Stronger regulation and a price freeze needed to curb power companies
Household energy bills are rising faster in the UK than in most other countries in the developed world.
New research shows that between 2010 and 2013, electricity prices rose by 23.5% and gas prices by 33.8%. Although electricity still costs less in the UK than in other EU nations the UK’s prices have risen much more sharply. In real terms, UK energy bills have risen by an average of 21% – around £221 per year. This figure does not take into account the latest round of price hikes.
In what is possibly the very worst excuse for not passing on falls in wholesale prices to consumers, the chief executive of NPower has said his firm has not reduced fuel bills because of the Labour party’s threat to freeze prices. This comes at a time when Ofgem has forecast that firms are set to nearly double the profit they make from every home. Ofgem estimate suppliers will make £102 from every dual fuel customer between now and next July, that’s up from their £56 forecast last year.
Labour has responded to NPower’s politicking by indicating that it would give a new energy regulator the power to revoke energy companies’ licences to help protect the interests of the public. Shadow energy and climate change secretary Caroline Flint accused the UK Government of presiding over a “broken energy market” and said Labour would hand a tough new regulator the capability to cancel energy companies’ licences where there were repeated instances of the most “serious and deliberate breaches of their licence conditions which harm the interests of consumers”.
She highlighted FoI figures that showed energy companies had continued to “mistreat their customers” and face another 16 probes into mis-selling, poor customer service and other bad practice, despite Ofgem issuing 30 fines, totalling more than £87 million since 2001. The new regulator would be charged with producing an annual scorecard for energy suppliers, reporting on the company’s performance and identifying areas of concern.
More pressure on companies comes from the UK government who have proposed penalties, including potential two year prison terms, for people who manipulate the gas and electricity markets. Manipulation or market abuse is very difficult to prove, but monitoring and data-collection methods are improving.
Given these developments the intervention of five former energy regulators into the debate is bizarre. They have suggested that too much regulation may have hindered competition among energy suppliers, maintaining high prices. Of course these are the very light touch regulators who contributed to the current state of the system.
The energy market has been a dismal failure and most of these developments still tinker at the edges. Stronger regulation and a price freeze is at least a step forward, but Michael Meacher MP sets out a more radical approach.
- Posted in: energy prices