TIME TO COME CLEAN ON ENERGY SUBSIDIES

The recent self generated row over the green levies is a classic attempt to distract people’s attention away from the realities of energy subsidies.  As the Con Dem government denounces proposals for a two-year price freeze as "socialism" the Westminster government has guaranteed EDF and Chinese state investors in the nuclear sector fixed above average prices for energy the next 35 years.

The small print of the deal for the new nuclear power station at Hinkley guarantees the French-owned EDF and Chinese state investors a strike price of £92.50 per MegaWatt Hour (or £89.50 if a second plant is built), this is around twice the current market rate for wholesale energy. This price per unit will rise in line with inflation and is being guaranteed for 35 years – so much of the ‘free market’.

The real irony is that in the event of wholesale prices falling or rising at a slower rate than expected, then it is we, the public who will pick up the tab in the form of higher taxes or higher bills. The Energy Institute at University College London has estimated that the annual public subsidy will be around £ 800 million to - £ 1 billion pounds. This is on-top of the current £ 2.3 billion pound annual subsidy most of which ends up as a form of funding to deal with legacy nuclear waste.

The problem is that we all face is significantly down to the cumulative effect of an almost unregulated energy market and the unscrupulous activities of the ‘Big 6’ energy cartel members who will continue to maximise their profits at our expense because they simply can get away with it. The three Westminster based political parties have dropped any pretence of trying to regulate the energy market, to curb excessive profiteering or even to attempt any long term energy planning.

There is no quick fix, as energy efficiency schemes install insulation help to reduce carbon emissions and reduce fuel energy bills over the long term rather than the short term. If green levies are to be reduced, and I don’t think that they should be, then energy efficiency and fuel poverty reduction schemes should be paid for out of (progressive) general taxation - with the burden placed on higher end of the income bracket.

ED SPEAKS OUT...

According to Ed Miliband a newly elected Labour Government would freeze gas and electricity bills for every home and business in the UK for 20 months if Labour wins the 2015 election. The big energy firms would also be broken up and would be governed by a new tougher regulator to give people "a fairer deal". Eds says that this plan would will save average households £120 pounds and businesses £1,800 pounds per year and cost the energy giants some £4.5 billion pounds. Apparently the Labour leader said that energy firms had been overcharging "for too long" and that it was time to "reset" the market.

It sounds good, save for the fact the energy market that now exists under the control of the big 6 energy cartel members  came into existence when Labour were last in power (with a significant majority). Gordon Brown, initially as Chancellor and then later as Prime Minister did nothing to curb the excessive profits of the large monopolistic energy companies, so why would we seriously expect Ed do anything different.

 Potentially this is the first real break in the consensus on the profitable privatised nominally ‘free’ energy market by the Westminster focused political parties – since the late 1980’s. The big 6 have kicked off with warnings (threats) of power blackouts and a lack of investment in the energy sector and the usual former fleet street suspects have kicked off big time with ‘Red Ed’ like headlines. The ‘policy’ may have sounded good on the conference platform yesterday (naturally it did not go down well with the big 6 cartel members) but it (and Ed) did not quite have sounded so good or so convincing on BBC Radio 4’s Today Programme this morning.

The adoption of this new Labour position on energy, may seriously stir things up a bit as Cameron whatever his private (or some of the Conservative Party) feelings are on the matter cannot afford to look like the best mate of the ‘Big 6’ energy cartel members in the run up to the next Westminster General election. The problem is that in office Labour (under Blair and Brown) adopted not so much ‘a hands off approach’ as ‘a look the other way approach’ to the increasingly excessive profits raked in (at our, the energy customers expense) by the cartel members as long as the Treasury continued to receive its share of the profits in the form of extra tax.

The applecart may well be truly been upset if  the power companies cozy relationship with the political parties ends. Over the years some of the Political parties have got used to some of the perks of having a close relationship with the Power Companies – who sponsor free food at funded functions, glossy paid adverts in conference brochures, etc. One very old rule that Ed may have forgotten is that once you sell your virtue it stays sold, and once you sell your principles they stay bought and the end result is that the fabric of our democracy is damaged or tainted.

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.