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Labour energy proposals anger industry

Ageing infrastructure, increasing demand, ambitious environmental targets, growing worries over security of supply, and rising prices for consumers. These are just a few of the well-publicised issues facing the UK energy industry.

Unfortunately, Ed Miliband’s proposed solution to this febrile cocktail - outlined at the Labour party conference in Brighton yesterday - doesn’t come close to addressing these problems. Indeed, it could even make things worse.

Arguing that the “big six” energy companies have been overcharging customers for years, he pledge to “reset” the energy market by freezing energy bills for 20 months if he wins the 2015 election.  He claimed that the move could save an average family £120 per year, whilst business could save upto £1,800.

Predictably, his arguments have been rapturously received by the party faithful, welcomed by consumer groups and angrily dismissed by the energy industry, which has warned that the move could hamper its ability to invest in new infrastructure, and even lead to the risk of blackouts.

In an unusually strongly worded statement issued on its website, British Gas owner Centrica said: ‘If prices were to be controlled against a background of rising costs it would simply not be economically viable for Centrica, or indeed any other energy supplier, to continue to operate.’

Meanwhile Angela Knight, chef executive of trade association Energy UK warned that while freezing bills is “superficially attractive” the move would also ‘freeze the money to build and renew power stations.’

It’s entirely plausible that the shadow government is correct in its assertion that that the UK’s big energy companies can afford to take a hit, and it’s probably also true that the blackout warnings are little more than scaremongering.

But concerns that such a move would hamper industry’s ability or appetite to invest in the new infrastructure that we so badly need should be taken a little more seriously.

Indeed, Labour’s proposed policy could give industry the perfect excuse not to make the huge investments in infrastructure and generating technology that would be essential to meet Ed Miliband’s stated aim to decarbonise electricity by 2030.

There was nothing in Miliband’s speech on the real energy issues. No mention of new nuclear. Nothing on renewables (a sector that he was regarded as a pretty credible champion for when he was government’s energy minister). No comment on the divisive issue of shale gas, CCS , or energy storage technology - I could go on.

Sadly, the pledge to freeze bills smacks of tokenism that’s unlikely to have much impact on anything.  There’s little to prevent energy companies raising prices before and after the freeze period and is a £120 saving over the course of year really that significant? An extra £10 a month is unlikely to make a significant difference to even the poorest members of society.

Readers' comments (21)

  • I disagree with the Author. Yes the points He ha smade are Valid. BUT these issues have been around for longer than the MODERN Energy Industry has!!
    Before Gas and Electricity were Privatised in the 1980's the problems associated with Nuclear Power were well understood. Ditto our Oil and Gas reserves in the North Sea. Ditto the problems with Ageing Infrastructure and it's inability to cope with the demands put upon it by an increased Renewable Industry in areas where Infrastructure did NOT EXIST!!
    But in THIRTY YEARS nothing has changed!
    The Power Generators and Gas Providers have made a FORTUNE out of Price Increases whilst doing Virtually NOTHING to address the very real issues outilned in this article. The authors arguments are totally unconvincing, He simply states that
    investors MUST be persuaded tht it's in their best interests to invest. WHY would it NOT be in their interests to invest in the businesses that THEY OWN?
    It is more of the same they want State guarantees that they will Profit from a Captive market and make a Profit, nothing wrong in that, but NOT having to take ANY RISK which is what investors always say thet are doing but don't.

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  • Labour just doesn't seem to learn, instead of hitting the tax payer they are hitting the energy providers. If they said they would check the validity of price rises then fair enough. But putting a freeze on energy cost irrespective of the world market then they are living in cloud cuckoo land - but I think that is already taken as read!

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  • I'll get the ball rolling; all our overseas owned energy companies see the UK as a bloated cash cow, which has been milked remorselessly for years. They have the utmost freedom to charge what ever they can get away with; hiding behind the sam old well worn diatribe.
    Any price rise is immediatly duplicated across all companies; the totally misguided and delusional Thatcher era idea of 'private companies competing against one another to force down prices' is now a long standing cruel (for the families struggling) joke .

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  • I'm not anti-Labour or pro-Conservative, but this does just seem like a move to purely gain votes.
    Big business, especially energy companies, are an easy target often being vilified in the media as purely seeking profit at the expense of the taxpayer.
    But where would we be if the oil/gas/power companies stopped investing and upgrading their facilities? (Doomed, I would imagine!)
    I work for a small independant Oil & Gas company, active in the Southern North Sea. We are spending millions drilling new wells and using new technology to keep producing from older gas fields. If our profit was capped then I suspect most of our investment would be channeled overseas to our other facilities.

    Everyone hates paying bills, but we all have to realise that companies supplying us with services need to make a profit, otherwise we will all suffer in the future.

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  • This is nothing more than a cheap trick to win some much needed popularity votes, and appear to be the ‘party for the people’. IF they managed to pull off a victory, within 5 minutes of negotiating with the main energy companies they will have rescinded from any compulsory mandates. Let’s credit UK citizens with an ounce of intelligence, we all know ultimately big business (who pays for everything) controls the country. Until all Politicians are made to spend a minimum of 5 years working in industry running UK business they will always be little more than glove puppets (and not particularly attractive ones at that).

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  • An energy price freeze is a gimmick, managing and resolving UK energy issues is not just about profit it is beyond just a few vote grabbing statements. I am surprised that such an intelligent man, can perform so poorly in the public domain

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  • It is a ludicrous promise that will make things worse.

    The prime reason energy bills are rising is are the decisions of the last labour government delaying new nuclear builds, the early closure of coal fired power stations encouraging the 'dash for gas' and the ludicrous subsidies for wind turbines. Policies agreed by the Liberal Democrats in Coalition with coal station closure apparently enforced by a European agreement on combating climate change.

    The UK needs to renew its electricty generating capacity rapidly at great cost with the costs been borne by us as consumers through our energy bills.

    Closing coal fired stations early is increasing the amount of generating capacity we have to replace sooner rather than later driving up the costs we have to pay as is delaying New Nuclear Builds.

    Gas is to valuble as a heating/cooking energy source to waste on electric power generation - especially when one realises that appox 2/3rds of the efficiency of generating electricty from gas is wasted unless part of a CHP (Combined Heat Power) application whereby 2/3rds of the energy would be used.

    Generating electricty from gas is driving up demand for gas and driving up domestic gas bills. Shale gas has a chance of providing increased supplies and hence a chance of driving down home and industrial gas bills.

    Subsidies for wind turbines are ridiculously high and will cost us as consumers on our bills for decades to come.

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  • If Labour want to reduce costs for consumers - why not reduce the taxes on fuel? The government's take on the cost of a gallon of petrol is FAR larger than the companies take.

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  • I believe a few years ago British Gas did freeze their prices for a guaranteed period. But they did so just after a rise to a very high price and then continued to make profit.

    In my opinion, we need better regulation of our energy industry not interference with ulterior motives.

    We have plenty of coal in the UK, perhaps we should rethink de-carbonising. Even the media have now caught on that Global warming stopped 15 years ago despite the massive release of CO2 in China over that time.

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  • Fair or reasonable profit made by these companies who knows? But I bet OFGEN does and is it policing the industry with vigour. I'm not a fan of each polarity of each of the two main parties, but before Ed gets the chance to take this measure shouldn't he task OFGEN to get the facts and give them the teeth to do the Policing instead of this political stunt to molify the masses.

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