BEING AWARE OF THE BEAR

Not that you would be aware of it from the UK media but another positive milestone was passed on the 29th November (2013) when the leaders of Georgia and Moldova signed their countries Association Agreements with the European Union. These agreements are an important step in their bid for membership of the 28-nation bloc, although as pen touched paper there must have been lingering thoughts about how Russia would react.

I am acutely aware that the largely London based and London centric UK  media rarely carries any positive EU related stories, but, as an interested child raised during the now thankfully historic Cold War era, the Eastern Partnership summit in Vilnius, is a positive event. The fact that the largely unheralded (by the UK media) summit was held in Vilnius, Lithuania, a country that was occupied by the Soviet Union from 1944 until 1991, in itself shows how far we have all travelled in recent years.

The problem is that the summit has understandably deepened real fears of harsh retaliation from Russia in both Georgia and Moldova. The Kremlin has reacted aggressively and somewhat successfully to prevent the Ukraine from signing its own EU pact. Just days before the deal was due to be sign the Ukrainian President Viktor Yanukovych walked away from the deal in Vilnius, in the process sparking a political crisis in the Ukraine and revamping the democratic western looking opposition.

Pro-European Demonstrators in the Ukraine (Picture from Reuters)

Thousands of pro-EU Ukrainians poured onto the streets of the capital , Kiev, on 24th November the crowd being  estimated at being more than 100,000 with larger demonstrations being held since then. The opposition continues to demand that the government resign after President Viktor Yanukovych decided to postpone the signing of a deal on closer ties with the European Union.

The Ukrainian parliament debated and held a stormy vote of no confidence in the government which the government just about managed to win. The Ukrainian President’s decision has sparked some of the biggest protests in Ukraine since the Orange Revolution back in 2004.

Only a few hours after the initialling ceremony, the Moldovan Prime Minister Leanca openly called on Moscow not to shut down the communication line with Chisinau. The reality is that Moscow will probably wait until after the Sochi Winter Olympics in February are over to initiate retaliatory measures to avoid any 'bad press' in close proximity to Russia’s golden Olympic moments on the media spotlight.

EU leaders in Vilnius condemned Russia for its pretty blatant bullying of Ukraine into shelving its landmark association deal with Europe in favour of retaining closer ties with Moscow. Russian sanctions could have devastating effects on Georgia's and Moldova's still-fragile economies as Russia is an important export market for both countries and regular destination for guest workers from both countries.

Perhaps this is the price to be paid for not following the bear

Georgia imports most of its natural gas from Azerbaijan and Moldova relies almost exclusively on gas from Russia - a state that has some form for periodically tightening the tap on its neighbours when it wants to. Russia has no right to try to dictate or to approve or disapprove whatever organisations economic or political associations independent countries might want to join.

Yet, the view from the Kremlin (or the Hermitage) is different, the sight of the EU map getting ever larger and drawing in more and more former Eastern bloc and former Soviet (however unwilling) republics is bound to set historic alarm bells ringing, not to mention setting the ghosts of Peter the Great and Stalin pacing the corridors of the Kremlin or the Hermitage. The dominant Russian component of the Soviet Union historically and practically ended up seeing the CCCP as an extension of greater Russia.

Smaller peripheral nationalities were (and continue to be in some circles) patronisingly and dismissed as possessing simple local political and linguistic peculiarities, this somewhat patronising idea, is entirely understandable particularly if you are Scottish, Irish, Breton, Catalan, Basque or Welsh. Or if you are participating in what looks (at least from the South East of our country) to be a somewhat one sided (London centric media wise) debate on Scottish independence. 

Dean Acheson, US Secretary of State under President Harry S. Truman, once rightly said that “Great Britain has lost an Empire and has not yet found a role”. In my opinion this well perceived observation was right then (in 1962) and is still right today; it’s been fifty years since the Empire was lost and the ‘Brit’ elite have still not got over it or adjusted to economic and political realities of their situation. Much the same can be said for Russia...

We are fifty years down the road since the end of Empire, yet the Westminster elite continue to preside over Fantasy Island and to act out a delusional role on the World stage. If nothing else this should, provide a degree of understanding to unfolding events in the East and Russia’s behaviour. The Russians lost their Empire in barely a fortnight (in late August 1991) and their elite and many (but by no means all) Russian citizens may well be a long way from getting over it and adjusting to the new realities and opportunities. 

THE GHOST OF CHRISTMAS PAST...

It has been suggested that David Cameron is considering launching an investigation of the energy market. Whether or not the ‘’Big 6’ energy cartel members are colluding to rig prices or deliberately exploiting excessive market power to fatten profits in an unfair way is perhaps open to question in some circles. From the perspective of the cartel members (and investors) if any investigation is launched then they (the ‘Big 6’) may argue that uncertainty will surround the energy industry.

If there is an investigation then if a Competition Commission inquiry may investigate whether there are structural flaws in the industry which mean that competition does not serve consumers' interests adequately. One significant question that should be asked (and hopefully answered) is whether it is good or bad for consumers, and for the economy for energy companies to both generate and sell energy to their customers.

Now it can be argued that the all in one generators and sellers of energy have little incentive to keep retail prices as low as possible, since higher prices boost the profits of their generators, not to mention the value of whatever gas reserves they happen to hold. It is also worth noting that if the energy industry is referred to the Competition Commission rather than to Ofgem (the current and fairly toothless energy regulator) then that pretty much puts the skids under Ofgem. Downing Street may believe that that is important to show that the big players in the energy industry suffer from behavioural rather than any structural weakness.  

Oddly enough there was a Conservative pre-election pledge for an independent inquiry into the £25 billion-a-year energy industry which was quietly dropped by the Com Dem Coalition Government in August 2010, when no doubt when they hoped no one would notice. Back in October 2009, the then Tory Energy Spokesman, Greg Clark has said that the "cartel" of the big 6 energy firms will be referred to the Competition Commission by an incoming Conservative Government.

