This week’s UK energy summit is a real missed opportunity to bring energy prices under control and we, as consumers, are the biggest losers. A Green Deal solution is welcomed but is not yet in place, and it doesn’t address the here and now of the problems consumers are facing up and down the country in balancing their household budgets while the ‘Big 6’ are making record profits. It also, equally fundamentally, hasn’t tackled the number of issues that need to be addressed for next 10 years both with the continued increase in prices which are expected as well as the significant investment needed to deliver a secure, sustainable, renewable future in the UK.
Ed Miliband won the initial bragging rights for forcing a movement in the energy sector last week but the announcement by Scottish and Southern, while welcome, was more of a public relations exercise as it only applied to the day-ahead market where very little is traded. What Labour needs going forward from this is a clearer, more coherent and more informed energy policy to counteract the current uncertainty of the government’s energy policy if we are to help consumers and encourage the investment needed in the energy sector.
Labour should have a ‘tougher but balanced’ approach to energy as the next decade is the most important in a generation for the sector and one which will affect everyone in the UK. This is because while the ‘Big 6’ have a enormous grip on the UK energy sector and have been able to get away with increasing energy prices by extraordinary amounts, the UK needs them and their workforces more than ever to deliver the £200 billion investment needed on infrastructure to reach the renewable targets as set out by the last Labour government which, quite rightly, continues to be supported.
Energy prices have risen by over 75 per cent in the last five years and, while price increases in other sectors such as in the rail industry have increased their ‘annual’ fares by 6-10 per cent (still far too high in my opinion), the ‘Big 6’ put their prices up by an eyewatering average of 17per cent for gas and 10% for electricity and have done so on more than one occasion per year.
The perception of the energy companies by consumers and, indeed, Ofgem, of which I am an advocate, is that there is a lack of transparency in the ‘Big 6’s’ pricing policies as they are quick to increase them when the price of generation and fuel sources increase, but fail to bring them down as quick when these prices fall. These levels of price rises cannot be right and are unsustainable for households who are already struggling with inflation rises of 5.2 per cent and a 2.5per cent VAT increase introduced earlier in the year.
I believe that Labour needs to approach energy with a tougher stance on prices and their transparency, to encourage the ‘Big 6’ to sell their energy generation beyond the day-ahead market, and require them to trade between 25-50 per cent of their generation on the future trading markets, which many in the independent sector believe is the amount which would allow more competition in the market, bring down pricing, and support and encourage more investment.
This is where the ‘balanced’ part comes in because, as said above, the UK needs the ‘Big 6’ to help deliver the unprecedented levels of investment needed. We also need a market which encourages additional inward investment beyond the ‘Big 6’, which is there and is available but is not forthcoming because of the policy uncertainty of the government, as they will not be able to deliver it on their own. So Labour has to have a policy which doesn’t just hammer the energy companies at every opportunity but one which says ‘the UK is open for business, come and invest here, we have a strong energy market (but we won’t give you carte blanche over energy pricing). ‘
Labour, both in government and in opposition, has had visionary policy positions for reducing carbon emissions and encourage renewable energy generation, but has for too long not had coherent and firm policy actions and deliverables which gave enough confidence to investors to support and deliver those policies. Ed Miliband and his new energy team need to address this now if we are to support consumers and a vibrant renewable energy future.
Mike Harrison is public affairs manager for Taylor Keogh Communications (specialising in the energy and clean tech sectors) but writes in his own capacity
Photo: Duke Energy