Red Ed makes powerful new enemies

STORM CLOUDS GATHER: Ed Miliband has stirred up a hornet’s nest among the big utilities
STORM CLOUDS GATHER: Ed Miliband has stirred up a hornet’s nest among the big utilities
Opinion by Energy Voice

Ed Miliband has for sure made a bunch of powerful new enemies as a result of his warning to utilities that gas and electricity prices will be frozen for two years should Labour get back into power in the 2015 UK general election.

Predictably, the Big Six barked back, warning via their professional rottweiler, Angela Knight, that such a move could lead to energy shortages and power cuts.

Now, it happens that Knight was previously CEO of the British Bankers’ Association and a former Tory MP.

Of course she claimed that the energy utilities would be starved of the investment they need to keep the lights on and cookers cooking. And yet their profits have apparently soared since 2009, suggesting that crocodile tears are now being shed.

And one of the heavy brigade, British Gas owner Centrica, has threatened to leave the UK. Its CEO Sam Laidlaw recently dropped £1.5billion worth of investment in new projects, blaming a lack of incentives from government.

What else could the general public expect from a bunch of companies that have, time and again, hiked energy prices during the run-up to winter, blaming rising commodity prices yet harvesting ever fatter profits.

I’m sure few if any will shed tears for Centrica, should it leave.

The utilities are at it again. Doubtless, recent headlines that British Gas is apparently about to jack-up the price of the gas it sells to you and me by a whopping 10% was the catalyst to Miliband’s decision to use the Labour Party’s annual conference as the platform to tell the utilities that the game is up.

When I first heard that British Gas intends a hefty hike this winter, I swore. I was promptly told off by The Management for not curbing my tongue.

But I for one am heartily sick and tired of what has become an annual ritual by the Big Six utilities as they make the usual excuses.

It angers me even more that an industry privatised during the Thatcher era, has largely fallen into foreign hands.

Even more insulting; some of those hands are state-owned, most notably Big Six member EDF (Electricite de France), plus smaller stakeholders like Vattenfall (Sweden) and DONG (Denmark).

As far as a succession of UK governments is concerned, state-ownership is anathema. Yet it is allowed indirectly. By the same token, this is also happening with our railways.

Basically, I think Miliband’s threat to “reset the market” and warning to the industry that he would not help guarantee funding for its development if it does not fall in line is long overdue.

So too is his apparent determination to axe that useless, toothless, lazy watchdog Ofgem which has for too long been comfortably in the pocket of the companies.

But I’m not at all sure that re-splitting energy utilities into generation and retail arms (except in Scotland where ScottishPower and Scottish & Southern were conceived as vertically integrated companies when the state system was butchered by Thatcher) will work.

So I find myself agreeing with the utilities’ rottweiler who said in her Miliband riposte: “And as for breaking up the energy companies or banning them both making and selling electricity – that is not the way to bring greater competition into the market or to provide the range of services which domestic and business customers want.”

During her time with the BBA, Knight was against similarly splitting that other group of corporate charlatans . . . the banks. Little wonder she has said the same about utilities. Whereas I agree with the notion of splitting the banks, as already stated, I disagree with splitting the energy utilities.

Inevitably, when a major change is proposed, all sorts of different points of view will emerge.

Two I find striking.

One: SSE said in a statement: “Instead of price freezes, which will lead to unsustainable loss-making retail businesses, the Labour Party should put policy costs into general taxation, taking them off energy bills.

“This would wipe £110 off the average person’s bill and shift the cost away from those who can’t afford to pay and on to those who can.”

That’s an excellent idea.

Two: Not everyone in the energy suppliers’ camp stands behind the Big Six.

Ramsay Dunning, general manager at Co-operative Energy, instead backs Miliband’s stance.

“We welcome the pledge Ed Miliband has made, to freeze energy prices if the party is elected in 2015. A tough approach, like this, is required to tackle the spiralling profits the Big Six continue to enjoy and, most importantly, to create a fairer deal for customers who are struggling or in some cases, unable to pay their energy bills.”

I have a question.

What’s all this nonsense about price capping not being possible with energy utilities? As I write this the BBC’s 10 O’clock News is on. Some supposed expert has just stated that price capping is unworkable.

Really?

In which case why has price capping been so extensively used as a part of the UK privatisation model? Rail fares and telecoms are prime examples.

I’m quite sure that some genius can come up with a price cap smoothing mechanism that takes account of commodity price fluctuations/trends.

Meanwhile, it is claimed that the UK is one of only five countries regarded as having the most sustainable national energy systems in a new ranking by the World Energy Council (WEC).

The London-based forum gives the UK a AAA rating alongside Denmark, Sweden, Switzerland and Spain in terms of how the countries balance the “energy trilemma” of energy security, energy equity, and environmental sustainability.

It sure as heck doesn’t feel that way.

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