21 August 2014: Turning up the heat on the ‘big six’

Shadow energy and climate change secretary Caroline Flint gave an impressive speech today in Reading about what a Labour government would do to protect energy consumers. She repeated the pledge that Labour would freeze energy prices until 2017, noting that ‘on David Cameron’s watch, energy bills in Britain have risen by over £300 – twice as fast as inflation, four times faster than wages and faster than almost any other country in the developed world.’ She explained that during this freeze Labour would reform the energy market. Electricity generators would no longer be able to sell power to themselves, behind closed doors, and then on to consumers. Instead, Labour would ‘make all the energy companies buy all their electricity in an open pool, or exchange’. This would be a significant and effective reform, which would make it easier for new entrants to grow in the market and challenge the dominance of the existing ‘big six’ companies.

She said that Labour would give the energy regulator a new power ‘to revoke energy companies’ licences where there are repeated instances of the most serious and deliberate breaches of their licence conditions which harm the interests of consumers’. Presumably this would apply to the businesses that sell electricity to consumers, not to the generators – or to the generation part of companies that remain part of a larger group. Flint referred to the fact that this power is available to regulators in parts of the United States: ‘The Pennsylvania Public Utility Commission, for example, has the power to revoke a supplier’s licence when they break consumer protection law or when they transfer a customer without their consent’. She uses this example to demonstrate that regulation is not anti-business: ‘It is difficult to think of a more vigorously free-market, capitalist economy than the United States’. It is unusual for a British politician to be willing to learn from overseas, so Flint should be commended for her open-mindedness in this respect.

Flint repeated the proposal that Ofgem would be abolished and replaced by a tough new regulator. However, she noted that Ofgem does not use all the powers it has at its disposal. Creating a new institution does not guarantee a change of regulatory behaviour. Will the new regulator really be tougher than Ofgem? A Labour government will tell it to be, but that does not guarantee toughness.

Flint said that ‘the market has failed to unlock the investment the country needs’. But this was the only reference to electricity generation. She did not say what Labour would do to help deliver investment. And the shadow climate change secretary said nothing at all on climate change.

The accompanying briefing note, called ‘The Choice: Energy’ has nothing to say on investment or climate change. Caroline Flint has said in the past that climate change is not an issue at the front of voters’ minds. She is an excellent campaigner, and campaigning is Labour’s most important task at present. It does not matter what it says if it then loses the election. But if it forms the government in May next year, electricity generation and decarbonisation will be extremely important. So we can only hope that policy plans are being worked out behind the scenes.



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