Energy bills: Ed Miliband promises simplification on top of price freeze
Ed Miliband will pledge on Friday to “reset the broken energy market”, promising that all energy bills will be simplified and use the same method to explain the cost of energy per unit and the precise standing charges. The idea is one of many laid out in a green paper on energy, including the implementation of its plan for a 20-month price freeze. Labour hopes its proposals will keep the pressure on the government over rising energy prices.
The green paper also sets out plans for how energy profits and trading can be made more transparent, and says firms’ retail and wholesale businesses should be separated as distinct legal entities.
Labour also develops its idea for a new energy security board, which would be responsible for ensuring the UK’s energy resources do not run out. It would take over the current responsibility from the National Grid and the current regulator.
Miliband achieved a political breakthrough with his promise at the Labour party conference to freeze energy bills for 20 months from June 2015 as a stop-gap pending reform of the market. Labour claims its price freeze will be worth £120 a year to the average household, but also suggests bills could be cut further if the so-called green levies were simplified.
Energy UK – the trade association for the energy industry – said it will debate Labour’s plans but has said they must be real ideas, not soundbites.
Miliband and the shadow energy secretary Caroline Flint do not address what measures they would take in emergency legislation to prevent energy firms circumventing a price freeze through pre-emptive price rises, either before Labour takes power or after the 20 months end.
Instead, in the most consumer-friendly commitment of the proposals, Miliband promises a simplified tariff structure involving a daily standing charge set by the regulator and a cost per unit for energy.
The unit price, Labour says, “will need to reflect the cost of paying by direct debit (the most common and lowest cost payment method) with any surcharges a supplier chooses to levy on other payment methods. Energy firms would be required to impose the same surcharge for direct debit.
“In addition, any discounts that apply to dual fuel or online customers should be presented as a universal amount priced in pence and pounds and available on all tariffs offered by a supplier.”
Miliband also promises to end the murky world of energy firm accountancy by requiring the companies to present their accounts with additional information showing retail, distribution, generation and trading activities as if they were separate companies.
Under the proposals, trading businesses will also be required to show the regulator what they are trading and the basis of their profitability, while energy generators will also need to show the regulator the average cost of their fuel, and the proportion bought in an intra-group trade.
The green paper claims “lack of competition in the retail market has resulted in consumers paying £3.6m more than they need to each year”.
Similarly a lack of transparency in the wholesale market has led to a growing gap between retail prices and wholesale costs. Since 2011, wholesale costs have risen by an average of 1.6% a year according to one supplier but retail prices across the industry have grown 10.4% a year.
Labour says the growing gap between wholesale and retail prices cannot be explained by the growth in network or policy costs which account for 20% and 9% of the bill respectively.
The green paper says: “The big energy companies can supply most of their domestic and small business customer base from their own generating capacity, so they have less incentive to trade in the open market. Where companies do self-supply, there is little transparency on pricing.
“Self-supply also lowers the volumes being traded, which reduces liquidity in the wholesale market and the availability of products for other market participants.
“As a result, independent generators find it difficult to secure long-term deals to sell their generation, which in turn inhibits future investment.”
The green paper even suggests there could be a ban on cross-subsidy between the generation and supply activities within the same group.
All market participants would also be required to trade 100% of their output a day.
To prevent wholesale price fixing in over-the-counter (OTC) trading of the kind alleged by the Guardian earlier this year, Labour says it “will require all participants in uncleared OTC gas and electricity trading to allow OTC brokerages and platforms to publish anonymised details of all transactions”.
Reforms to green levies are also proposed so local authorities, as opposed to energy companies, effectively “blitz” specific geographical areas with support for energy-efficiency measures.
Analysis by IPPR suggests that, for the £540m currently spent on low income households under Energy Company Obligation, an area-based scheme could cover 117,000 more households a year than under the ECO model.
On Thursday night it was reported that the government was asking the big six energy firms to hold prices until 2015, barring any major increase in wholesale fuel costs. Citing industry sources, the BBC said the government wanted to avoid another round of price rises that could be blamed on government green levies.
Fonte: theguardian.com
