Ed Miliband has said Labour would press ahead with its planned energy price freeze, within months of taking office. Energy Switcheroo explores how Labour’s price freeze is likely to affect consumers.
The Labour approach to an Energy Freeze.
At Labour’s 2013 party conference, Ed Miliband stressed that an energy bill freeze, would be one of the first actions that they would implement, and could be in place, for up to 20 months. Under Labour’s plans, the regulator Ofgem would be asked to “review prices,” and given the power to instigate price cuts by the autumn. They also want the regulator to have access to energy company books, which in the past has been a very commercially sensitive area. The big companies give little away regarding when, where and how much they pay for energy.
Labour say a freeze on rising prices, should not halt any potential lowering of energy tariffs. Mr Miliband sees it as a legal duty of the energy companies to correct the present situation, considering that world wholesale energy prices are “tumbling down”. He wants to make it law that falling costs are passed on to the consumer this winter.
Labour suggests that a further cut of 10% would save an average family around £100 this year alone.
Energy companies could be forced into splitting up and pooling their energy trading. Labour sees the recent reductions by the “big six” as not going far enough, their actions only effecting gas, and not electricity prices.
Labour’s shadow energy secretary, Caroline Flint, has pointed out that energy costs have fallen by an average of 20%,which is at odds with the small reductions that the energy companies have made so far.
Conservative response to Labour’s intended energy freeze
The Conservatives have, as expected, poured scorn on Labour’s ideas, pointing at the fact that the major energy suppliers are now reducing their costs, after government pressure. The big six have reduced tariffs between 1.3% and 5.1% and it is suggested that one of the reasons they have not gone further, is the threat of a Labour freeze, should they gain power.
Chancellor George Osborne has said that Labour’s policy on energy just “doesn’t add up”. The government stance is that its energy reforms have helped develop healthy competition in the energy market, and allowed consumers to switch suppliers, in order to drive down prices.
Unrelenting pressure from politicians to pass on falling wholesale prices, seem to have forced suppliers to rethink. Figures reveal that 1.3 million customers moved from a large supplier to a small one during the past 12 months, due to dissatisfaction with high bills.
The overall view
The consumer body, Which, have confirmed that the energy suppliers have failed to keep their standard tariffs in line with wholesale prices for the past two years. An average family being approximately, £145 worse off during the past twelve months. The total not passed on to the consumer is in the region of £2.9bn, a staggering amount by any measure.
Regulators will be required to investigate if the “Big six” energy companies have in effect, prevented healthy competition in the energy market here in the UK, by their combined intransigence.
However, the final report may take up to 18 months to become available. By that time the whole world energy picture, may have changed dramatically.