He also said that there was an unacceptable lag between the cost of wholesale gas prices and household energy bills - noting that customers were on average being charged some £74 pound too much for their energy per year. An 'independent' investigation in the Energy companies refusal to pass on reductions in wholesale energy prices to customers was also mooted along with an overhaul the energy sector billing structure and charges. 

Few people this winter will have as snug a relationship with the gas companies as that exists between the political parties (within the Westminster village) and the energy supply companies. Before the last Westminster general election, the Conservatives and the Liberal Democrats made repeated criticisms (and much political capital) from New Labour for its failure to tackle prices charged by the Big Six suppliers. Both the opposition parties publicly and repeatedly demanded an inquiry by the Competition Commission. 

Now don't get me wrong, an investigation sounds great, but, it was a Conservative Government that was responsible for starting the whole sorry mess by privatising the energy market in the first place. Throwing any rational energy pricing structure upon the whims of the alleged 'free market' by allowing the newly privatised energy companies to price gouge customers in the first place was a catastrophically bad idea. By the time the dust settles the fact that Conservatives pre election pledge ended being kicked into the long grass may well yet come back and haunt them before the next Westminster election. 

DON’T PANIC! MR CAMERON…

With temperatures dropping yet again and a problem with one of the major gas (UK - Belgium) pipelines (it may have been closed for 1.4 days) there may well be a faint whiff of panic in the air. What with former (Climate Change) Ministers claiming (in the Radio 4 Today Programme) that the UK is down to less than 36 hours worth of gas supplies, it should be pretty clear by now that any UK strategic energy reserve leaves a great deal to be desired.

With the privatisation of the UK energy sector in the 1980’s it is pretty clear that any provision for future energy planning and provision was abandoned to the whims of the free market. A healthy gas reserve would not only cushion (domestic and commercial) customers from potential shocks, it would also potentially curb the prospects of fat profits on the members of ‘the big 6’ energy cartel. With little prospect of any effective regulation of excessive profits being ramped up it is clear that we are going to continue to get fleeced for a good few years yet.

As of March 2012 around two thirds of UK primary energy demand was met from domestic production. Coal accounted was barely 4% of final energy consumption by fuel in 2010. Almost all UK oil and gas production came from the seas that surround the UK. Peak oil (for the UK) incidentally happened in 1999, and Peak gas production took place back in 2000 - something which may explain the Unionist panic over the prospect of Scottish independence. Since then the UK has moved from a position of relative self-sufficiency to one of dependency on imported oil and gas.

By 2009, imported gas was around 32% of the total gas used. 58% came from Norway, 25% from liquefied natural gas (LNG) from various different countries, 16% came from the Netherlands, and 2% came via the Belgian interconnector pipeline. The increased reliance on imported oil and gas left the UK far more open to supply risks associated with global supply constraints and price volatility. The UK Government periodically punted plans to reduce the need for oil and gas imports, by pushing primary energy production, and by developing low-carbon alternatives such as electric vehicles, biofuels and fuel efficiency.

The writing is not so much on the wall as on TV, one Tuesday evening in February saw a TV first, the first airing of a Gazprom advert on UK domestic television advert – they sponsor the European Champions League.  Russia has periodically put the squeeze on gas exports to the Ukraine, (currently some 80 per cent of Russian gas exports to the EU flow through the Ukraine) so the real dangers of relying on imported energy from unreliable sources have been clearly highlighted.

As for gas, some states have made efforts to protect themselves against external shocks to their energy needs; France was able to store 122 days of gas and Germany able to store 99 days worth (2013 figures). Here in the UK the almost entirely market driven approach turned out to be entirely inadequate,  the UK has a storage capacity which would last for only up to 20 days (up from 15 days in 2009).

New Labour took the best part of a decade to recognise the need to increase storage capacity and the UK has been playing catch up ever since – and still little has been done to resolve the problem. One consequence of this lack of storage capacity is that UK had to sell gas during the summer and purchase gas again when it is needed in the winter. The Conservative’s headlong dash to gas in the 1980’s was accompanied by a complete if not abject failure when it came to strategic energy planning.

The situation has been made worse by the current Government's decision to somewhat half-heartedly look at developing diverse reliable alternative energy sources whilst pursing yet another dash for gas.
The last New Labour Government and the current Con Dem Government largely ignored repeated warnings that the lack of sustainable energy has set the UK on a path towards higher domestic energy prices and potential power blackouts. Over the next four to six years almost all of our old nuclear reactors, along with nine major coal and oil-fired power stations, will be run down and closed, with nothing ready to replace them.

We are now in the situation where we will become even more dependent upon imported gas from either unstable regions or dubious suppliers. The Con Dem’s solution to was to rush to go Nuclear and to effectively hand the Nuclear industry lock stock and barrel over to French energy companies who are busy paying off large loans to the French government. Anyway that was the plan, although the wheels seem to be still wobbling on that particular wagon as well.

DON'T HOLD YOUR BREATH...

It started as a story in the Gruinad (The Guardian 13.11.2012) stating that the City watchdog, the Financial Services Authority, is now investigating claims by a whistleblower that the UK’s £300 billion wholesale gas market has been "regularly" manipulated by some of the big 6 power companies. The Guardian also notes that Ofgem (the energy regulator)  has been separately warned by a company responsible for setting so-called benchmark prices, ICIS Heren, that it had seen evidence of suspect trading on 28th September (this is end of the gas financial year) and gas prices on this date can have an important influence on future prices.

The claims suggest that dealers made unrealistic bids (on the 28th September) when information was being gathered to set the wholesale gas price, basically to suit their own trading position (maximise profits). The alleged manipulation is said to have reduced the wholesale price, and as such does not imply any knock-on impact on the retail price paid by customers. Later today the Con Dem Energy Secretary Ed Davey will make a statement to the House of Commons later as regulators investigate claims that wholesale gas prices have been manipulated.

