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October 23, 2013

Taking on the giants

As the big six energy companies vie with each to see who can impose the largest price increase this winter, and then blame everything and everyone (except shareholder greed) for forcing their hand, Lesley Riddoch asks why everyone is being so passive in accepting these arbitrary price hikes. She cites various examples of consumers ganging up against the energy giants by holding energy auctions – lowest price gets the business. Could communities and local authorities work together on this one?


Lesley Riddoch, September 29, 2013

Ed Miliband gets tough. Headline writers were clearly amazed. Nice, gentile, cuddly, polite Ed says a new Labour Government would bash the energy giants to save households £120 on energy bills. 

True – the Labour leader still faces the minor task of getting elected Prime Minister. But his get tough promise was serious enough to knock a cool thousand million pounds from Centrica share prices and – even more gratifying — to annoy the heck out of prickly old Peter Mandelson. Labour’s one-time Business Secretary warned a twenty month energy price freeze would send Britain into a time warp – back to the scary 1970s when governments ran vital industries like energy, water and rail and Margaret Thatcher had yet to flog off the family silver. Actually, what’s not to like? No-one in Scotland needs lectures about fuel poverty. Gas, coal, oil, hydro, wind and soon tidal power-rich Scotland still has old folk and young families choosing whether to be cold or hungry. And experts now agree dampness caused by poorly ventilated, hard to heat homes contributes to the “Scottish Effect” where Scots die sooner than folk on similar incomes in the rest of the UK. That’s nothing short of scandalous. 

Household energy bills have risen by £300 since just 2010 while the big six energy company have amassed £12 billion in profits. So anything that halts the energy rip is welcome. But there are snags. Any date for a price freeze gives wily operators the chance to hike prices ahead of time. David Cameron faced just such a problem a year back when he said energy companies must charge customers their lowest tariffs. Energy Secretary Ed Davey later admitted that would energy bills simpler but not cheaper – and the idea withered on the vine. There’s a bigger snag. As long as you only care about GDP it doesn’t matter if a few folk make big wonga while others live in fuel poverty. It all generates “economic activity”, stock market interest, and jobs in the City. Of course it isn’t morally right. But since Thatcher no-one has really cared if un-regulated markets deliver fairness or real competition. Will Ed be bold enough to tackle that whilst successfully wooing Conservative Middle England? I hae ma doots. 

But we don’t actually need to wait for 2015 and the uncertain prospect of an overall Labour victory.

We could cut energy bills right now with collective switching. 41% of us have never switched energy supplier — because we aren’t sure how, don’t have time to compare tariffs and doubt better deals will stay that way for very long. But if a trusted authority takes the initiative to make switching safe and easy they can give punters a better deal for years. It’s already happening.

The Eden Project are behind a Cornwall scheme with 20 thousand members set to save a whopping £3.7 million when their switch goes ahead. Almost 5 thousand Liverpudlians just saved £110 apiece the same way. Labour MSP Jenny Marra launched the first Scottish scheme last year – folk saved an average £154. It’s easy. Folk opt into an auction to see which energy supplier offers the lowest price — “group purchasing” like this in Belgium has knocked 25% off energy prices. Tidy. So why the heck isn’t every council, housing association and the Scottish Government backing collective switching across Scotland right now? Hard-pressed consumers could find they’re running the market together — not being steam-rollered by it – and raise confidence in cooperative ways of working. All that’s holding us back are red tape and lack of leadership. Alex Salmond and Scotland’s councils – over to you.