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Ed Miliband’s energy price promise

Ice cubes with flame

Ed Miliband has promised to freeze gas and electricity prices for 20 months if Labour wins the next election. It sounds like a bold move, but will it solve the underlying problems in the energy market?

Ed Miliband’s promises at the Labour Party Conference will give hope to the millions worrying about how they will heat their home this winter.

Consistently, we find that rising energy prices is one of the top worries for hard-pressed consumers, with some people even having to dip in to their savings to cover ever spiralling household bills.

Freezing prices to 2017 is a bold move and we look forward to seeing the detail of how this will work. However, the market itself is broken and temporary price promises won’t solve the underlying problem.

With rumours of yet more inflation busting energy bill hikes to come this winter, and the average annual bill standing at a staggering £1,300, it’s no wonder people are questioning whether the price they pay is a fair one.

Radical action is needed.

Ring-fence energy companies

Which? has been calling for a ring-fence of the Big Six so it was encouraging to hear Labour rubber stamping this.

While energy companies blame price rises on an increase in wholesale costs, which make up 60% of bills, or on government policies, while at the same time announcing huge profits; public trust in this industry is shamefully low. Which? research shows less than a quarter of us trust their gas or electricity suppliers.

The truth is that it is almost impossible to establish whether the price we’re paying for our energy is a fair one. For many years a lack of transparency has meant we could not establish whether price hikes are always a fair reflection of wholesale costs or confirm whether the way the market operates ensures that retail prices are being kept in check by competition between suppliers. You’re being left to take it on good faith alone that your interests are being well served.

Lack of openness in the energy market

Part of the problem is that the largest six energy suppliers in the UK are ‘vertically integrated’, supplying 98% of the domestic market and generating 70% of electricity – very little electricity has to be sold on the ‘open’ wholesale markets. Most of what other trading there is also happens behind closed doors, with estimates suggesting relatively little goes through the ‘open’ wholesale markets.

This lack of openness and external scrutiny means it is almost impossible for anyone looking in from the outside to obtain robust price information.

The very structure of the largest companies, the low levels of trading and competition on the open market and the closed nature of trading and price setting could be adversely impacting on the competitiveness of the market and on prices.

As it stands, the energy market needs fixing.

The regulator has taken steps to make changes, but we don’t think these go far enough. It’s time for radical action from all political parties setting out how to build trust and ultimately improve competition.

Comments
Guest
richard says:
25 September 2013

I really don’t care – I want a Prime Minister on my side – NOT as Cameron is – on the side of the rich punishing the poor

Guest

He could achieve this by simply re-nationalising them, instead forcing energy companies to freeze prices which might be a good headline but will lead them to a) raise prices before the freeze or b) raise them after to help recover they’re perceived lose in profits.

Maybe he should remove the green taxes from our bills, that would remove any need for action from the energy companies.

And all talk of simplifying tariffs means is that all the cheaper deals will go,

Re-nationalising is looking better and better, although we’d end up paying for it one way or another.

Guest

Many people foresee problems with this proposal, especially people representing the energy suppliers. There is fear of an investment freeze and even as a result power outages.Now of course to prevent that any future Labour Government could re-nationalise, could guarantee investment and could also freeze prices for as long as they like.

We consumers could also control events to some degree, through the ballot box.

Guest

Once again its time to bash the energy companies over the head !!!! Yes prices are high but isnt everything else ?? Lets talk about how the goverment screw us over everyday with the price of fuel. The actual cost of petrol or diesel is probably some where in the reigon of 40% of what we actually pay at the pump, yes thats it 60% of my hard earnt money goes to the goverment every time i fill up, ive already been taxed on the money i earn but no, lets give a bit more away !! what about the price of food !!?? public transport !!?? cigarettes/alcohol !!?? quite simply what people dont understand is this, Energy companies have to buy there energy at a given price on the ooen market and pay for it straight away. We then use it and then when we get the bill complain its too expensive !! if you dont want to pay for it then dont use it !! A huge proportion of what we pay goes back and gets reinvested in renewable energy for the future when we run out of coal and gas. Energy companies do make profit yes, would you run a business that didnt ? since when was profit a dirty word ? I dont think people actually realise that after all the energy had been paid for, stafc, overhead costs etc and then huge amounts of money is put into the future for creating renewable energy the profit isnt that great. Quite simply if you dont like it, dont use it. Go and pick on something else for a change and change the record

Guest

You really cant have private energy companies and control their pricing when world prices are a significant element in their costs.
I agree that this self-generation doesnt help transparency.
However the news report I saw said that the UK has some of the cheapest gas and electricity prices in Europe – someone must be doing something right then ?

Are their profits really “huge” in real terms i.e. % of turnover; its no good looking at profits of any company in absolute terms only although it does make good headlines.

Guest

Indeed , and much to my surprise I see that the UK is not the most expensive place for electricity and gas.

http://www.energy.eu/

Just shows how unreliable respected organisations can be when the EU figures show in May 2013 that we are only mid-table in domestic electricity costs:

Euro per kilowatt
Bulgaria 0.08795
Romania 0.10695
Estonia 0.11066
Croatia 0.11325
Lithuania 0.1255
Latvia 0.13942
Greece 0.14073
France 0.14466
Poland 0.14618
Czech Republic 0.15071
Hungary 0.15613
Slovenia 0.15659
Finland 0.15718
Luxembourg 0.16736
Malta 0.16986
United Kingdom 0.17078
Slovakia 0.17322
Spain 0.18926
Netherlands 0.19323
Austria 0.20147
Portugal 0.2031
Sweden 0.20361
Ireland 0.22518
Belgium 0.22566
Italy 0.2314
Germany 0.26527
Cyprus 0.27249
Denmark 0.29525

Guest

Which? can you take the EU to task for misrepresenting? Or am I completely misunderstanding the figures.?

Country € per kWh Natural Gas
Romania 0.02717
Lithuania 0.04419
United Kingdom 0.0445
Latvia 0.04667
Estonia 0.047
Poland 0.04822
Slovakia 0.04902
Bulgaria 0.05061
Luxembourg 0.05637
France 0.05706
Hungary 0.05752
Ireland 0.05827
Czech Republic 0.05934
Germany 0.06139
Spain 0.06141
Belgium 0.06362
Austria 0.06691
Portugal 0.06841
Slovenia 0.06976
Netherlands 0.07374
Italy 0.07932
Denmark 0.10805
Sweden 0.11523
Croatia 0.3715

Guest

I would agree that the UK is not the most expensive place for Gas or Electricity. But I don’t quite see the significance of that