Energy bosses offer to help – vaguely
As yet another set of gloomy forecasts revealed annual energy bills could rise to over £5,000 by April, ministers emerged from a round table meeting with industry leaders of the electricity sector. The outcome of today’s talks, however, appears somewhat vague.
According to chancellor Nadhim Zahawi who hosted the meeting, the companies attending pledged “to do more to help the people who most need it.” But the Treasury hasn’t provided details of what help that might be, or who qualifies as those in need.
Attendees present included the CEO of British Gas owner Centrica, the largest supplier of gas to UK households, the CEO of Scottish Power, the UK boss of EDF, the boss of renewables investor Greencoat Capital and the lobby group Energy UK. Though the CEOs of BP or Shell – who, between them, made profits of £29bn during the first half of the year – were noticeably absent.
It appears as though the talks focussed heavily on future investment as opposed to tax. According to one energy industry source briefed on the meeting: “It was a constructive discussion about ways to support customers and accelerate investments in energy security in the UK. It was clear the windfall tax is not a preferred option for anyone – ministers or electricity companies.”
Johnson, who unexpectedly turned up at the meeting, says he urged firms to do more drilling in in the North Sea, as well as reiterating the importance of energy companies investing more in renewables and biomass.
Away from Number 10, Gordon Brown put his head above the pulpit again today to plead for more drastic action to address the cost of living debacle.
The former Labour prime minister has suggested the government could temporarily re-nationalise energy firms who fail to lower bills for households.
In fact, Brown has a number of new suggestions: we must urgently seek out new supplies of gas and storage, follow Germany’s lead by agreeing on voluntary energy reductions to prevent blackouts, scrap October’s price cap rise and urge energy suppliers to provide social tariffs to households dictated on “what people can afford.”
As a last resort, if energy suppliers are unable to provide such tariffs, then the government should temporarily bring them into public ownership.
Brown, who was PM during the banking crisis – has drawn a parallel with how some banks were temporarily nationalised to protect consumers back then.
Brown also reminded us of the levy placed on banker’s bonuses in 2009, which leads him nicely onto how he plans to fund his big plans.
His current proposals would be paid for “with a watertight windfall tax on energy companies and a tax of the high levels of City bonus payments”. So he’s likely be displeased with the direction talks with big energy bosses took today.
One thing to be mindful of throughout all of these discussions is that the distinction between energy providers and energy producers is sometimes lost when “energy company” is confusingly thrown around as an all-encompassing term. While companies producing energy, such as Shell, are experiencing bumper profits, companies which simply provide energy to households are suffering enormous losses at the hands of the skyrocketing price of wholesale gas prices – just witness the fate of Bulb.
The household price cap which Brown proposes be scrapped is based on the assessment of the cost of supplying energy, allowing for just a small profit margin. As the sceptical economist Julian Jessop points out, the problem with nationalising energy suppliers to reduce household bills is that it wouldn’t reduce the exorbitant prices that energy providers have to pay for wholesale gas in global markets. Nationalising the problem sounds simple. It isn’t.