Deja vu over election energy price row

Energy prices have taken an early place in the general election debate, even with a bit of deja vu.

Work and pensions secretary, Damian Green, has said the Conservatives would allow Ofgem to impose a price ceiling for customers on standard variable tariffs, saving families about £100 a year. When Ed Miliband proposed a similar cap, the media parroted the Conservative line – that such a policy was dangerous, anti-business leftist extremism. The Daily Mail carried the headline “back to the bad old days” and claimed “Red Ed revives 70s socialism”.

Now, only a few years later, May has hijacked the policy. The Mail’s coverage this time round is ludicrous. “Crackdown on energy rip-offs” they announced – “Mrs May is set to announce a cap on soaring bills”. This simply demonstrates the absence of an even political playing field, with 80% of the print media owned by five billionaires. They are desperate to prevent greater redistribution of wealth, greater regulation and other policies Labour is likely to propose for the benefit of ordinary people.

The media hypocrisy can’t hide the industry reaction and this may point to a watering down of the policy. Lawrence Slade from Energy UK, said the move would be “giving up on competition. Intervention on this scale will additionally create huge uncertainty around government intentions, potentially putting at risk the billions in investment and jobs needed to renew our energy system.”

ScottishPower’s Keith Anderson said putting an upper limit on prices could leave people who are not on fixed tariffs feeling that they have been offered some protection and so don’t need to shop around for a better deal. He reckons the key to ensuring that more energy users get the best deals lies in getting people off standard variable tariffs and requiring them to engage with the market. The best way to achieve this would be to ban SVTs.

There is some logic to his approach. The energy market has served the “switchers” relatively well in recent years, with the cheapest fixed price deals falling from £1,100 in 2014 to around £800 today. By contrast, SVTs paid by non-switchers have increased dramatically since 2006, and continue to increase.

Another tweak to the market is proposed by the Policy Exchange. They argue government and Ofgem do not have to set prices or examine the detail of energy supply costs. They simply set a cap on the differential between the highest and lowest price charged by each supplier.

However, all this really means is let’s give the failed energy market yet another chance. We shouldn’t forget that even the feeble CMA investigation identified several features of the market that were not working properly, leading to consumers paying £1.4 billion more than they would in a fully competitive market.

Labour MP Andrew Gwynne, said the Tories’ promises on energy bills should be taken with a huge pinch of salt. “The Tories don’t stand for working people. Their record is one of failure and broken promises, letting ordinary people down at every turn.” Or as Ed Miliband tweeted: “Where were these people for the last four years since I proposed cap? Defending a broken energy marketed that ripped people off.”

Hard to disagree with that!

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