OECD speaks out against Labour’s energy price freeze
Secretary general warns that a two year gas and electricity price fix could deter investors from the UK energy market
The Organisation for Economic Co-operation and Development (OECD) has spoken out against Ed Miliband’s pledge to freeze energy rates for two years should Labour win the 2015 general election.
Ángel Gurría, secretary general of the OECD, explained that taking away energy firms’ ability to increase prices would greatly reduce the attractiveness of the sector for investors.
Investors would ‘probably go bankrupt’
Speaking on an episode of BBC One’s Panorama programme, due to be aired tonight, Gurría said: “Who’s going to pay the difference? Well, are you going to ask the investors to take the difference? Well, you know they’ll probably go bankrupt.
“How are you going to get people to come in and invest to get their money back in 30, 40 years’ time, when you are saying there’s going to be a freeze? I think this is simply not consistent, not economically objective.”
On the other hand, Shadow Energy Secretary Caroline Flint said consumers would see the freeze as a step towards restoring trust in the energy market. She added that when wholesale energy costs dropped in 2009 these were not passed on to customers.
‘The reputation of the industry has been battered and morale bruised’
Sir Roger Carr, chairman of Centrica, which owns British Gas, recently came out against those criticizing the big six energy companies. He called for an end to the attacks and added that potential investors were unlikely to see the market in its current state as an attractive proposition.
“The reputation of the industry has been battered and morale bruised. All energy companies have been accused of profiteering, collaborating with competitors, manipulating costs to disguise profits, and caring little for their customers. These charges are false,” Carr said.
Liberum Capital recently announced that Labour’s price freeze promise had knocked between £7bn and £11bn of shareholder value in energy companies.