Ed Miliband defends Labour energy prize freeze plan

Ed Miliband wrote to the 'Big Six' yesterday, urging them to back his plans. Picture: Reuters

Mr Miliband wrote to the “Big Six” yesterday, urging them to back his plans after claims his proposals would lead to falls in investment in the sector, and even blackouts.

Energy giant Centrica has said it will stop selling energy in the UK if the proposals go ahead and a senior British Gas executive said there was a risk the lights could go off in the UK.

Westminster’s Energy Secretary Ed Davey also warned that fixed prices risk “blackouts, jeopardise jobs and put investment in clean, green technology in doubt”.

Shares in Centrica fell by 5.3 per cent yesterday, while shares in Swalec owner SSE fell 5.8 per cent. But Mr Miliband, whose announcement in his party conference speech on Tuesday has dominated the political agenda since, said he was standing up for ordinary people. It is estimated the proposal, which would see energy prices frozen between May 2015 and January 2017, would save the typical household £120 and an average business £1,800, at a cost to the industry of £4.5 billion. In that period, the energy market would be reformed under Labour’s proposals, with the break-up of companies that provide energy and those that sell it.

Mr Miliband said there was already “a crisis of confidence” in the energy sector and insisted he would not tolerate attempts to undermine the policy through “scare stories”.

Writing to the Big Six, he said: “You and I know that the public have lost faith in this market. There is a crisis of confidence.

“We face a stark choice. We can work together on the basis of this price freeze to make the market work in the future. Or you can reinforce in the public mind that you are part of the problem not the solution.”

The Labour leader later added: “We will have scare stories from the energy companies, like we had scare stories from the banks – threats, scare stories about regulation. I’m not going to tolerate that. The Conservative Party will support them, but I’m in a different place. I’m standing up for the British people.”

Mr Miliband said he would support David Cameron if he implemented an immediate freeze. But the proposal has already led one of the UK’s biggest energy suppliers, Centrica, to warn it would not continue to operate parts of its business in the UK if Labour goes ahead with a bills price freeze in 2015.

Centrica, which owns British Gas and supplies energy to 12 million UK households, said the company could not afford to continue selling energy in the UK if the policies went ahead.

“If prices were to be controlled against a background of rising costs, it would simply not be economically viable for Centrica, or indeed, any other energy supplier, to continue to operate and far less to meet the sizeable investment challenge that the industry is facing,” it said.

“The impact of such a policy would be damaging for the country’s long-term prosperity and for our customers.”

Centrica chairman Sir Roger Carr added: “We are all concerned about rising prices and the impact on consumers, but we also have a very real responsibility that we find supplies to make sure the lights stay on.”

And in a letter, E.on chief executive Tony Cocker wrote: “Successive governments have collected taxes for different schemes through energy bills and this has added extra pressure and is a factor in why bills have risen over a sustained period of time. All politicians, from all sides, need to acknowledge that fact. At a stroke, you could remove a large cost from energy bills simply by moving these costs to general taxation.”

Speaking earlier, senior British Gas executive Ian Peters also suggested price intervention could “threaten energy security”.

He added: “It would mean we are selling products at significant amounts of a loss and that would threaten energy security in the in the UK”. Asked if that meant “the lights could go off”, he said: “I think that is a risk.”

Lib Dem Energy Secretary Mr Davey also warned of the risk of blackouts. He said: “Fixing prices in this way risks blackouts, jeopardises jobs and puts investment in clean, green technology in doubt. Ed Miliband made a  significant contribution to tackling climate change with the 2008 Climate Change Act. But he is putting this all at risk with his ill-thought-through plan which will put off investors in low-carbon power generation.”

Tory business minister Matthew Hancock claimed Labour’s policy was “unravelling” and the government’s approach of requiring firms to offer customers the best tariff was a much more “credible” way forward.

However, Ramsay Dunning, general manager at Co-operative Energy – which bills itself as an alternative to the main suppliers – said it was “no surprise” to see the Big Six objecting to Mr Miliband’s pledge to freeze energy prices from 2015 until 2017.

He said: “The British energy industry has been in the grip of a stranglehold by these companies for too long. It doesn’t have to be this way and something has to change to help customers who are not only confused and deprived of real choice, but unable to pay their energy bills.”