Now the wholesale gas market includes everything from the UK's own North Sea gas supplies, to gas from Norway or elsewhere, or arriving in the UK by ship as LNG, liquefied natural gas. Energy companies buy gas at the wholesale price and then sell it on to businesses and domestic users. The cost of wholesale gas makes up the majority of our energy bills - 45% of the average energy bill is made up of the cost of wholesale gas, supply costs and profit margins.

The whistleblower, who worked for ICIS Heren, flagged up their concerns after identifying possible attempts to distort the prices reported by the company. These prices are especially important because many wholesale gas contracts are based on them and even small changes in the gas price can cost or save companies millions. These revelations come at an unfortunate time for UK’s energy sector, with many of the big six suppliers (the cartel) under fire for alleged profiteering on household energy bills and mis-selling on the doorstep. So far four of the UK's big six energy suppliers have released statements denying any involvement.

When it comes to regulation of the energy market the silence from the Con Dem Government has almost deafening. In the heady days of opposition, back in October 2009 the then Tory Energy Spokesman, Greg Clark (now Financial Secretary to the Treasury) stated that the "cartel" of the big 6 energy firms would be referred to the Competition Commission by a Conservative Government. He also  condemned the unacceptable lag between the cost of wholesale gas prices and household energy bills and noted that customers were on average being charged some £74 pound too much for their energy per year.

An 'independent' investigation into the Energy Company’s refusal to pass on reductions in wholesale energy prices to customers would still be welcomed by many hard pressed energy customers. As would the promised 'Energy Revolution' which was supposed to overhaul the energy sector billing structure and charges.

In many ways it is somewhat ironic that we find ourselves here, as a Conservative Government started the whole sorry mess in the first place, by privatising the energy market in the first place. This threw any rational energy pricing structure upon the whims of the 'market' by allowing the newly privatised energy companies to price gouge customers in the first place and since the effective demise of any real competition in the ‘market place’ we have all been regularly fleeced.

As for any inquiry into irregularities in the energy market, it is worth noting that once in Government that was consigned quietly to the too difficult pile. The pre-election pledge for an independent inquiry into the £25 billion-a-year energy industry (which has been subject to lengthy and repeated criticisms surrounding accusations of profiteering on electricity and gas) was quietly dropped by the Com Dem Coalition Government. So I won’t hold my breath.

IN THE MONEY

Here we go again; British Gas has announced increases to the gas and electricity prices it charges customers. The company (a member of the ‘Big 6’ energy cartel) has announced that it will raise its charges for both gas and electric by around 6%, which will add around £80 a year to the average dual fuel bill, from the 16ht November 2012. This not unexpected decision follows SSE (which trades as Scottish Hydro, Swalec and Southern Electric) announcement that it will increase its domestic gas and electricity prices by an average of 9% from 15 October.

SSE (also one of the ‘Big 6’) has blamed the increases on the extra cost of using the gas and electricity networks and rising costs in energy wholesale markets. Around 3.4 million gas and five million electricity customers will be affected with an average standard dual-fuel bill will pay an extra £102 for the year, or £1,274 in total. Back in May 2012, British Gas, reported a 2% rise in annual pre-tax profits to £1.33bn, though profits in its division which supplies electricity and gas to homes and businesses fell 20% to £321.6m.

Npower has also joined its fellow cartel members (sorry colleagues) British Gas in and SSE by announcing it is increasing gas and electricity prices in the UK. Npower announced that it will increase the price of gas by an average of 8.8% and electricity by 9.1% from 26th November. And then there were three…

In 2011, all the big-six energy suppliers raised their prices, in some cases twice. Earlier this year the ‘Big 6’ all staged a token gesture round of small price cuts, which affected their gas or their electricity customers. SSE cut its gas prices by 4.5% in March this year. British Gas last raised its tariffs in August 2011, gas prices rose by 18% and electricity prices by 16%. Back in January 2012, it cut its electricity prices by 5%. Centrica (which owns British Gas) in May 2012 warned that continued increases in the wholesale price of gas might lead to renewed domestic price rises this autumn.

The silence from the Con Dem Government is almost deafening. Truly we have come a long way from the heady days of opposition, when back in October 2009 the then Tory Energy Spokesman, Greg Clark  (currently Financial Secretary to the Treasury) said that the "cartel" of the big 6 energy firms would be referred to the Competition Commission by an incoming Conservative Government. The then Tory Energy Spokesperson also condemned the unacceptable lag between the cost of wholesale gas prices and household energy bills - noting that customers were on average being charged some £74 pound too much for their energy per year.

An 'independent' investigation into the Energy companies refusal to pass on reductions in wholesale energy prices to customers would have been very welcome along with the promised 'Energy Revolution' to overhaul the energy sector billing structure and charges. Oddly enough a Conservative Government started the whole sorry mess in the first place, privatising the energy market in the first place. This threw any rational energy pricing structure upon the whims of the 'market' by allowing the newly privatised energy companies to price gouge customers in the first place?

Oddly enough that pre-election pledge for an independent inquiry into the £25 billion-a-year energy industry which has been subject to lengthy and repeated criticisms surrounding accusations of profiteering on electricity and gas, was quietly dropped by the Com Dem Coalition Government. Heaven forbid that principle get in the way of profit. No doubt in the next few weeks the other cartel members will feel duty bound to roll out energy price increases to their customers, I mean you have to keep the dividend up somehow and keep the shareholders happy.

Few of us this winter will have as snug and cozy a relationship with the energy companies as that which exists between the political parties within the Westminster village (and without) and the energy supply companies. Prior to the last Westminster general election, the Conservatives and the Liberal Democrats made repeated criticisms (and much political capital) from New Labour for its failure to tackle prices charged by the Big Six suppliers and repeatedly demanded an inquiry by the Competition Commission.

