Miliband offers only hot air on energy

The report by Ofgem last week showed the profit margin for energy companies has risen to £125 per customer per year. It expressed concern at the rampant profiteering by energy companies. This is important - let's remember that every winter an extra 20-30,000 pensioners die due to cold-related illnesses. With prices having risen by 10-20% this will be a life or death issue for tens of thousands this winter.

The Ofgem report did not surprise us; in March 2011 we published our report 'Restoring the Public' and noted:

The unusually cold winters in the past two years, and large margins, have led to bumper profits for energy suppliers such as British Gas, whose profits rose by 24% in 2010. The regulator Ofgem has found that energy companies increased their net profit margin per customer by 38% last November, and is currently reviewing energy prices. However the case for a windfall levy now is not in conflict with future recommended reforms to regulation.

At that time we advocated a windfall tax on these excessive profits. It's clear though that seven months later, the energy companies remain unconstrained by regulation. Ofgem deliberately does not have the teeth to prevent excessive profiteering.

In retrospect our call for a one-off windfall tax, combined with the review of regulation, underestimated the problem. Let's face it: no review of regulation under the current government is likely to constrain business to benefit consumers.

Ed Miliband writing in the Sunday Mirror, continues his 'moral capitalism' theme from his Labour Party conference speech, stating "there is nothing to stop those power companies giving up those profits".

But there is! The very reason the companies profiteer is because their purpose is to maximise profits for their shareholders. Ed's plea is as asinine as Vince Cable repeatedly imploring the banks to lend more. The lesson is companies (as they are designed to do) will act in their own interest, not the public interest (unless the two happen to coincide - rare).

If Ed Miliband wants cheaper energy prices exhortations are not enough. Neither would be his other plan: "more competition". More companies will act exactly the same as the big five already do - because they will also want to maximise profits.

The only permanent solution is public ownership. If something is 'too important to fail' as the banks and energy companies are then they have to be run in the public interest - that means control.

If Ed Miliband is going to inspire voters to return to Labour he needs something that will electrify the electorate. His current gas is just hot air.

Watchdog warns of British energy crisis

From the Morning Star

Energy regulator Ofgem has warned that the current free-market model for the industry is not fit for purpose and could lead to supply shortages and spiralling fuel poverty.

Following an extensive consultation period, the watchdog unveiled a set of radical proposals for a "secure and sustainable" energy supply across Britain.

It acknowledged that sticking with the current market was "not an option" - barely two years after it declared privatisation was working - and hinted at nationalisation as a possible solution.

The report expressed "reasonable doubt" over the security and sustainability of the country's power supplies amid a perfect storm of the financial crisis, environmental targets, dependency on imported gas and the closure of ageing power stations.

It warned that failure to reform the energy system could mean power shortages after 2015, while inaction would lead to a "degree of crisis" in three or four years.

Ofgem has predicted that average household bills could jump as much as 25 per cent to nearly £2,000 without urgent action.

"The higher cost of gas and electricity may mean that increasing numbers of consumers are not able to afford adequate levels of energy to meet their requirements," the report stated.

Ofgem put forward a range of proposals it claimed would help release the estimated £200 billion Britain may need to invest by 2020 in order to ensure future supply.

The most far-reaching of these was a call for a "dramatic move away from competitive markets" and towards the creation of a central energy buyer that would set the amount and type of new power generation needed.

In short, the government could be forced to reverse Margaret Thatcher's privatisation of the energy market and renationalise the industry.

The report was endorsed by left economists, environmentalists and union leaders.

Left Economics Advisory Panel co-ordinator Andrew Fisher called for "renationalisation without compensation" and to use the surplus to secure the investment needed for publicly owned supplies that are sustainable and affordable.

"The major investment work needed has not happened despite years of massive profits and will not happen in the future," he stressed.

"The only solution is full nationalisation. The private energy companies have been ripping off consumers for long enough."

GMB national officer for utilities Gary Smith said that the report was "a death knell to the liberalised energy market. We now need the political courage to grasp this and look after people's needs."

And Friends of the Earth executive director Andy Atkins made the case for more substantial investment in renewable energy to protect the planet and our future.

"A commitment to radically reform the energy system must be a significant element of all the political party manifestos," he added.

Energy and Climate Change Secretary Ed Miliband insisted that the government was "confident" of meeting energy supply needs until 2020.

But he admitted that Britain would need more "interventionist energy policy" to deliver secure and sustainable supplies beyond 2020.