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.

GAS PRICES AND GAS PROFITS

Here we go again - British Gas - owner Centrica is to raise its average prices by 6% from today (Friday 16th November 2012), they have stated that the price rises are due to costs that are out of its control. Meanwhile Centrica, with 15.8 million customers, says that required investments and measures to meet carbon reduction targets have added about £50 to the average bill. The company, which recently issued a trading update, stated that wholesale gas prices were now 13% higher this winter than last. The company will report its full-year profit figures in February 2013.

Centrica stated that average UK residential gas consumption for the first 10 months of 2012 was 9% higher than for the same period of 2011, while average electricity consumption was 1% lower. On Wednesday (14th November 2012) SSE (one of the UK's biggest energy suppliers) reported a 38% rise in half-year profits. They made £397.5 million pounds profit in the six months to the end of September, this compares with £287.4 million in the same period last year. SSE, along with most of the members of the big 6 energy cartel, raised its domestic gas and electricity prices by an average of 9% one month ago.

Plaid has long voiced its concerns over allegations that the 'Big Six' energy companies have been manipulating wholesale gas prices in an attempt to save millions of pounds. The allegations, brought forward by a whistleblower, are currently being investigated by City watchdog the Financial Services Authority, whose findings could trigger a crisis of confidence in the energy sector similar to that in the banking industry following the rate-fixing Libor scandal. Plaid is concerned that the people of Wales are suffering disproportionately as a result of the 'Big Six' monopoly due to the fact that they're less likely to switch energy suppliers and therefore receive higher bills than anywhere else in the UK.

Plaid Cymru MP Hywel Williams said:

"These allegations against some of the 'Big Six' energy companies are deeply troubling and hold the potential to prompt a fresh crisis of confidence in yet another sector of British society.

"Just as was the case with the Libor scandal where the inter-bank lending rate was fixed, claims that wholesale gas prices have been manipulated raise serious questions over scrutiny and transparency.

"Most of the 'Big Six' energy companies are already under fire having declared intentions to push up their prices before the end of the year. This will see ordinary families having to keep an even closer eye on their budgets while the eldest and most vulnerable face an increasing risk of hypothermia or malnutrition as they're forced to choose between heating and eating.

"It is clear that the competitive market fails the neediest within our society. The Party of Wales believes that utilities should be operated on a not-for-distributable-profit model, like Glas Cymru, where profits are reinvested rather than pocketed by shareholders.

EVERY LITTLE HELPS?

It has long been noted that when it comes to justice (and a fair price) for consumers the wheeels of justice can turn pretty slow and those with deep pockets can no doubt smooth the path towards compromise and delay. The Office of Fair Trading (OFT) after an inquiry into the price fixing of dairy products has hit Tresco with a £10m fine.

The supermarket giant was one of nine firms facing penalties totalling close to £50m for colluding over the price of milk and cheese in 2002 and 2003. The OFT found that Arla, Asda, Dairy Crest, McLelland, Safeway, Sainsbury's, The Cheese Company, Wiseman, and Tesco all infringed the Competition Act by co-ordinating rises in the prices consumers paid for certain dairy products in 2002 and, or 2003.

Tesco who have denied collusion with the other companies, say they will appeal have expressed "surprise and dismay" that it was included in the penalties handed down by the regulator. OFT estimates that the collusion (or unhappy coincidence) resulted shoppers paying 2 pence extra for a litre of milk and 2p extra on 100g of cheese.


The final penalties announced by the OFT were £9.39m for Asda, £7.14m for Dairy Crest, £1.66m for McLelland, £5.69m for Safeway, £11.04m for Sainsbury's, £1.26m for The Cheese Company, £3.2m for Wiseman and £10.43m for Tesco. Although Arla was found to been involved in the infringement regarding milk in 2003, it has not been fined as it alerted the OFT to price fixing and was given immunity.

While this does not sound much the regulator initially calculated that £270m extra was spent by UK consumers as a result of the price fixing, but no total figure has been included in the final report. So how much longer will we have to wait for the Con Dem Govenrment to deliever on its pre election promises of brining in a Supermarket Ombudsman?