Sadly any faint hope that an inquiry into the nefarious activities of the energy supply cartel which might have had the power to reform the industry, encourage new entrants to break the hold of the Big 6 on the nominal free market and even possibly impose price caps quietly died in the summer months of  2010. Perhaps there should be an inquiry into the dubious (and financial rewarding) relationship between the Westminster based political parties and the representatives of the energy supply companies who are pretty keen to shower enough goodies around during Party conference season (and beyond) – perhaps not?

A BIT OF GIVE AND TAKE (MOSTLY TAKE)

A nice little earner...

The news that the members of the energy cartel plan to cut our domestic energy charges will be warmly welcomed by hard pressed customers. EDF Energy started the ball rolling announcing plans to cut a typical gas bill for UK domestic customers by £38, or around 5%, from 7th February. This move, which affected around 1.4 million customers, followed a sharp fall in the price of wholesale gas over the winter period due to the (so far) relatively mild weather. What was not mentioned was that that EDF ramped up its gas bills by 15.4% last November in response to rising wholesale gas prices. The move was rapidly followed by the others members of the energy cartel (British Gas, Scottish and Southern Electric, etc) fell over each other in their haste to announce pending cuts to domestic gas bills. Oddly enough not all of the energy cartel members (who control over 90% of the domestic market) have yet to mention of any intention to reduce the cost of its domestic electricity bills, the cost of which increased rose by 4.5% last November. As welcome as the promised cuts are it is worth remembering that barely six months ago had the Big Six energy suppliers ramped up their prices by an average of 17% for gas and 10% for electricity.

HE WHO PAYS THE PIPER?

Almost quietly, almost unnoticed and certainly unheralded at least in this part of Western Europe the Nord Stream gas pipeline has come on-line which enables Russia to ship commercial natural gas supplies to Western and Central Europe. The gas pipeline, currently one of the world's longest submerged pipelines has not been without controversy. The pipeline project, which was actively pushed by the Russian government and agreed to by Gerhard Schröder's government of Germany. The project has not been without a degree of controversy for a number of reasons, especially the fact that it increasing European energy dependence on Russia.

Gazprom, nominally an independent energy company but in fact the energy arm of the Kremlin, has a bit a reputation for generously spreading it's largess around to help get what it wants. Some dubious activities may have taken place in Sweden and in Germany to smooth the path for the Nord Stream pipeline. Certainly it is a fact that Schröder, by coincidence after leaving the post of Chancellor of Germany, ended up as head the shareholders' committee of Nord Stream AG.

There is another factor that has set some alarm bells sounding and that’s because the new pipeline may enable Russia to bypass traditional transit countries Ukraine, Slovakia, Czech Republic, Belarus and Poland. Some transit countries are very concerned that a long-term plan of the Kremlin is to attempt to exert political influence on them by threatening their gas supply without affecting supplies to Western Europe.

In recent years there have been several seasonal and very bitter public Russian and Ukrainian gas disputes. Now with Nord Stream there is a real fear that France and Germany may sell the Eastern European countries down the river in exchange for cheap Gas. These fears have been strengthened by the fact that Russia has consistently refused to ratify the Energy Charter Treaty (ECT).

The ECT is an old international agreement which should provide a transparent framework for energy trade, transit and investments. The ECT process was originally based on plans to integrating the energy sectors of the then Soviet Union and Eastern Europe just after the end of the Cold War into a much broader European and world energy market.

Nord Stream’s critics have said that Europe could become dangerously over dependent on Russian natural gas supplies, especially if Russia faces a surge in both domestic and a foreign demand for gas. A Swedish Defence Research Agency study noted over 55 incidents since 1991, with "both political and economic underpinnings".

Back in April 2006 Radosław Sikorski, who was then Poland's defence minister, made reference to the project in terms of the 1939 Nazi-Soviet Molotov–Ribbentrop Pact. More recently Edward Lucas in his updated (2009) book The New Cold War: Putin's Russia and the Threat to the West, (which is well worth a read) has suggested that "though Nord Stream's backers insist that the project is business pure and simple, this would be easier to believe if it were more transparent."

The involvement of Gazprom in the project – a company that's as great a believer in transparency as its masters in the Kremlin - does not help matters and neither does the fact that Nord Stream AG is incorporated in Switzerland where it can take full advantage of effective banking anonymity. Russia's response has been that the pipeline actually increases Europe's energy security, and that any criticism is caused by bitterness about the loss of significant transit revenues, and political influence. Diplomatically that's as close to ‘Bite me!’ as you can get.

So there we are Russia is quietly supplying a significant portion gas supplies to Western Europe – how soon before we end up hostage to a Russian political agendas. Be silent and get your gas or criticize us over Human rights or when we attack a small country or chill in the leak midwinter! I have no yearning for a new cold war, but harsh realities, but the writing may be on the wall when it comes to energy security.

Relying on energy supplies that are at risk of interruption or are found in unstable regions of the world is just plain stupidity, as is consciously choosing to become more increasingly dependent on imported gas. If you think that the members of the big six give customers a hard time just wait until one or two of them get bought by Gazprom no doubt ably assisted by the city based friends of New Labour and the Conservatives, ever eager to chase a quick profit at our expense.

Here in Wales, a small country on the fringe of Europe, we had better take note and hope that we can rapidly make our small country energy independent. We need to develop a flexible self-sufficient energy development strategy that encourages decentralised micro generation schemes and by actually implementing it this could create jobs, useful skills and help to bootstrap the economy out of the developing recession as well as helping consumers. The peoples of these islands need to be entirely self sufficient via renewable non nuclear non market driven energy resources and quickly.

A VERY NEW LABOUR MOMENT!

Yesterday David (“Call me Prime Minister”) Cameron called for a "trusted, simple and transparent" market – simples everything is fine now. Now quite – anybody who thought for a moment that at the end of the energy summit that their energy bill was going to drop, seriously needs to have their head read. That's not what this was about this was literally David Cameron's Tony Blair moment – the energy summit was about looking good, sounding good, sounding concerned and saying the right things without actually doing anything.

