Frozen prices or frozen out?
Energy companies’ response to Miliband price pledge shows they just don’t get it
25 September 2013
CSE's Chief Executive, Simon Roberts OBE, responds to the Labour leader's energy price-freeze pledge
It was bizarre watching energy company spokespeople rushing to the media microphones on Tuesday to condemn Ed Miliband for committing to freeze energy prices for 20 months if Labour win the 2015 election. These are the very same spokespeople who have been extolling to us the virtues of their fixed price gas and electricity tariffs, many of which last longer than 20 months.
But instead of welcoming the customer certainty offered by fixed tariffs, we had the same energy companies waving the shrouds of power shortages and an end to investment in low carbon infrastructure. These two worlds – “we can fix prices but it would be very dangerous to do so if we’re told to do it” – cannot meaningfully co-exist.
This is an observation rather than a party political point.
It’s an observation that centres on how broken the relationship has become between energy companies and consumers and society more generally. Two other, less-reported aspects of Miliband’s pledge reinforce this observation. He spoke, albeit more briefly than we would have liked, about the need for ‘public consent’ to the way the energy market worked – and the need to change the way the energy market worked to sustain any semblance of public consent.
To a person, the energy company media voices failed to address these issues, even though they are presumably at the heart of why Miliband felt it worth risking political capital to make the pledge. He wasn’t doing this in a political vacuum. He was doing this in the context of widespread public anxiety about rising and volatile energy prices which is mirrored by a widespread sentiment that the energy markets are rigged in favour of the energy companies rather than consumers.
That sentiment has been reinforced over the last few years by, of all people, Ofgem. In other words, it’s true.
I have written elsewhere* about the importance of establishing meaningful public consent for changes in our energy system and for the way those changes are achieved, not least because the public will be paying for the changes. I’ve written about it because it looks to us like that public consent is being steadily eroded by the corporate behaviours stimulated by current market structures, existing planning policies, and the increasingly limited expectations of civil society.
So what does it look like when public consent for a particular approach becomes so degraded that the approach can no longer be sustained and has to change? I suspect it looks a lot like an Opposition Leader pledging to his party conference that something dramatic must be done to change the approach. And it looks a lot like the representatives of those who gain from the current arrangements trying to scare the public into keeping with the status quo.
That doesn’t mean the dramatic gesture is necessarily the right new approach. Nor does it mean that there aren’t aspects of the current approach which should be retained. And we should remember price controls were only abolished in 1998 (at a time when the market featured 13 major energy suppliers rather than six). But the fact the gesture was made should tell us something has fundamentally changed in the public discourse on energy markets.
Ed Miliband’s speech didn’t break the energy market; it was Miliband trying to appeal to a public which already believes the energy market is broken and wants someone to do something about it. The key challenge we all face is to work out what that something is and, perhaps even more importantly, how to build public consent for whatever happens next.