The Commons Trade and Industry Committee has just about steered clear of accusing six major energy companies of operating a cartel in respect of gas and electricity prices, although the MPs are making it clear they regard the marketplace as far from fair. In a worrying report published today, the committee says it has uncovered evidence that the big players are “abusing their market position” in order to prevent smaller companies from gaining a toe-hold in Britain, while in Europe Governments have conspired to make sure energy prices are lower for consumers and industry.
All of this makes for grim reading in a country teetering on the brink of recession. With wholesale gas prices climbing steadily throughout 2008 it is highly likely that next year will see huge increases in energy bills for both householders and industry.
The political impact of electricity and gas bills climbing towards £2,000 per household is obvious enough and it is already being suggested that the Prime Minister, as part of his latest comeback strategy, will soon announce substantial financial help for pensioners and low-income families this winter. It so happens that the knock-on effect on industry of energy inflation is less headline-grabbing as far as the Government is concerned, but the capacity for economic disaster way into the future is great.
If price differentials between Britain and the rest of Europe are maintained, the competitiveness of the UK economy will be affected and this is particularly the case in manufacturing where thousands of jobs are at risk, the committee found. MPs painted a picture of Ofgem, the regulator, behaving in a haphazard manner while accusing the Government of failing to respond to the country’s increasing dependence on gas imports by encouraging investment in storage. Ominously, the MPs added that “this is now an issue of national importance”.
What is required over the next few years, as committee chairman Peter Luff correctly noted, is for the Government to take necessary measures to free the internal UK energy market and to continue to work for the liberalisation of European markets. Big structural changes are required if, in Mr Luff’s words, we are to “keep the lights on” as we lose a large proportion of our generating capacity around the middle of the next decade.
It is a chilling thought, 40 years after Britain began to reap the financial rewards of North Sea Oil, that the future for low-cost energy supply is so uncertain.