Chris Huhne (the energy secretary) blamed the consumers (us) by saying that at the end of the day it's up to us (as consumers) to shop around and we should not expect the government to somehow resolve the issue of high energy prices. The caring Conservative (and that is definitely an oxymoron) went on to say that the energy companies are not charities ("They're not the Salvation Army”) they are private companies and that there is only so much that a government can do.

What was unsaid was that there is only so much a government can do short of any form of regulation. Part of the problem is that the privatised energy market is an almost sacred ideological inheritance from the Thatcher years. Expecting a Conservative Government (which despite Lib Dem bleating is what we effectively have) to tamper with the ‘free energy market’ would be a little like expecting Labour to remove clause 4 or curb the power and influence of the Trade Unions.

So after that stern talking too from David Cameron the Energy Cartel members are effectively free from pressure to cut domestic prices despite previous Ofgen (the energy regulator) reports that hinted at profiteering. Despite the energy summit and previous calls for firms to cut their gas prices, little will happen partially because Ofgen is toothless and partially because the UK Government has no appetite for regulating the allegedly ‘free’ energy market, even when it no longer works.

While, wholesale energy costs fell in 2009 – 2010; there was no corresponding fall in the energy costs for hard pressed energy consumers. We can no longer afford the luxury of an effectively unregulated energy market or its consequences. Ofgen has failed, it has failed to protect consumers, failed to regulate the energy companies or the so called ‘free’ energy market.

Plaid has rightly repeated calls for a windfall tax on energy companies profits after September's inflation figures were published, and show a 13% increase in gas bills and 7.5% in electricity. The money raised from a windfall tax could be returned to users to cap costs and introduce better insulation and other elements which will not just be cheaper, but also more environmentally friendly.

In October 2009 the then Tory Energy Spokesman, Greg Clark (currently a Minister of State in the Department for Communities and Local Government) said that the "cartel" of the big 6 energy firms would be referred to the Competition Commission by an incoming Conservative Government. The (then) Tory Energy Spokesperson also condemned the unacceptable lag between the cost of wholesale gas prices and household energy bills - noting that customers were on average being charged some £74 pound too much for their energy per year.

Strangely enough that pre-election pledge for an independent inquiry into the £25 billion-a-year energy industry which has been subject to lengthy and repeated criticisms surrounding accusations of profiteering on electricity and gas, was quietly kicked in to the long grass by the Com Dem Coalition Government. Heaven forbid that we let simple ideological principle get in the way of profit.

Few people this winter will have as snug a relationship with the gas companies as that exists between the political parties (within the Westminster village) and the energy supply companies. Before the last Westminster general election, the Conservatives and the Liberal Democrats made repeated criticisms (and much political capital) from New Labour for its failure to tackle prices charged by the Big Six suppliers. Both the opposition parties publicly and repeatedly demanded an inquiry by the Competition Commission.

Any faint hope that the nefarious activities of the energy supply cartel might have prompted the reform of the industry did not happen. All the talk of encouraging new entrants to break the hold of the cartel which controls 99 per cent of the market and any thoughts of imposing price caps or windfall taxes to curb excessive profiteering have come to naught Only four months into the new Coalition Government, it was revealed that there was to be no inquiry and the Department of Energy and Climate Change quietly confirmed (17th August 2010) that it had no plans to refer the industry to the Competition Commission.

Perhaps there ought to be an inquiry into the dubious (and financial rewarding (in cash and kind) relationship between our political parties and the representatives of the energy supply companies who are pretty keen to shower enough goodies around during Party conference season (and beyond) – perhaps not? I mean it might upset the dinner guests...

GAS PRICES, PROFITS OR DIVIDENDS?

Centrica Shareprices

Centrica, which owns British Gas, has warned that customers may face higher energy bills. Centrica says that "end-user prices" do not reflect the price they are paying for gas on the wholesale market. Additionally the company also stated that it was likely to cut investment in the UK after the Government raised taxes on North Sea oil and gas production. Centrica says that the tax hike would erode profit growth in 2011, sending the company's shares down more than 4%. Hmmm gas prices? falling profits or fresh dividends for shareholders? Your new bill coming to a letter box near you...

PROFIT BEFORE PEOPLE

Just as winter begins to bite, and the morning air has that pleasant dry,cold and crisp feel to in, there is that faint whiff of coincidence in the air. British Gas customers are to face a 7% rise in gas and electricity bills which comes into effect on 10th December. As a result of rising wholesale prices, said British Gas. Oddly enough British Gas has become the second major UK energy supplier to announce price increases for the winter months - when there is a grater demand, and coincidentally a greater profit to be made.

Scottish and Southern Energy intends to raise its domestic gas charges by 9.4% at the start of December, blaming wholesale prices for the increase in customer bills. It is worth noting that the price increase announcement, was made just before just before they reported a 6.1% fall in pre-tax profits to £386m in the first half of the company's financial year.

The market wholesale price for gas is around half of what it was at peak in 2008, yet over the same time period customers prices have only been reduced by less than 10%. No doubt British Gas and the other cartel members (sorry suppliers) will trot out the old excuses of having to respond to forward energy prices, etc. It's strange that the suppliers did not make cuts when market conditions allowed it, they are merely covering their profit margins as wholesale prices slowly rises. The timing is interesting especially at a time when there are reports of a gas glut, perhaps consumers take on all the risks.

Back in October 2009 the then Tory Energy Spokesman, Greg Clark (currently a Minister of State in the Department for Communities and Local Government) said that the "cartel" of the big 6 energy firms would be referred to the Competition Commission by an incoming Conservative Government. The then Tory Energy Spokesperson also condemned the unacceptable lag between the cost of wholesale gas prices and household energy bills - noting that customers were on average being charged some £74 pound too much for their energy per year.

