December 18, 2013
Cameron, Miliband brawl OVER energy ratesWednesday, October 23, 2013
Who’s got the power?
Report from UK for the Herald
LONDON — When Ed Miliband announced the proposed bill to freeze energy prices at the Labour Party conference in September, the opposition leader forced the issue back into the light. His supporters cheered Miliband’s bold move against the private companies squeezing consumers, while the same companies slammed the move as unsustainable and poorly thought-out.
Meanwhile, the Conservatives described the announcement as a cynical, vote-mongering tactic, picking an issue that is easy to state in opposition but far harder (and perhaps irresponsible) to implement in practice.
In the Houses of Parliament on October 13, Miliband decried the “cost of living crisis” and said that his announcement had left David Cameron “floundering”, while the Prime Minister responded that the opposition leader appeared to want to live in a “Marxist universe” with his price freeze “gimmick.” Energy became political.
The issue returned to the headlines this week for two reasons: the decision by energy companies to raise their prices ahead of winter; and the announcement that a new nuclear power plant is set to be built in Britain, “the first nuclear plant in a generation,” as the BBC put it.
The two approaches, one short term and the other long term, say a lot about the future of energy in the UK, and the perils facing political leaders as they attempt to juggle the needs of those they represent with the sustainable development of the country.
The short-term approach, or the decision to raise energy prices, is a political hot potato. The problem returned to the fore a year ago, when npower, British Gas and SSE, three of the ‘big six’ energy companies, raised their prices in October 2012 before a bitter winter set in.
The price raises ranged from 6 per cent (British Gas) to 9 per cent (SSE), hitting consumers with a punchy increase at a time of high need. Inevitably, there was a backlash. David Cameron announced legal recourses to tackle energy prices, and openly strived to combat increases.
One year later, and little has changed. The announcement by npower on October 21 that energy prices would increase this year by 10.5 per cent was a depressing certainty after similar statements in the previous week by SSE (with an 8.2 per cent increase) and British Gas (9.2 per cent). The promised political action has not materialised, although is in the pipeline, with reforms expected.
The Prime Minister’s response to the “disappointing” British Gas announcement was to encourage consumers to switch suppliers “to see where they can get a better deal.” Speaking on October 17, Cameron insisted the aim was to increase competition in the market, despite attacks from shadow energy secretary Caroline Flint, demanding the government “stand up for consumers.”
The companies themselves appear to actively court negative publicity. In July, British Gas, owned by Centrica, announced profits of £356 million, based on increased energy use in winter, and even then refused to rule out price increases for 2013.
The company further angered its 7.8 million customers on October 17 when its residential energy director Ian Peters said that the company “understands” concerns but encouraged consumers to “use less.”
However, in its October 10 announcement of price increase, SSE raised a direct challenge to the government, accusing ‘green taxes’ on energy emissions as being the root cause of energy price increases.
“I doubt the public like price increases of this magnitude, but if we carry on firmly behind the green agenda we will continue to have price increases like this,” said SSE CEO Alistair Philip-Davies.
The energy company head also said the raised prices would encourage a national debate on cost of living, particularly regarding energy sources for the UK and the financial impact of these on consumers.
Arguably, this is a debate that is already taking place. The furore over ‘fracking’, which boiled over in Balcombe in the summer as Cuadrilla carried out exploratory work in Sussex, pitted alternative energy campaigners and companies against local residents and environmentalists.
As with most alternative energy issues, the process by which Cuadrilla began its exploratory work in Balcombe was badly handled similarly to the mess made with windmills up and down the UK. The problem is not that new energy sources are required; it is how these sources are packaged and ‘sold’ to the public as ideas.
Nuclear energy has never quite escaped from negative connotations, not helped by the 2011 Fukushima disaster. The power plants themselves are enormous and unsightly, an aesthetic eyesore.
However, the benefits of nuclear energy cannot be denied: it is a proven and reliable alternative energy source that can provide power to millions, and it allows for a shift away from the burning of fossil fuels, particularly coal.
It was in this context, or with this message, that the planned construction of Hinckley Point C power plant was announced on October 21. The plant, which will include two reactors and has an estimated construction cost of £16 billion, will be built by a consortium led by French energy company EDF.
The consortium, which includes Chinese energy firms China General Nuclear Corporation (CGN) and China National Nuclear Corporation(CNC), as well as French state-owned Areva, will assume all the costs, including those incurred if the project goes over budget.
The nuclear plant, the first to be built worldwide since Fukushima and in the UK for decades, still needs approval from the EU. The deal with the consortium means that the UK commits to paying £92.50 per megawatt hour, twice the current market rate, when the plant comes online, currently expected in 2023.
The government was quick to laud the deal as an important step forward for sustainable energy and industry in the UK. Speaking at the current Hinckley Point A and B plant on October 21, Cameron hailed the move as “a very big day for our country,” promising “thousands of jobs and providing long-term, safe and secure supplies of electricity far into the future.
Energy Secretary Ed Davey continued this theme by saying that this would be the first time that a nuclear plant was built in the UK without burdening the taxpayer, and underlined the long term benefits, stating “if we don’t make these essential investmentsàwe’re going to see the lights going out.”
The dramatic rhetoric used by the government to justify the deal underlines the sense that this is a long-term project, not a short-term fix but it is still a gamble.
Flint was again quick to criticise the apparently confused statements coming from a government that claims to set prices for companies producing energy years down the line while being unable to “freeze prices for 20 months for consumers while much-needed reforms are put in place.”
Similarly, npower CEO Paul Massera was quoted by the Financial Times as suggesting that the higher power costs indicated by the plant would eventually filter down to consumers.
The party conference season was described by many as an opportunity for the key political figures to establish their trajectory in the run-up to the 2015 elections. It seems that the energy battleground has been chosen by Labour, with the Conservatives establishing long-term measures to counteract the short term fixes promised by the opposition.
One could argue that the Conservatives have aimed at a project for the future, showing statesmanlike responsibility, although it would be hard to deny the impact that Miliband’s price freeze has had on the population.
Nevertheless, the key conclusion that one can draw from the energy issue is that it is now a debate over what is best for the consumer, for the taxpayer and that is clearly the best possible option for a weary UK, even if it means paying more to keep warm this winter.