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Could Political Point Scoring Leave the Energy Sector Dead?

By 29th October 2013May 17th, 2022No Comments

Was the leader of the opposition’s attack on the energy companies blatant electioneering or does the talk of a shake-up of the sector have any merit in a global industry that is driven by the free market principles of supply and demand?

Auditel, one of the UK’s leading cost management consultancies, draws on the knowledge of energy experts David Lowe, Ian Hopping and Ian Lessen to discuss why Ed Miliband’s pledge isn’t the answer.

It’s the view of the Auditel energy specialists that the suggestions are politically charged, unworkable and offer little detail or substance. They suggest that Miliband’s proposal would most likely lead to unsustainable and loss-making energy retail businesses, a lack of investment in the energy infrastructure and the option to inflate prices before the freeze to recover potential lost profits. In addition, they speculate that thousands of jobs could be put at risk across the industry and there could be a knock on effect resulting in a reduction in investment into greener energy sources.

On the subject of price fixing, Ian Lessen says: “Ed Miliband pledged that if elected Labour will freeze energy prices for domestic and business users until 2017. For those of us old enough to remember, income and price fixing was tried in the 70’s and it was a catastrophe.” Whilst Ian Hopping thinks that: “the proposals are unworkable and could lead to potential power cuts and blackouts.

David Lowe criticises the Labour leader’s insight into the complexities of pricing: “You can’t buck the market, particularly when it is an international market. We are physically integrated with Europe for both electricity and gas, the wholesale energy price is an international commodity, not a political determinant. I wonder if Mr. Miliband realises that prices for electricity vary daily depending on all manner of influences, such as the amount of wind in Germany, resulting in expensive coal-fired generation needing to be turned on or off at short notice? Such are the daily, monthly and seasonal complexities of the energy market.”

Hopping adds: “It is also worth remembering that political intervention into the energy markets over the last 12-months has resulted in near crisis. Labour’s pledge is set against the backdrop of the UK being six hours away from running out of gas during the cold weather last March, talks between Centrica and the current government over gas storage facilities breaking down and EDF’s continued uncertainty over whether to go ahead with building a £14bn nuclear plant at Hinkley Point in Somerset.

So what could our politicians do? “We would like to see some simple measures implemented such as a clampdown on rogue energy brokers and an enforcement of miss-selling penalties. The regulations are already in place,” says Lowe, adding: “Westminster could also review its policy on carbon taxes and if it really wants to regulate then set up a commission to look at speculation in the wholesale market rather than assumed profiteering in the retail market.” Whilst Lessen suggests: “Encouraging a better understanding of consumption amongst users is still also needed together with a better understanding of the environmental issues surrounding energy”. Perhaps most importantly, the experts agree that if politicians want to take the UK’s energy issues seriously then they should avoid cheap political point scoring and stop taking risks with our energy for the sake of short-term political gain.

Auditel are recognised as market leaders in cost management. Over the last 20-years its energy management programme has been built on this enviable track record. The holistic approach provides organisations with a complete solution to their energy needs, from procurement of services and management of consumption through to strategic planning and the implementation of complex energy management programmes, including facilitating access to Government subsidies such as Feed-In tariffs and the Renewable Heat Incentive.