An 'independent' investigation in the Energy companies refusal to pass on reductions in wholesale energy prices to customers would have been welcome along with the promised 'Energy Revolution' to overhaul the energy sector billing structure and charges. It all sounded great, save for the fact that it was a Conservative Government that was responsible for starting the whole sorry mess in the first place by privatising the energy market in the first place, throwing any rational energy pricing structure upon the whims of the 'market' by allowing the newly privatised energy companies to price gouge customers in the first place?

Oddly enough that pre-election pledge for an independent inquiry into the £25 billion-a-year energy industry which has been subject to lengthy and repeated criticisms surrounding accusations of profiteering on electricity and gas, was quietly dropped by the Com Dem Coalition Government. Heaven forbid that principle get in the way of profit.

Few people this winter will have as cozy a relationship with the gas companies as that exists between the political parties within the Westminster village (and without) and the energy supply companies. For sometime before the last Westminster general election, the Conservatives and the Liberal Democrats made repeated criticisms (and much political capital) from New Labour for its failure to tackle prices charged by the Big Six suppliers. Both the opposition parties publicly and repeatedly demanded an inquiry by the Competition Commission.

There was a faint hope that an inquiry into the nefarious activities of the energy supply cartel (sorry companies) might have had the power to reform the industry, encourage new entrants to break the hold of players such as British Gas and EDF on 99 per cent of the market and even possibly impose price caps. Yet, it appears that barely four months into the Coalition Government, there will be no inquiry has been called for and the Department of Energy and Climate Change confirmed on the 17th August 2010 that it has no plans to refer the industry to the Competition Commission.

Perhaps there ought to be an inquiry into the dubious (and financial rewarding (in cash and kind) relationship between our political parties and the representatives of the energy supply companies who are pretty keen to shower enough goodies around during Party conference season (and beyond) - I suspect not?

STAYING WARM THIS WINTER?

Even though many of us will be enjoying the summer, some of us will also be faintly wondering about what our winter fuel bills will be like if we have a bad winter. Some of us may be thinking about making a stark choice between heating or eating this winter. Energy supply wise, we are now in the situation where we are now even more dependent upon imported gas from either unstable regions or dubious suppliers than ever before, and we the customers face unnecessarily expensive bills.

As a matter of urgency the Westminster Government, the Scottish Parliament, the National Assembly and the Northern Ireland Assembly should work with the Irish Government to make these islands entirely self sufficient via renewable non market driven energy resources rather than pursing the dubious and costly (potentially in more ways than one) nuclear alternative that is particularly favoured by Whitehall civil servants.

The renewable energy sector can and should play a major role in creating more sustainable green energy jobs in Wales and elsewhere in the UK. If we can develop a flexible self-sufficient energy development strategy that actually encourages decentralised microgeneration schemes and then actually implement it then we have a fighting chance of creating jobs, useful new skills and will be able to bootstrap the economy out of the recession, as helping consumers and securing a stable safe energy supply.

As part of this process, we need to create a decentralised power generation system, which will create sustainable long-term jobs for local people, not damage the environment and contribute to providing our local communities with a long-term sustainable economic future. We can create more sustainable green jobs with exportable technology e.g. plumbers can install solar water heating and other professionals can install solar panels, micro-generation, biomass systems, green sanitation and water use can all contribute to the sustainable growth of our economy.

However, When it comes to energy supply in these isles, we are subject to the less than tender mercies of the so called 'free market', I say that because what we have is a virtual monopoly on energy supply in the UK. This is a direct result over the last eleven years of so or the departure from the commercial scene of a significant number of the energy supply companies - they fell from twenty two in number to six.

Now we have been told don't worry about it, that's the way the market works, and besides everybody took advantage to buy cheap shares in all the privatised utilities didn't they? Many people might have done so, but, how many people still have them or shares in their successor companies. By way of experiment at one of the Westminster election hustings (in Trelech) I asked that very question - out of well over 100+ people present only one person raised their hand. The only real beneficiary in the medium term was the City. Now the free marketeers will tell us that this was a good thing - I beg to differ the only real end result of the privatisations was that the ever richer minority in the City (and some of their friends in the Palace of Westminster) got richer at our expense.

Anyway, as I said, Free market, I think not, what we have is less than a £30 differential between all of the energy supply companies, which works out to be no more than a few pence a week difference in bills. We are all paying the price, and future generations will continue to pay the price of the economic consequences of an energy cartel which brings minimal benefit to hard pressed energy customers and maximises it's profits and which feeds the UK government impressive amounts of tax.

The Energy companies who have reaped vast profits over (500% between 2003 and 2008) were pretty quick to blame rising oil and gas prices, and even quicker to rake in the profits, as the average annual dual fuel bill rose from £662 a year in 2005 to 1,048 in 2007. The New Labour Government was pretty happy to rake in the extra tax revenues and ignore repeated calls for a windfall tax on excessive profits and the Energy companies were equally slow to pass on any reductions in energy costs to their customers – the only real losers in this pretty picture was us, the unhappy energy customers.

The then New Labour Government ignored repeated warnings that it was setting the UK on a path towards higher prices and blackouts. Over the next six years almost all of our old nuclear reactors, along with nine major coal and oil-fired power stations, will be closed, with nothing ready to replace them - now that is something to think about.

Now it's not all New Labours fault, that would be too easy and too simple. This mess has been along time coming, the real culprits are the Conservatives. Conservative complicity in the headlong dash to gas in the 1980’s was bad enough, but, things were compounded by a real and basic failure in strategic energy planning something that was made worse by the then New Labour Government's perverse decision to half-heartedly look at developing diverse reliable alternative energy sources.

Back in October 2009, the Tory Energy Spokesman, Greg Clark has said that the "cartel" of the big 6 energy firms would be referred to the Competition Commission by an incoming Conservative Government. He also condemned the unacceptable lag between the cost of wholesale gas prices and household energy bills - noting that customers were on average being charged some £74 pound too much for their energy per year.

