Comment: Why price-freeze opponents are full of hot air

The pledge to freeze gas and electricity prices for 20 months has featured in most of the headlines. Picture: AFP
The pledge to freeze gas and electricity prices for 20 months has featured in most of the headlines. Picture: AFP
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Critics of Ed Miliband’s energy vision fail to see the long-term benefits to both the market and the consumer, writes Tom Greatrex

AS the cost-of-living crisis deepens across the whole of the UK, bills, tariffs and the profits of big utilities are increasingly significant issues. When the average household energy bill has increased by £300 since 2010, it is not surprising that people are concerned.

In Scotland, the failure of the SNP to tackle fuel poverty, which is devolved to Holyrood, has resulted in fuel poverty rates twice that of England. A price freeze until January 2017 will benefit households in Scotland to the tune of £120 and the average business £1,800, but it is also the wider reforms to the retail energy market which will assist the Scottish energy sector.

Ed Miliband and Caroline Flint have set out a comprehensive plan to deliver energy that is greener, more secure and more affordable. It is a framework that will re-set the failing energy retail market, while providing a clear, long-term focus for investment for the future in Scotland and across the UK.

Unsurprisingly, the pledge to freeze gas and electricity prices for 20 months has featured in most of the headlines. It drew noisy, predictable criticisms, facile comparisons and veiled threats from trade body supremo Angela Knight. In speaking up for a minority of her members, the former Tory MP – who previously made a living defending the banking system from calls for change – suggested that the retail market does not need reform.

As Tom Burke of E3G Investment (a former Tory adviser), Anthony Nelson (a former Tory minister) and others (not necessarily Tories) have demonstrated, the market reforms that sit behind the price freeze are good for creating much needed transparency, competition and fairness in the retail supply market – all of vital importance for energy investment in Scotland.

The price freeze is for a temporary, specific and defined period to enable reforms to bed in that are far greater in their ambition and longer lasting in their effect.

Consumers are the engine of competition in a functioning market. Labour will restart that engine by returning power and information to the consumer.

On Tuesday last week, Caroline Flint announced plans to dramatically simplify bills. Under Labour, all tariffs will be presented as a regulated standing charge combined with a unit price.

By introducing a pool for energy trading, we will create a transparent wholesale market in which consumers can see what their supplier has paid for energy and make their own judgments about the value added.

The pool will also mean that companies separate their retail activities from generation, ending the practice in which companies can sell energy to themselves at inflated prices in undeclared trades, minimising retail profits in order to justify charging consumers more on their bills. Significantly, this open book approach will stop other retailers being crowded out.

We will scrap Ofgem and replace it with a new body that has an avowed commitment to making sure that consumers are not exploited and a duty to ensure cost reductions are passed on to users.

These policies will provide an immediate relief to those Scottish families and businesses that dread the sound of the energy bill landing on the doormat, or dropping into the inbox.

Beyond these measures, Labour also unveiled policies to guarantee the long-term strength of the Scottish energy sector.

Our long-standing commitment to a 2030 decarbonisation target sends a clear message to investors about the direction of the UK’s energy policy. New investment in energy infrastructure has halved since David Cameron came to office.

The proposed Energy Security Board will ensure that there is consistent and authoritative advice on the investment needed to keep the lights on across the UK while minimising our exposure to volatile international commodity markets, ensuring that we have the right balance and mix in our energy supply.

This investment will be further encouraged by Labour’s plans to create an energy pool across Britain.

By requiring that generators sell their power into a pool, Labour will create a transparent wholesale price process and will allow new players to enter the market. Those considering investment in Scotland will see that it is easier than ever before to sell their product into a market of close to 30 million consumers.

As Scottish families struggle with a deepening cost-of-living crisis, Labour have demonstrated that the best answers will come by making the retail market transparent and promoting a long-term investment framework across the UK.

As a recent Audit Scotland report highlighted, the rhetoric and the reality regarding low carbon technology in Scotland have become increasingly detached. Scotland’s leading role in the UK’s energy sector is best enhanced by protecting the links between Scottish generation and UK consumption. It provides a single, integrated system that benefits Scotland.

Taken together, these measures amount to a wide-ranging reform of the retail energy market. Long after the price freeze has lifted, this new architecture will go on delivering benefits to consumers and the industry alike.

By focusing on the price freeze as a policy in itself, critics have failed to recognise the long-term benefits that it unlocks, for Scotland and all of the UK.

• Tom Greatrex is MP for Rutherglen and Hamilton West and shadow energy minister