This week’s news has been full of hot air about energy prices.
The Chief Executive of Npower suggested that consumers should use less energy if they want lower bills. Actually, that’s very sound advice, but it came on the back of the recent energy price hike and so of course the media and politicians have been up in arms over this ‘affront to the public’.
Shadow Energy Secretary Caroline Flint said that energy companies shouldn’t lecture customers when thousands are struggling with bills and Labour Leader Ed Milliband said that this was more evidence of ‘a broken market’ and reiterated his call for an energy price freeze.
Meanwhile the energy companies are desperately dissembling; trying to blame Government subsidies and levies for the price hike, when in reality these represent a very small percentage of bills. Maybe that’s what led to the spat between Deputy Prime Minister Nick Clegg and Prime Minister David Cameron over green taxes.
I guess that politicians and energy companies alike don’t want the public to know just yet that we are on the fast track to ever more expensive fossil fuel (see my oil price infographic) that will likely make the strike price for nuclear electricity agreed this week look like a bargain in 2023.
There is of course one simple measure that could be taken right now:
Instead of the cost of energy reducing as you use more, it should more expensive.
Imagine if the first 1000kWh or so of energy you used each year were free of charge. That would equate more or less to the winter heating allowance paid to pensioners, but would benefit all vulnerable households reducing fuel poverty across the board. Then the next 1000kWh would be charged to cover the cost of production, the next 1000kWh would cost more and so on. We could pitch it so that by the time you get to the UK average consumption the overall bill remains the same as it is now. Then the cost could increase rapidly with further consumption, allowing the energy companies to make their profits at the expense of profligate consumers.
At a stroke you’d address fuel poverty, rebalance the energy market, encourage energy efficiency and penalise the wasteful. This would re-balance the energy market in exactly the way that the politicians keep saying that they want to achieve.
So why are they not doing it? This is, after all, the way in which road duty is applied to cars – the more polluting the higher the charge, and council tax is applied to housing – the larger the home the higher the charge. Unfortunately our political parties of all shades are now firmly capitalist and rebalancing the market through taxation would be anti-capitalist.
The market will not deliver such change either, since no single company dare move to a new pricing system in isolation and concerted action by all the energy companies would be classed as collusion and anti-competitive!
It is not simply the energy market that is broken, it is our political-economic system.