Many people, at the time, could see the benefits of an 'independent' investigation into the Energy companies refusal to pass on reductions in wholesale energy prices to customers and welcomed the promise of a long overdue 'Energy Revolution' to overhaul the energy sector billing structure and charges. All good stuff, but, and don't get me wrong here, this all sounded great, but, it does seem to have gone awfully quiet over there (in Government).

Also if my memory serves me correctly wasn't it a Conservative Government that was responsible for starting the whole sorry mess in the first place by privatising the energy market in the first place, throwing any rational energy pricing structure upon the questionable whims of the 'market' by allowing the newly privatised energy companies to price gouge customers in the first place? One reason why it may have gone quiet is that the energy cartel helps to feed the fat wallets of their Tory chums in the City?

By the look of it and energy prices are set to rise once again and while no one is disputing that the six main energy suppliers have been ever so slowly (in most cases) reducing their prices since the beginning of this year, energy bills are still too high. Consumer Focus research suggests (in October 2009) that current gas bills should have been at least 7.4% cheaper (some £60.10 annually) and electricity bills should have been at least 3.1% cheaper (£13.80 annually). I suspect that the energy companies will move pretty swiftly to raise our bills if energy prices go up again.

Now the reality is that little has changed, vast profits are still being made by the energy companies. Customer Focus's research showed the reality, that the energy companies are pocketing £1.6bn extra, despite the belated passing on of some energy cost reduction to households, little has changed and if energy prices continue to fluctuate then once again millions of households may yet struggle to make ends meet this winter.

IN THE COLD AND IN THE DARK?

That Ofgen has said that there is "reasonable doubt" about the ability of the UK's energy market to deliver sustainable energy supplies in the coming decade, should come as no surprise to anyone with half an eye on what has been going on within the energy sector over the last twenty years. Neither should it come as much of a surprise when Ofgen goes onto say that the open competitive energy market, such as it is in the UK, may fail to deliver secure, sustainable supplies in the coming decade.

This is the result of a sustained lack of Government interest in the energy sector, particularly when it comes to developing the sustainable energy sector, especially when it comes to the development of realistic storage for gas and when it comes to developing sustainable green energy resources. UK Government interest in the energy sector and this applies equally to whoever has been and is in government at Westminster, has largely been focused on spending the funds received from the energy companies and profiting from higher tax returns when energy prices and energy company profits have risen.

Ofgen has effectively admitted that as a result of the credit crunch, the ongoing problems of maintaining international supplies, and dealing with the consequences of dealing with global warming that the UK needs to look for new solutions to protect security of energy supply. Ofgen, somewhat belatedly has also suggested that the private energy companies be required to deliver more generation capacity and gas storage. Things must be bad, because the suggestion has been made that the industry should revert to a form of centralised market control, which is potentially the most significant shake up of the complacent energy sector since privatisation.

The suggestion that the energy sector needs some £200bn of investment and stronger incentives to deliver sustainable and secure energy supplies for the UK within the next ten years, may prompt many people, who have been paying higher and higher energy bills since privatisation to wonder where all the vast profits that the privatised energy companies have been tucking away have gone?

And over the longer term who has really benefited from the privatisation of the energy market, save for the Tories and their money men and banker friends in the City of London, as we face in the short term yet another cold spell and in the medium term higher energy bills and in the longer term potential energy blackouts over the next few year, I suspect that the answer may turn out to be the few at the expense of the many.

GOOD OLD UNCLE VLAD...

With the Russian Orthodox New Year rapidly approaching and with temperatures dropping; Vladimir Putin will no doubt pick his moment to revive the long standing feud with Ukraine over gas prices. This time last year the Russians decided to reduce gas exported into Ukraine, through which 80 per cent of Russian gas exports to the EU happen to flow, something which highlighted the real dangers of relying on imported energy.

So what you may say does this have to do with us? A lot is the answer, while Russia may have declining cash reserves over the long term and an economy that is heavily reliant on its trade in oil and gas – the risk of shortages as a consequence of the Kremlin and Mr Putin's geopolitical games is something we in the West can truly all do without. We are in the middle of a cold snap at the moment, and gas is the fuel that is used to heat about two thirds of Britain's homes.

On Monday (4th January 2009) the National Grid issued a warning (a Gas Balancing Alert) to energy providers that demand for gas is threatening to outstrip gas supply. This warning (the last one was sent out in March 2006) follows a 30 percent rise on normal seasonal demand as the cold snap continues. Natural Gas prices rose to their highest level in 10 months (reaching 45 p per therm) – this triggered the import of extra gas from Belgium and Norway via the natural gas (liquefied) importation terminal in Kent.

So what you may ask? Well - quite alot including the prospect of higher energy bills (because we the consumer pay for the shortsighted self interest of the energy companies), higher profits for the energy cartel (sorry companies) and more tax for Gordon Brown’s government. Now while other countries insured themselves against external shocks to their energy needs; successive UK Government’s left it to the market to sort out – so what did the energy companies do, they chased quick short term profits at our expense.

The UK’s market driven approach has been entirely inadequate. One year ago as of January 2009, France could store 122 days of gas and Germany 99 and the UK had storage capacity which would only 15 days. In the 1980’s and 1990’s developing a long term energy strategy or making sensible long term decisions in relation to energy supply was never an option for the Tories during their last tenure on government.

Likewise, the New Labour Government took the best part of a decade to recognise the need to increase storage capacity. The consequence is that UK has to sell gas during the summer because we cannot store it but UK energy suppliers often struggle to purchase gas again when it is needed during a particularly prolonged cold spell as we have at the moment.

The complicit insanity of the Conservative’s headlong shortsighted dash to gas in the 1980’s has been compounded by a real failure in basic strategic energy planning and made worse by the Government's perverse decision to half-heartily look at developing diverse reliable alternative energy sources. This New Labour Government has ignored repeated warnings that it was setting the UK on a path towards higher prices and blackouts.

