This is the question perplexing politicos
across the political spectrum. The right, led by its erstwhile cheerleader, the
Daily Mail, screams ‘socialism’ and a return to the 1970’s of nationalization
and state intervention, whilst the Left applauds Miliband’s attempts to fight
and take on vested interests. He’s already proven himself a resolute customer, having
confronted (and won against) the Murdoch Empire and now railing against the
unjust practices of the Paul Dacre cadre running the Mail. The energy companies
know that Miliband means business and is not posturing for political gain. Labour’s
energy policy, as announced at conference last week, is seen as the fulcrum of
its cost of living debate. It is a policy for the doorstep that says: ‘the
Labour party is placing the cost of living crisis at the head of our
priorities.’ Miliband is hoping that his energy announcement will prove a
political masterstroke, instilling him as the leader of the ‘little people.’
Opinion polls so far vindicate this position (with gas bills at the top of
voters concerns). So, what is Labour’s new energy policy and why can it be
effective?
The
policy itself: Miliband has promised that if Labour
were to win the general election in 2015, they would freeze energy bills until 2017. This is aimed at giving respite to
Britain’s struggling households, and preventing the energy companies from
overcharging. This has provoked a frenzy of debate, ranging from the right
calling it a return to Labour attempts at price controls, and the left
marveling at the chutzpah of Ed Miliband in attempting to fix Britain’s
somewhat broken energy market. It has been argued that the policy is a ruse,
and come January 2017, the companies will react by immediately raising prices
again. Labour’s hope is that the new watchdog’s remit will ensure that prices
remain fair and that overcharging becomes a thing of the past.
Labour
will:
1)
Ensure that energy companies
separate the parts of their businesses that generate energy from the parts that
supply to the public with different licenses/separate operations.
2)
Enforce transparency in the
energy market by forcing companies to sell energy into a pool.
3)
Introduce a basic, new tariff
structure so people can easily compare prices.
4)
Overhaul Ofgem by introducing a
tough regulator to prevent the energy companies from ‘letting down their
customers.’[1]
The
facts: the Big 6 (British Gas, EDF Energy, E.ON UK,
Npower, Scottish Power, SSE) supply energy to 98% of Britain’s homes and run
70% of Britain’s power stations. Ed Miliband wants to break this oligopolic
system by freezing prices, and keeping them at such a level that enables other
companies to break into the market. Simple economics dictates that increased
competition will lower prices. Currently, significant barriers exist in
preventing potential energy companies from setting up shop. What most people do
not know is that ‘the same companies
which sell us energy at the retail level largely sell it to themselves at
wholesale level.’[2]
British have argued this week that their 9.2% hike in prices is down to the
increase in wholesale prices. This can be discounted as bogus PR.
How
to dispel the naysayers?
1)
The fear mongering of the
energy companies seek to put many off this policy. Their fears reek of
self-interest and a lust for huge profits. Critics who say that Miliband ‘just
doesn’t understand markets’, conveniently forget about the much maligned banking
sector. The so-called financial behemoth was though to have the capacity to
‘self-correct’ upon too much heat being applied to its pillars. We all know how
this turned out. The world had to contend with the fallout of a broken market,
and would have benefited from regulation prior to the catastrophic events that
occurred. This is why opponents of ‘state intervention’ should be silenced.
2)
The policy has caused chaos
amongst the ‘Big 6’. Company bosses howled in outrage at the cheek of Ed
Miliband. Yet, only 3 days after the announcement, three of the ‘Big 6’-
Npower, Scottish Power and EDF- have now offered ‘fixed price tariffs’ until
2017. Miliband must be doing something right. He’s got the very people he’s
bashing on his side.
EDF energy (Electricite de France) is owned
by the French state. The French energy market has strict regulatory rules and
offers significantly lower prices than we have in Britain. In fact, Britain has
‘one of the highest rates of energy inflation’ in the EU. As Alex Andreou of
the New Statesman writes ‘only nine of
the twenty-seven EU members states do not exercise some form of price
regulation of energy retail prices, much to the chagrin of the European
Commission.’ This is something largely forgotten by price-freeze critics.
Let’s end with this new slogan from Npower:
‘Why
wait for Ed’?
