of the transition to a low-carbon economy without being open and honest with consumers to explain why and what's happening to their bills.

Justin Webb: Greg Barker's the Minister for Energy and Climate Change, and is here. Good morning to you.

Greg Barker: Good morning, Justin.

Justin Webb: A reasonable point.

Greg Barker: I think it is a, you know, a reasonable point, and we're trying to be as transparent as possible. And we're absolutely focussed, in government, on delivering cheaper bills and cleaner energy.

Justin Webb: Cheaper.

Greg Barker: Cheaper bills.

Justin Webb: Because what he suggested, Mr. Massara, is that we have to accept that unless we save money on our energy bills through greater efficiency in our homes, to an extent that he seemed to suggest was a bit unrealistic, then actually our bills will go up.

Greg Barker: Well, that's right. Energy efficiency's going to be a real driver for delivering cheaper bills, in an age of energy uncertainty. But npower have got a bit of form, on this. About a year ago they were arguing that the ECO programme, which supports the Green Deal, was going to cost around £3 billion to deliver. We know it's actually coming in very close to our assessment of £1.3 billion. So, I think anybody forecasting out to 2020, wherever that forecast comes from, you have to take it with a slight pinch of salt.

Justin Webb: But I mean, for someone listening who's concerned about energy bills, who wants to know what the unvarnished truth is about what is likely to happen to them, the assumption is that they are going to rise and that part of that, at least, is as a result of the government's decision to invest in greener energy in the future. And that's just a fact, isn't it.

Greg Barker: You're absolutely right, there's a huge investment programme. We inherited almost an investment desert - there had been no nuclear power station built, very few new gas-fired power stations built, we were at the bottom of the league for renewables. We're changing all that. To put it in context, we're building the equivalent of eight Crossrails between nine - between now and 2020, or twenty Olympic stadium. It's huge, over £100 billion. And that does come at a cost. But we're doing it in a way that's going to, in the long term, actually reduce bills for consumers, or at least make them cheaper than they otherwise would be.

Justin Webb: Yes, and Mr. Massara, I think, accepted that, in the longer term.

Greg Barker: That's right. And we're talking about the longer term, here, we're talking about putting in place now the building blocks to deliver a cleaner, more secure, good value energy sector by the 2020s.

Justin Webb: Greg Barker, thank you very much.