As I have said before (and will say again) that as a matter of urgency the Westminster Government, the Scottish Parliament, the National Assembly and the Northern Ireland Assembly should work with the Irish Government to make these islands entirely self sufficient via renewable non market driven energy resources.

If we develop a flexible self-sufficient energy development strategy within these isles that encourages decentralised micro generation schemes and by actually implementing it this could create jobs, useful skills and help to bootstrap the economy out of the developing recession as well as helping consumers.

THE GREAT ENERGY RIP-OFF

The Energy companies have reaped a 500% increase in profits over the last five years have been quick to blame rising oil and gas prices, and quick to rake in the profits, as the average annual dual fuel bill has risen from £662 a year in 2005 to 1,048 in 2007. The New Labour Government has been happy to rake in the extra tax revenues and the Energy companies have been slow to pass on reductions in energy costs to their customers – the only real losers are the energy customers.

While Crude oil has fallen from $147 a barrel in July last year to about $70 a barrel and no one is disputing that the six main energy suppliers have not cut their prices since the beginning of the year, energy bills are still too high. Consumer Focus research suggests that current gas bills should be at least 7.4% cheaper (£60.10 annually) and electricity bills at least 3.1% cheaper (£13.80 annually). Customer Focus’s new research for the first time shows the reality, that the energy companies are pocketing £1.6bn extra, while millions of households struggle to make ends meet.

Lets be brutally honest here, what we have here is an effective monopoly on energy supply in the UK. This is a direct result over the last ten years of the number of energy supply companies falling from twenty two to six - that's the way the market works we have been told don't worry about it. Now with less that £30 differential between all of the energy supply companies, which works out to be no more than a few pence a week difference in bills, so what we have is an energy cartel which brings minimal benefit to hard pressed energy customers and maximises it's profits and which feeds the government impressive amounts of tax.

The complicit insanity of the Conservative’s headlong dash to gas in the 1980’s has been compounded by a real failure in basic strategic energy planning and made worse by the Government's perverse decision to half-heartedly look at developing diverse reliable alternative energy sources. This New Labour Government has ignored repeated warnings that it was setting the UK on a path towards higher prices and blackouts. Over the next six years almost all of our old nuclear reactors, along with nine major coal and oil-fired power stations, will be closed, with nothing ready to replace them.

We are now in the situation where we are now even more dependent upon imported gas from either unstable regions or dubious suppliers and we the customers face unnecessarily expensive bills. As a matter of urgency the Westminster Government, the Scottish Parliament, the National Assembly and the Northern Ireland Assembly should work with the Irish Government to make these islands entirely self sufficient via renewable non market driven energy resources. By developing a flexible self-sufficient energy development strategy that encourages decentralised microgeneration schemes and by actually implementing it this could create jobs, useful skills and help to bootstrap the economy out of the developing recession as well as helping consumers.

HOPING FOR A MILD WINTER...

News that Gazprom (the Kremlin controlled Gas company and an effective arm of the Russian State) has signed a big new natural gas deal with Azerbaijan, may seem of little importance as we in the UK temporarily swelter in hot weather. What it does though is strike a severe blow to European efforts to reduce energy dependence on Russia (and Russian controlled Gas supplies).

The news that Moscow will buy 500 million cubic metres of gas annually from next year is not good news from a Western European perspective and should be a spur to developing alternative sustainable energy supplies. At the moment Europe gets around 20% of its gas supplies from Russia via pipelines that cross the Ukraine, through last winter a series of increasingly bitter rows between Kiev and Moscow saw supplies being cut or reduced.

The fact that Gazprom chief executive Alexei Miller was more than happy to say that that the firm had also been promised priority in buying gas from the second phase of the Shakh Deniz Caspian Sea field, is not good news for the rest of Europe. The Shakh Deniz Caspian Sea field has been seen as a potential key source of gas for the EU-backed Nabucco pipeline, which is free from Russian control.

Back in the spring, Vladimir Putin's decision to reduce further gas exported into Ukraine, through which 80 per cent of Russian gas exports to the EU flows, should have highlighted the real dangers of relying on imported energy. While Russia has declining cash reserves and its economy is heavily reliant on its trade in gas – the risk of shortages as a consequence of Mr Putin's geopolitical games is something we can truly all do without.

While other countries have insured themselves against external shocks to their energy needs; the UK’s market driven approach has been entirely inadequate. France can store 122 days of gas and Germany 99. Yet the UK has storage capacity to last only 15 days (there is a quiet but frantic effort to change this); the New Labour Government took almost a decade to recognise the need to increase storage capacity. The consequence is that UK sells gas during the summer because we cannot store it but UK energy suppliers struggle to purchase gas again when it is needed in the winter.

The complicit greed driven insanity of the Conservatives headlong dash to gas in the 1980’s has been compounded by a real failure in basic strategic energy planning and made worse by the Government's perverse decision to half-hearted look at developing diverse reliable alternative energy sources. This New Labour Government has ignored repeated warnings that it was setting the UK on a path towards higher prices and blackouts.

Over the next six years almost all of our old nuclear reactors, along with nine major coal and oil-fired power stations, will be closed, with nothing ready to replace them. We are now in the situation where we are now even more dependent upon imported gas from either unstable regions or dubious suppliers and we the customers face unnecessarily expensive bills.

As a matter of urgency the Westminster Government, the Scottish Parliament, the National Assembly and the Northern Ireland Assembly should work with the Irish Government to make these islands entirely self sufficient via renewable non market driven energy resources. By developing a flexible self-sufficient energy development strategy that encourages decentralised microgeneration schemes and by actually implementing it this could create jobs, useful skills and help to bootstrap the economy out of the developing recession as well as helping consumers.

In the meantime, lets all hope we have a mild winter...