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The Government energy gaff: anything but funny

October 20th, 2012 Posted in Uncategorized by

I might be the only person in the country actually feeling a bit sorry for the energy companies. I am not saying that they are the good guys – I complain like the rest of us when I see the bill. But I do look at what has happened over the past few months and I have to feel a bit of sympathy for their situation and a large amount of dread for the rest of us. Of course bankers will already know about confusing government messages – being told simultaneously to hold larger reserves and lend more. But if anything the energy companies plight is worse – and if we don’t want brown outs in the next few years we really need to get a grip on this now.

Good job the impressive Angela Knight has moved from banks to energy in recent months – she must feel right at home.

First a quick rewind to April 2011. Back then the government introduced a scheme called “midata”, as part of the Government’s “consumer empowerment strategy” ,  “Better Choices: Better Deals”. Midata was created as a “partnership” between the UK government, consumer groups and major businesses, aimed at giving consumers access to the data created through their household utility use, banking, internet transactions and high street loyalty cards. (I always read “partnership” as “government says play with us and if you don’t we will clobber you with legislation”. I am usually right too).

I wont go into the complexities, or rights and wrongs of the Government decision this summer to move from “playing nicely”, to forcing companies to join the Orwellian-sounding “midata vision” – suffice it to say it is yet another wet dream for all those huge IT giants, rubbing their hands at the prospect of all that lovely lolly (just like IDS smart cards).  Another disproportionate technological answer to a problem that almost certainly doesn’t exist and will probably be met with total public apathy.

The consultation closed last month – but in reviewing it , I noticed at that it was the energy companies that were said to have “led the way in the midata initiative“, “with a number of suppliers already giving their customers access to transaction data”.

So in August the energy companies were being praised or their boldness in embracing “the midata vision”, they were indeed responding to the governments desire to “empower the consumer” with more information.

Roll onto October (and presumably the latest set of focus group reports showing the price of gas and electricity is high on the list of concerns of would-be voters) and David Cameron has a eureka moment – force all companies to offer everyone the cheap fuel!

Yet another ill-conceived, knee jerk idea that has more holes in it than a swiss cheese. Not least the fact that would if companies are forced to offer everyone their lowest tariff then companies will simply raise the price of the lowest tariff.  Why would people pay more ? And if everyone elects to pay the lowest price, where is the profit for the developments that the Government and Ofgem say are needed, unless erm, the lowest price is higher than currently offered.

Another policy that benefits the idle that do nothing and penalises the financially prudent who have taken the effort to seek out the better deal. A deal that doubtless will no longer be available to them if Mr Cameron’s scheme comes into play. No worries people, you sit on your sofa and scoff your pies, Government will do everything for you.

If Mr Cameron really wants to see lower energy prices, how about cutting the accelerating social and environmental charges (5-10%) on our bills for useless green energies that all too often just don’t work. Or cutting back costly hyper regulation costs or dubious government initiatives such as “midata” that simply ad to company overheads.  Energy company profits are between 5 – 9% depending on who you listen to. That is not excessive. Government profits from energy are as high as 15% (5% VAT, 5-10% green charges).

It is all too clear that Cameron’s announcement on legislation to force energy companies to give the lowest tariff to all their customers’ came as surprise to everyone.

Junior minister John Hayes admitted in the Commons he had no idea how the PM’s promise might work in practice, then seemed to later backtrack on Cameron’s pledge, saying the government was only considering introducing such a law. Meanwhile Energy Secretary Ed Davey was talking about a totally different approach to cutting bills yesterday morning – promoting competition between energy companies.

It’s like the Thick of It – but not as funny.

Ofgems timely announcement may just have saved Mr Cameron’s bacon with an announcement that tariff complexity, poor supplier behaviour and a lack of transparency and competition in a market  are the main issues in need of addressing. We almost certainly do need simplifcation of the tariff system encouraging savvier customers to switch supplier to get the best deal. That in turn will encourage much-needed competition (something Ed Davey is clear he wants to see).

So what the energy companies might expect from the upcoming energy bill is anybody’s guess but I reckon they are hoping for no more unhelpful off-the-cuff remarks from the PM any time soon. The energy market is in enough turmoil already. I will sign off with wise words from Angela Knight

“As Ofgem’s proposals and the Energy Bill are debated, clarity of plans and certainty of proposals will be essential, as well as open consultation and decision-making that is grounded in facts and evidence”. 

Listen up Mr Cameron, that “clarity of plans” and “certainty of proposals” bit is aimed at you.

One Response to “The Government energy gaff: anything but funny”

  1. It doesn't add up... Says:

    Some nice common sense here. A few further thoughts:

    Under the Large Combustion Plant Directive, generators are being forced to absorb the costs of writing down perfectly serviceable plant over a legislatively foreshortened working life. This adds to costs beyond those arising from replacement by more expensive forms of generation in less good locations relative to demand centres. It also gives rise to the brown-out/black-out threat, given the dithering over properly sorting out new capacity in the Labour and Huhne years. Ed Davey’s pitch for more CCGT is the only half viable way of trying to cope, but it has come too late: there is no way the 20 plants he calls for will be built by 2015. He needs to tell the EU we need further derogations (and soon, before plant is decommissioned and scrapped because it doesn’t make sense to do a statutory 5 year boiler maintenance shutdown if the plant will have to shut in 18 months anyway).


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