Ed Miliband hits back at energy firms over prices plan

 

Ed Miliband: ''We've got to tackle the cost-of-living crisis''

Ed Miliband would "take action" against energy companies if they defied a Labour government by raising prices ahead of his promised freeze.

The Labour leader has pledged gas and electricity bills would not go up for 20 months if he wins the 2015 election.

It has been welcomed by consumer groups angry at price hikes over recent years, but the "big six" suppliers warned it could have serious consequences.

Energy Secretary Ed Davey, a Lib Dem, said it risked "the lights going out".

Mr Miliband told the BBC the UK had "a market that isn't working" and, as the row between Labour and the energy firms escalated, he dismissed them as "unreliable witnesses" after they claimed possible blackouts.

He has written to the big six suppliers warning that without changes, taxpayer-funded guarantees to energy firms might not be sustainable.

The plan for a freeze on household and business energy bills between June 2015 and the start of 2017 was the stand-out announcement of Mr Miliband's party conference speech on Tuesday.

'Overcharging'

The Labour leader argued firms had been "overcharging" customers for many years and millions of households would benefit from the temporary cap on prices at a time when finances were under acute pressure and many were struggling to heat their homes.

Labour says the move will save average households £120 a year and businesses £1,800.

When the lights went out - the BBC reports on California's energy blackouts in 2001

Mr Miliband insisted he wanted energy suppliers to be successful and to continue to invest in new capacity to supply the UK's long-term energy needs.

But he said "public consent" for these arrangements depended on consumers getting a fair deal and that could happen only if the energy market was totally restructured to separate firms' generating and retail operations.

'Patently absurd'

Speaking to BBC News he said: "I've written a letter to [the energy companies] this morning saying there's a crisis of confidence in the system.

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"It's time we fixed it and they can either choose to be part of the problem or part of the solution. I hope they choose to be part of the solution."

Rebutting claims that to protect their profits, suppliers would merely put their prices up ahead of Labour's freeze, Mr Miliband said he would "make sure this is a genuine freeze that works for consumers".

"If we have to take action to make sure that happens, we absolutely will."

The party has rejected suggestions the cap, which could cost energy firms £4.5bn, will endanger much-needed investment in new plants, saying suppliers should be able to absorb the cost of the freeze out of recent profits.

Responding to suggestions the policy could lead to energy blackouts, Mr Miliband accused the industry of spreading "scare stories".

Shadow business secretary Chuka Umunna added the claims were "patently absurd" and "nonsense" put about by the large energy companies.

Since 2007, gas bills have risen by an average of 41% in real terms, while electricity has gone up by 20%, according to the Office for National Statistics.

Energy profits

The "big six" - British Gas, EDF, E.On, npower, Scottish Power, SSE - made total net profits of:

2009: £2.15bn

2010: £2.22bn

2011: £3.87bn

2012: £3.74bn

This has contributed to overall industry profits of £2.15bn in 2009, £2.22bn in 2010, £3.87bn in 2011 and £3.74bn in 2012.

But suppliers say prices have gone up to cover their rising environmental and social obligations and in response to commodity price rises - sums paid on wholesale markets.

Speaking at a fringe meeting on Tuesday evening, a senior British Gas executive suggested such a direct price intervention could "threaten energy security in the UK".

"If we have no ability to control what we did with the retail prices, and that (wholesale price volatility) was to happen again, it would mean we are selling products at significant amounts of a loss and that would threaten energy security in the UK," said Ian Peters.

Asked whether it could mean "the lights could go off" he replied: "I think that is a risk."

'Economic ruin'

Energy UK, the trade body representing the six largest energy firms, has described the price freeze as "superficially attractive" but suggested it could bring a halt to future infrastructure projects.

Chief executive Angela Knight said: "It will also freeze the money to build and renew power stations, freeze the jobs and livelihoods of the 600,000-plus people dependent on the energy industry and make the prospect of energy shortages a reality, pushing up the prices for everyone."

Centrica's boss warns that the plan could lead to firms' "economic ruin"

And the chairman of Centrica - British Gas's holding company - said a firm unable to control either its costs or its prices was potentially in danger of "economic ruin".

"We are all concerned about rising prices and the impact on consumers, but we also have a very real responsibility that we find supplies to make sure the lights stay on," Sir Roger Carr said.

Energy Secretary Ed Davey said: "Fixing prices in this way risks blackouts, jeopardises jobs and puts investment in clean, green technology in doubt.

"Ed Miliband made a significant contribution to tackling climate change with the 2008 Climate Change Act. But he is putting this all at risk with his ill thought through plan which will put off investors in low carbon power generation."

Asked on BBC Radio 4's Today programme whether a Labour government would step in if a firm went bust, Mr Miliband said: "That's not going to happen."

But he added: "Of course if there was a major shock, companies could make their case."

Energy regulator Ofgem, which Labour plans to replace after 2015, has suggested legislation would need to be passed to change pricing arrangements.

In his speech, Mr Miliband also promised Labour would build 200,000 new homes a year by 2020 and enfranchise 16 and 17 year olds.

 

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  • rate this
    +248

    Comment number 126.

    We must not forget that Miliband was Labour Energy Minister when price rises started because of his policy of taxing energy firms to subsidise green energy plans. He had his chance when Labour had power and messed it up then and let us not forget which party/govt got us into this mess in the first place!

