Time to get serious about energy prices

Every seven minutes in the UK an older person dies of cold.

As Geoffrey Lean recently put it in the Independent; “people will die of cold in their own homes – in this, the world’s fifth-largest economy – because they cannot afford to pay the high prices charged by energy companies.”

He was highlighting the disconnect between the falling price of wholesale gas and the much smaller fall in household energy prices. If this were a competitive market, which reflected the 45% fall in wholesale prices seen over the last two years, the average dual-fuel consumer in Britain would be paying £850 or so a year, rather than the £1,100 charged to most customers on standard tariffs.  Analysts at ICIS expect that wholesale gas prices will continue to fall in 2016.

The Prime Minister meekly said that bills were “not falling as fast as I would like”. The Energy Secretary has written a stiff letter to the energy companies and Ofgem has wrung its hands as usual. Dermot Nolan, the watchdog’s chief executive said; “we really should be seeing bigger retail cuts. Bills should be cut by around £300 for the majority of people”.

And his solution? People should switch. Unsurprisingly, this was also the energy industry’s response on the BBC. The spokesperson there went as far as blaming consumers for not switching.

The much-vaunted Competition and Market Authority’s investigation into the energy market has been delayed for a second time, with provisional remedies now due in March and the final report in June. This follows the six month delay announced last September.

Maybe they are checking their sums after SSE chief executive Alistair Phillips-Davies publicly accused them of getting their sums wrong last summer when it said the big six suppliers were overcharging customers by £1.7bn a year.

Which? and Citizens Advice have been more robust: “The industry as a whole urgently needs to step up to the plate – suppliers need to play fair with customers and start passing on the major savings they have been making from cheap wholesale costs.”

The problem is not limited to the Big6. A personal disappointment to me was that Co-operative Energy has attracted the most customer complaints ever recorded by Citizens Advice in its quarterly ranking of the best and worst suppliers. The company received 1,584 complaints per 100,000 customers – 40 times more than the best performer, SSE.

Sadly, this came as no surprise to me. After very poor customer service I reluctantly switched from the Co-op. The final meter reading was then hugely overestimated and they took more than £2,500 too much from my account through Direct Debit. It has taken months to resolve and so it is easy to see why people are reluctant to switch. In fact seven out of ten consumers don’t regularly switch and would rather have a model that offers them an honest tariff, as Patrick Collinson argues in today’s Guardian.

With fuel poverty in Scotland increasing rapidly the independent experts at the Scottish Parliament Information Centre (Spice) have confirmed that the final fuel poverty budget for 2015/16 was £119 million. This is due to fall by £15 million in 2016/17 under the draft Scottish Government budget – a cut of 13%.

This is the year that fuel poverty is supposed to be eradicated by law. Scottish Labour’s policy response is what they describe as a; “ground-breaking Scottish Warm Homes Act. This will deliver important changes in planning and building regulations to further help Scotland tackle fuel poverty. We will also adopt energy efficiency as a National Infrastructure Project and we will look at ways to better support the most vulnerable insulate their homes.”

While this may address energy efficiency, I would point to another solution to rising prices – municipal ownership. Municipal engagement in energy supply could also unlock the potential of local generation and generate a much needed new source of income for local authorities. Last year, IPPR published City energy, a study of this emerging new trend. It showed that many councils are already starting to play a substantive and innovative role in Britain’s energy market – tackling fuel poverty, investing in local clean energy and benefitting the local economy.

The energy market has failed. Municipal energy as well as action on energy efficiency is the way ahead for all consumers, but most of all for those dying from fuel poverty.


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