Tom Greatrex: Thousands feel the chill as energy giants profit

With David Cameron’s confused intervention in the debate about energy prices, he was clumsily seeking to respond to an issue of huge concern to many people throughout Scotland, and in the whole of the UK.

A YouGov survey found that the biggest economic concern for households in Britain is rising energy bills. Four of the “Big Six” energy companies, which dominate 99 per cent of the retail market, including SSE, Scottish Gas and Scottish Power, recently announced big rises in energy bills. The average cost of gas and electricity for households in the UK is now more than £1,300 a year, and has increased by £200 in the last two years. When you consider that the owner of Scottish Gas made £1.45bn in profit in the first half of 2012 alone, it is difficult for consumers to understand why they are paying through the roof to keep their homes warm as winter approaches.

More than 650,000 households in Scotland live in fuel poverty, which means they pay more than 10 per cent of their income on energy bills. To the shame of the SNP, which has had devolved responsibility for addressing fuel poverty since 2007, this is higher than any other part of the UK and almost double that of London.

Improving energy efficiency is very significant in reducing fuel poverty, yet the SNP’s primary focus is elsewhere and Alex Salmond is, for some reason, uncharacteristically reticent about rising domestic energy bills.

The reality is that there is a fundamental problem with the energy market which currently does not work in the public interest.

When wholesale costs rise, energy prices go up like a rocket. Yet when these costs fall, energy prices drop like a feather. It’s unfair on the consumer and must be reformed. Rather than standing idly by on the sidelines, making up policy on the hoof which then unravels within hours, it is time the government took some action to help families and businesses already struggling to keep their heads above water.

Labour has set out three clear policies that would provide support for consumers, reduce the dominance of the “Big Six” and introduce much-needed transparency in how energy prices are set.

We would abolish the energy regulator Ofgem. It is no longer fit for the purpose, and is failing to provide consumers with the protection they need. In its place, Labour would create a new watchdog with the specific power to clamp down on abuses by the energy giants and force them to pass on price cuts to consumers when wholesale costs fall. Only with a regulator the public can trust will there be confidence that the interests of the hard pressed consumer are paramount.

Labour also believes that those over 75 should automatically be placed on the cheapest tariff available. This age group contains some of the most vulnerable people in our society. A significant number are without access to the internet to shop around for the best deal, and many don’t have a bank account to sign up to cheaper direct debit packages. It is intolerable that thousands of pensioners die each year as a result of cold weather. Part of a fair and just society should be about caring for our elderly folk, and Labour’s policy is one way of doing that.

But, more than anything, we need root and branch reform of how the energy market operates. At the moment, companies like Scottish Gas generate their own power and sell it on to themselves and each other, which eventually makes its way into our homes. There is so little transparency about this process that it is virtually impossible to know what the true cost of this is, and whether claims by energy companies about the impact of wholesale costs and the reinvestment of profits are accurate.

That is why Labour is proposing a more transparent system, where energy is bought into a pool. This would stimulate more competition in the energy market, break up the crushing dominance of the “Big Six” and introduce a level of openness which has hitherto been missing.

Public trust in energy companies and the willingness of government to stand up to them is at rock bottom. Whilst Cameron and his out-of-touch ministers do nothing to tackle rising prices, on Salmond’s watch Scotland has become the fuel poverty capital of the UK. Energy bill payers in Scotland need help from both governments at a time like this, but at the moment they are being let down in the worst way.

• Tom Greatrex is the Member of Parliament for Rutherglen and Hamilton West and Labour’s shadow energy minister