  • rate this
    +19

    Comment number 125.

    If Ed every gets into power this will be another promise he fails to deliver against when he realises how ridiculous it is.... or is he actually just stupid

  • rate this
    +9

    Comment number 124.

    Having recently alienated swathes of union voters, this is a tacky attempt by Miliband to net voters. Such an amateur.

    I agree too with an earlier post that this is very poor journalism. What are the facts regarding wholesale prices, margins, competition, regulation, investment etc? Do your job BBC - after all you are riding the biggest, subsidised gravy train of all.

  • rate this
    +7

    Comment number 123.

    Use all that stuff at Seascale and get at our coal reserves using the German method. Can't expect today's politicians to do what needs to be done for the good they've been infected by whining greenie virus. To keep the lights on and streets safe we need a new more practical political class.

  • rate this
    0

    Comment number 122.

    Which firm is going to walk away from the sort of vast profits the energy companies of this country make? I'm sure they can afford to give a little back whilst still being paid to invest in future energy needs.

  • rate this
    +2

    Comment number 121.

    This is a mental idea which will result in people losing their jobs and investment in renewable energy frozen!

    In case Labour hadn't realised the energy companies are private sector organisations!

    If I was an investor I would be shorting energy companies the moment this is set in stone!

  • rate this
    +2

    Comment number 120.

    "Ed Miliband would "take action" against energy companies if they defied a Labour government by raising prices ahead of his promised freeze"

    Is this bloke for real?

    Who does he think he is? The King of England?

    If he legislates, then the energy companies have no choice but to comply.

    But if he doesn't legislate, they can just stick two fingers in the air..... and they probably will!

  • rate this
    +65

    Comment number 119.

    All I know is energy bills are soaring and coupled with the increasing price of food, people are struggling and becoming desperate. Something is going to have to give sooner or later.

  • rate this
    +4

    Comment number 118.

    If Ed is serious about energy prices, he should renationalise out energy industry, scrap those expensive renewable energy plans and build more nuclear power stations, instead of making promises he can't keep.

    Before the last election Clegg pledged LD'd vote against any increase in student fee... well we all know how that turned out.

  • rate this
    +150

    Comment number 117.

    This sounds great but it betrays a fundamental lack of understanding about global energy markets. Having worked in this for near enough 30 years I'm aghast at Ed's lack of grasp of reality.

    Remember...the UK energy market is already delivers amongst the lowest prices in the developed world.

    It may please his disciples but it will make the Pasty Tax look positively well thought-through!

  • rate this
    +3

    Comment number 116.

    It's a tough one. Whilst the energy companies are making increasing profits, this could very well be another example of a politician making promises and taking actions that totally ignore and undermine what the 'experts' (with vested interests) say.
    Either listen to the energy company executives, or the politicians. Talk about stuck between a rock and a hard place.

  • rate this
    -32

    Comment number 115.

    I've never been a Labour supporter, but he's saying things I agree with and setting out policies I would vote for.

    And I thought he looked better than ever in his big speech.

  • rate this
    -5

    Comment number 114.

    The purpose of her majestys opposition is to oppose. Every government needs an effective opposition. Thats what he made a start with yesterday. It really is time somebody stood up to this price fixing cartel on behalf of the people. Lets hope it concentrates the coalition " minds"

    RAIL FARES NEXT!

  • rate this
    +8

    Comment number 113.

    According to this article, industry profits nearly doubled in 2011. Are we expected to believe that all these companies became twice as efficient in one year? Ofgem is a joke. Strong action against these parasites is long overdue.

  • rate this
    +20

    Comment number 112.

    Well done Ed, true to the old Labour communist form. Promise everything, deliver nothing, and blame everhone else when it goes wrong (which it will). Energy companies deliver essential services, employ many people and pay lots of tax themselves. All this and make a profit. If this was state controlled it would cost twice as much and be half as efficient. This has been proven many times.

  • rate this
    +6

    Comment number 111.

    Sounds like a political gimmick to me and another case of blaming business for the mess which politician have created

    And the facts get in the way of the rhetoric


    UK electricity prices are in fact cheaper than every other western European country, other than France of course which has mostly nuclear generation.

    http://www.energy.eu/

  • rate this
    -2

    Comment number 110.

    Nationalise essential services such as gas, electricity, water and rail and start looking after the people, not greedy shareholders.This is not the 1960s. Employ excellent, accountable, removable board members and lean-manage these utilities.

  • rate this
    +5

    Comment number 109.

    Lets say I'm a village baker. People need bread and will pay whatever I decide or go hungry. But charge too much and I'll be regulated so I buy the mills that make the flour. Now I have my mills sell flour to my bakery at inflated prices. I can then explain to customers that it's not my fault bread is expensive, sadly flour has risen in price and my poor bakery is making only modest profit.

  • rate this
    +3

    Comment number 108.

    Such hypocrites..... for the Labour Party to blame energy firms is a disgrace, because of them, UK consumers will be paying for energy in Spain to help Britain meet green targets.....they are the ones that have added to our bills!!!!! What makes this worse is no jobs for the UK and no other benefits

  • rate this
    -2

    Comment number 107.

    Capitalism is self correcting. High profits attract more competition which increases efficiency and ultimately brings energy prices down. Interfering with it is only going to make living standards worse. The "£120 households save on energy" can only in the long run be paid for by the same households.

 

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