End the Big Six energy rip off


Writing for Central Lobby, Green Party MP Caroline Lucas says it is time to stand up to the Big Six energy cartel.

In recent months, our newspapers have been filled with stories of excessive profiteering by the UK’s Big Six energy companies, coupled with big pay awards for their top executives.
French-owned EDF, Centrica, parent company of British Gas, and Scottish Power have all announced billion pound profits at a time when consumer bills are rising.

With household incomes being squeezed, people are finding it increasingly difficult to meet the high cost of those bills. I have had many letters and emails from anxious constituents who are fearful that keeping warm in their homes is becoming an unaffordable luxury.

Average annual household bills for gas and electricity have increased from around £600 in 2004 to around £1,200 in 2011. USwitch has predicted that by 2020, this could rise to a massive £3,202.

It is estimated that over 5.5million households in the UK are now facing fuel poverty, with an estimated 3,000 premature winter deaths attributed to the problem of living in damp, cold and leaky homes.

And it’s not just households that are struggling. Small businesses with tight overheads are also feeling the pinch from the increasing cost of energy.

Meanwhile, energy company profit margins appear to go up unabated, leading to an OFGEM warning that profits on dual fuel deals only last October had increased from £15 per household to £125 – a 733% rise.

The energy regulator has said that although fossil fuel price rises – in particular, wholesale gas – are the driving factor pushing up bills, on top of this, the Big Six are actually increasing their margins on each bill.

And just this weekend, an IPPR report that found as many as 5.6 million people may be being overcharged as a result of pricing policies by the big companies which, it believes, prevent new companies from gaining a foothold in the market.

Meanwhile, despite the scaremongering, environmental costs as a proportion of the average bill have remained broadly static over the last four years. DECC figures show that, excluding the EU Emissions Trading Scheme, energy and climate change policies account for around 5.5% of each bill.

So, given their huge profits, it’s clear that energy companies could comfortably reduce their prices and still make a reasonable profit.

But the Government seems unwilling to hold them to account. That’s why a group of NGOs, politicians, public figures, and academics have come together behind the ‘End the Big Six Energy Fix’ campaign, calling for a better deal for consumers.

To tackle the over-charging of customers, and challenge companies over their failure to invest in energy efficiency measures or protect the poorest from the impacts of price rises, we are calling on the Government to do the following:

First, impose a levy on energy company profits – similar to the one imposed on the North Sea oil companies and big banks, and the kind used by the Conservative Government in 1981 to claw back the excessive profits of the high street banks.

In spite of OFGEM’s efforts to create a competitive energy market, nearly two decades after privatisation, the Big Six still control more than 99% of the retail market. A windfall levy would be one way of addressing this market failure and ensuring that the companies pay a premium for their privileged market position.

The money raised should be ring fenced for a mass home insulation and efficiency programme, which would help create thousands of new skilled jobs, as well as enabling the Government to meet its fuel poverty and emissions reduction targets.

Second, to prevent energy companies from passing the cost of any levy onto consumers and make energy prices fairer, the Government should give OFGEM more powers to cap prices and – importantly – the mandate to use them.

Third, the Government should initiate a public inquiry into the Big Six energy companies. Not a Competition Commission inquiry – rather, a truly independent public one with a broader remit than just that of prices and competition.

There is huge public support for these measures. A YouGov poll commissioned by Compass and Friends of the Earth found that 71% of voters support a levy on the Big Six profits, 77% support the revenues being spent on home insulation and energy efficiency measures, and 86% support an independent public inquiry.

Failure to stand up to the Big Six cartel will result in ever more households being pushed into fuel poverty, where the choice really does become one between heating or eating. And that is not a choice anyone should have to make in Britain today.


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