It's about time someone took on the energy companies

Donna Hume

26 September 2013

I'm just back from Brighton, where Ed Miliband has set the Big Six energy companies in a tizz by announcing that a Labour government would freeze energy bills for 20 months after the next election.

And surprise surprise, the energy companies don't like it. The first thing they say will have to go if they are forced to freeze prices is investment in clean energy. Projects like new wind turbines, energy storage and wave power.

An interesting response. What about profits? Which have increased by 74% in 2 years. Or executive pay? With the British Gas' parent company's CEO taking home £36 000 a week, after tax. Or what about a bit less investment in climate-changing fossil fuels?  

The truth is the Big Six energy companies have for too long kept us hooked on increasingly expensive and polluting fossil fuels while making record profits - and to deliver an energy system that works for people, you have to be serious about taking them on.

This is what they don't tell you: once renewable energy projects are built they pretty much run for free. There's no charge for the wind or rays from the sun. This pushes the wholesale cost of electricity down, which in turn makes fossil-fuel generated electricity less profitable. This has already started to happen in Germany, where they get about 25% of their energy from renewables. The rising price of gas, on the other hand, pushes prices up. And profits have been going up alongside it. For those with big gas, oil or coal investments, renewable energy is as good for your profits as helping your customers use less energy. Fundamentally, you using less energy means they can sell you less - which is perhaps why it's not the best idea for the energy companies to be delivering Government programmes to insulate our homes.

A report last year by Bloomberg Energy Finance for Greenpeace found that most of the Big Six energy utilities haven't been investing money from customer bills in a way that brings energy prices under control and secures a clean energy supply for the UK. It found that since 2006, £13 billion has been spent by the Big Six energy utilities on 14GW of new electricity generating infrastructure, and over half of this has been new gas plant.

They have invested so little in green energy that if you have a solar panel on your roof, you're part of a group of small-scale solar power owners that together own more renewable capacity than any of the Big Six.

Building new gas is bad for bill payers as well as the planet because the price is going up. Ofgem found that of the £150 increase in the average dual fuel bill between March 2011 and March 2012, £100 was due to the rising wholesale cost of energy, largely driven by the increased price of gas.

And if keeping us hooked on rising gas prices wasn't bad enough, Consumer Focus have found that when the gas price does go down, the energy companies are slow to pass the savings on to consumers. However, even the Confederation of British Industry agrees that, in the future, the only way for gas prices is up.

This is why Miliband's much less reported pledge this week that electricity would be pretty much carbon-free by 2030 under Labour is so significant. And not just for the climate. It's something hundreds of businesses, environmental organisations, unions, faith groups and climate experts have been calling for, for almost 2 years. In fact just about everyone has been calling for a clean power target, minus George Osborne. And, of course, most of the Big Six energy companies.

With a quarter of households now struggling to pay their energy bills, a freeze on prices will be attractive to billpayers. The detail of how it will work will be important. But crucially to solve the problem in the long term: we need a switch to clean, renewable energy and a nationwide programme to insulate every heat-leaking home, as well as allowing every community to generate its own green energy. Not only would this keep bills under control, it would also go a long way towards a routemap to the one million green jobs that the Labour leader also pledged. But this cannot be done overnight, and a price freeze could give much needed breathing space for those struggling to pay bills while long term solutions are put in place.

Labour still has to show it is serious about these crucial reforms, having missed the opportunity to properly tackle our inefficient housing last time round.

It's also apparent it can't be done without standing up to the Big Six - and that's exactly what Miliband has now made it clear he will do. Politicians from all parties that believe in an open, affordable and clean energy market would do well to follow his lead.