CEO James Constant explains why Ed Miliband’s energy price freeze promise creates false hope and an unworkable solution in the continued struggle to create meaningful and executable energy policy.
As an organisation focussed on improving energy market conditions for businesses we are working with the government to remove the worst excesses of business energy suppliers.
Moving those suppliers away from rollover contracts, opaque terms, and poor customer communication is no mean feat but we have now achieved that.
This is something to be applauded by all the political parties.
It is therefore unfortunate that Labour has chosen to overlook these improvements and instead make unrealistic and unworkable promises.
Quite simply, whatever the frustrations with energy suppliers, price freezes, back door nationalisation and state intervention in markets is an appallingly silly thing to want to happen.
Simple unbiased economics will lead us to the obvious consequences:
- Price freezes will be at a price that is palatable to the suppliers’ needs or in other words higher, unpalatable prices for customers
- Customers will be faced with a take it or take it choice. One price, no innovation, no competition
- Suppliers themselves will attempt to retain margin by whatever means. Their biggest cost after energy? Their workforce.
Good call Ed.
And if to do this Milliband thinks he can trade in the wholesale market better than energy suppliers and drive the price centrally then we can all expect our taxes to rise to subsidise government energy trading.
As unworkable as it is unwelcome this is a grossly unfair ‘promise’, deluding customers, giving false hope to small businesses and driving prices up for all.
The irony surely won’t be lost on the business market that state intervention is the recipe for the day from a potential future Labour administration.
Contrast that with our moves to simplify and increase transparency in the business energy market:
For the first time the majority of business energy customers have total freedom of movement at contract end to decide the best fit contract for them at a time that suits them safe in the knowledge that a) the market is innovative and competitive and b) that they can exercise their rights without being trapped by the dreaded rollover.
I am proud to have both highlighted this issue and worked with the government and a cross industry group put together at the request of the PM to bring about this change.
Labour should have focussed on this recent and long overdue achievement and how to optimise its impact rather than tub-thump the silliest silly season statement of all.
Cue energy suppliers putting up the barriers again and cooperation for market improvement being horribly compromised if not killed for good. This is a huge own goal for Miliband; let’s hope he hasn’t scored an even bigger one for UK business.
Let’s get back to the real debate on the future of a fair energy policy for all and leave the playground politics for less important issues.
The Background
Labour has pledged to freeze electricity and gas prices until 2015 if the party wins the next general election. Speaking at the party conference on Tuesday 24 September, leader Ed Miliband said that, while they would not welcome the move, companies in the sector had been “over charging people for too long because of a market that doesn’t work”.
Shadow energy and climate change secretary Caroline Flint pledged on Tuesday 24 September that a Labour government would break up the Big Six. Speaking at the party’s autumn conference, she said: “The power stations will be separated from the companies that send you your bill. Just as the banks will have to separate their investment and trading arms from the high street branches, so we will make the energy companies separate their production from the companies that supply your home.” Confirming the party would also support a single unit price, Flint said Labour’s proposals amounted to the most radical, comprehensive energy reforms since privatisation”