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Labour calls for energy market reform

Pressure on consumers must be eased

Caroline Flint, Shadow Secretary of State for Energy and Climate Change

Labour will today call on the government to implement ‘real energy market reform’ in a bid to ease the pressure on consumers and guarantee a fairer deal for all.

Ahead of a Commons debate, Labour published a Policy Review detailing how it believes urgent changes need to be made to the energy market to prevent the current crisis from escalating.

Complaints close to record figures

The Policy Review documents show that since 2008 the number of people switching energy supplier has fallen by 50%.

However, with complaints against energy suppliers close to record figures, Labour says it is doubtful that consumers are not remaining with their current supplier because they are satisfied.

“Unlike most retailers, energy companies sell us a product that we all have to buy; people cannot choose to opt-out of buying energy,” it states.

“There is, therefore, a strong case for arguing that energy needs regulation of a different order to almost all other goods and services, and that even consumers who do not wish to engage with the market should be protected from being ripped off.”

Calls for a “complete overhaul”

In a week where Prime Minister David Cameron appeared to prematurely announce legislation requiring energy companies to give the lowest possible tariff to their customers, the opposition has claimed that the coalition’s promises are flimsy at best.

Caroline Flint, Shadow Secretary of State for Energy and Climate Change, said the time has come for a “complete overhaul” of the energy market.

“Labour is the party with the ideas and strength to meet the massive challenges facing the country,” she explained.

Three major objectives

She claimed that a Labour government would set out three major objectives to reform the energy market, which would first involve abolishing Ofgem and creating a “tough” new energy watchdog, which would have the power to force energy suppliers to pass on price cuts if wholesale costs fell.

Energy companies would also be required to pool the power they generate and to make it available to any retailer, thereby opening up the market and boosting transparency.

Finally, it would become mandatory for all energy companies to put over-75s on their cheapest tariff, saving up to four million pensioners as much as £200 a year on the cost of their energy bills.

Market ‘dominated’ by the Big Six suppliers

In the Commons today, Labour will set out these proposals and also highlight that energy bills have risen by more than £200 since May 2010, with further price rises set to follow.

The party will call on the coalition to reform the energy market in order to break the “dominance” of the Big Six suppliers, by ordering them to sell energy into a pool, enabling new businesses to enter the market and thereby increasing competition.

This would in turn help to drive down energy bills for all – something complemented by the creation of a new regulator, which would ensure bills do not rise unnecessarily again.

The Labour review documents show no new entrant to the energy market has achieved anything close to the scale of operations that the Big Six currently enjoy.

Scope for greater efficiencies

Although energy companies regularly claim that electricity and gas prices in the UK are among the lowest in Europe, this only applies when tax is included, due to the country’s comparatively low tax levels for gas and electricity.

“Tax is a government instrument, not a feature of market efficiency. When tax is not included, the UK compares much less favourably,” the Policy Review states.

Last year, UK electricity prices were 5.3% higher than the EU-15 and G7 median and 19.1% higher than the EU-27 median, while UK gas prices were above the EU-27 median – suggesting there is definitely scope for greater efficiencies.

Consumers need protecting

Ms Flint said it is clear that more needs to be done to benefit consumers and ensure they are getting the best possible deal from energy suppliers and the government.

“Families struggling with soaring energy bills and facing more price rises this winter deserve better than this shambolic government and clueless Prime Minister.

“We need a One Nation government to break the dominance of the energy giants, protect vulnerable customers from being ripped off and create a tough new energy regulator with the power to force energy companies to pass on savings to consumers.”

  • When will you build gasometers to store gas as it was many years ago in order to keep prices at an affordable level.The reliance on Russian gas etc to keep us warm beggars belief.Only in the UK can we have foreigners running the utilities.What madness.