“Until the Government recognises public ownership is central to addressing the crisis we face in our energy system it’s our constituents who pay the highest price, victims of a chaotic market driven not by their need but by profit.”
By Rebecca Long-Bailey MP
Households are in the midst of a cost of living catastrophe and on top of all of this, annual fuel bills are expected to rise by a whopping 54% when the current energy price cap is raised in April.
Many have called for stringent emergency temporary relief. For example the Government must cut the rate of VAT for household energy bills as soon as possible and levy a windfall tax on oil and gas companies. They must expand and increase the Warm Homes Discount, the costs of supplier failure must be prevented from going onto bills, there must be an increase in Universal Credit to offset soaring inflation as well an increase in public sector pay and the living wage.
In response to these calls, the Government has offered paltry support in the form of a £200 “discount” that consumers must pay back over the next five years, essentially loading even more debt onto cash strapped households. This will not provide the immediate cash support many people need and nor does it address the longer term problems that brought us into this crisis in the first place.
Sadly many warned of this outcome. Closing the UK’s largest gas storage plant in 2017 without a plan to replace it was illogical, we have seen paltry levels of investment in renewable and low-carbon energy and storage, and there has been no urgent national plan to insulate and retrofit homes to bring energy use down. Indeed Carbon Brief recently reported that energy bills in the UK are nearly £2.5bn higher than they would have been if climate policies had not been scrapped by Government over the past decade.
But perhaps one causal area often overlooked is the structure and ownership of the energy sector as a whole.
For years since privatisation the monopoly grid companies prioritised dividend extraction over upgrading the system for renewable energy. For example National Grid paid shareholders £1.4bn in both 2020 and 2021 and a record £3.2bn in 2017.
In terms of the energy supply market, even the Government eventually had to admit there was a huge problem with many energy customers being left on exorbitant price tariffs for years simply because the onus was on them to switch once a deal ended, rather than on the supplier to deliver energy at the lowest price possible. And now smaller suppliers are folding creating even less competition for would be ‘switchers’ to consider, leaving huge market shares for the bigger players who remain.
The Government’s response has not been to address such acute market failures but to set aside billions in public funds to prop up firms too big to fail but with no public stake in return, no reduction in household bills, and none of the benefits of public ownership.
If however our energy system was brought into public ownership we could address some of these fundamental issues. Public companies would not be duty bound to prioritise huge returns for shareholders. They could invest in the energy system, invest in renewables and use the financially buoyant times to build up reserves to protect against the types of price fluctuations we are seeing.
And the sad fact is, this is already happening all over the world. In Germany, two-thirds of all electricity is bought from municipally owned energy companies. In France, two-thirds buy their electricity from EDF, majority-owned by the French state, which also runs the grids and generates most of the electricity. What is even more galling is that EDF actually supplies and generates energy for homes here in the UK, thus generating profit for the French State, but our Government does not think it fit to have our own public energy company generating a return for people here in the UK by supplying energy both here and across the world.
And public ownership does point towards cheaper bills. A 2013 study by the Department of Economics, Management and Quantitative Method at the University of Milan, found when comparing electricity costs across the whole of Europe that public system ownership is associated with prices 20%-30% lower than private ownership. In the UK, recent research by David Hall and Vera Weghmann at the University of Greenwich showed that eliminating private energy ownership would be equivalent to a staggering 25% reduction in energy prices.
So until the Government recognises that public ownership is central to addressing the crisis we face in our energy system it’s our constituents who pay the highest price, victims of a chaotic market driven not by their need but by profit.