Why Grant Shapps doesn’t know what he’s talking about on energy prices

Why energy bills are really sky high and what Grant Shapps and the Tories won't do about it.

Grant Shapps

Conservative Party chairman Grant Shapps has produced an interesting Buzzfeed post entitled ‘12 Facts: Why Energy Bills Are Sky High, And What We Can Do About It?

According to Shapps, the “Conservative Party will keep you warm this winter”.

The problem is, all but three of Shapps’s ‘facts’ are plainly untrue or miss the point entirely.

Shapps’s ‘facts’ are in bold; the actual facts are underneath.

1. “So your energy bills have probably DOUBLED in the last 10 years. Even if you use less energy.”

This is true. In the last eight years energy bills have risen by £520, and the Committee on Climate Change has blamed this on the rising price of gas.

2. “This is partly because, in the last 10 years, wholesale gas prices are up 240%.”

The Committee on Climate Change indeed blames energy price rises on the rising price of gas. But this doesn’t account for the recent price hikes. As smaller energy supplier OVO recently pointed out on its website, the most expensive price it paid for wholesale gas in the last four years was in May 2011 – since then the wholesale price has come down.

WHolesale graph

3. “AND Labour didn’t build a single new nuclear plant, to shield us from those price-rises.”

Shapps is correct; they didn’t.

4. “AND, Labour destroyed competition. They squeezed 14 energy firms down to just the ‘Big Six’.”

The ‘big six’ energy companies control 98 per cent of the retail market. In 2000, there were three generating companies and 14 suppliers – 17 companies – and by 2010 there was the big six. This can’t be blamed entirely on Labour, however – a similar tendency toward concentration and monopoly has plagued other big privatised utilities too. And Ed Miliband has pledged to break up the Big Six, which is more than the Tories are offering.

5. “AND Labour let the energy market get really confusing, with more than 4,000 different tariffs.”

Considering that the Big Six mysteriously hike their prices by similar amounts and at the same time every year, the biggest problem customers face is not really which tariff to choose – they are being fleeced whichever tariff they go with – but that there is nothing to stop the energy companies raising their prices. That’s what Ed Miliband’s price freeze is for.

Tariffs

6. “The result? Labour left 2 million more households in fuel poverty.”

If you use the measure of fuel poverty that the government intends to adopt – if fuel costs are above the national average, and were the household to spend that money, their costs would leave them below the poverty line – fuel poverty actually went down under Labour. According to Channel 4 FactCheck and the Department of Energy and Climate Change (DECC) figures, fuel poverty fell under Labour from 11.8 per cent of households in 2003 to 11.5 per cent of households in 2009.

7. “So this is how your bill breaks down today.”

Breakdown fuel bill

The graph is accurate. What it doesn’t show, however, is that, as per point two, wholesale gas prices are roughly the same now as they were in 2011. Consumer bills have gone up during that period, however.

8. “The fastest way to save money today is by switching your provider.”

Not according to the graph below it isn’t (there is some discrepency in the final destination of the lines because not all of the Big Six have yet put their prices up this year. As you can see if you look back across the graph, though, they always do).

Electric and gas]

9. “Ed Miliband attacks switching as a con. But that’s exactly what he did himself.”

Trying to make the best of a bad situation does not mean that you cannot propose fundamental change. If I believe that the price of petrol is too high, does that mean that I can’t shop around in the meantime to make a small saving? Don’t. Be. Silly.

10. “Even now, Ed Miliband wants your bills to rise by another £125 a year.”

Npower estimates that bills will increase by £80 (not £125 a year) by 2020 as a result of low carbon policies. This is actually less than the potential savings from energy efficiency measures. The Committee on Climate Change (CCC) says that measures such as boiler replacement, insulation measures and efficient appliances would be “worth around £145 per household in 2020, with more savings potentially available in the 2020s”.

Update——- (HT the Carbon Brief)

In fact, the Tories predict that consumer bills will rise by £125 by 2030, if the power sector is decarbonised by 2030. The figure is sourced to a report by consultancy Poyry, for the Committee on Climate Change. The CCC estimate that a 2030 decarbonisation target will add £20 to bills by 2030 – six times lower than the Conservatives’ figure. It says the Conservatives are misusing Poyry’s figure. http://www.carbonbrief.org/blog/2013/08/conservative-estimate-for-cost-of-decarbonisation-target-six-times-higher/

11. “That’s right. Ed Miliband is demanding your bills must rise by £125 a year. Madness!”

See point 11.

12. “The Conservatives will keep you warm this winter.”

David Cameron does in fact have a number of tips to keep warm this winter, but they don’t involve reducing you energy bill. Here they are:

#1. Baking Bad

David Cameron doesn’t have a clue about the price of a loaf because, he says, he bakes his own.

“You set the timer [of the bread-maker] overnight so when you wake up there is this wonderful smell wafting through your kitchen. It takes 30 seconds to put in the ingredients,” Cam said.

A Panasonic SD2500 Breadmaker costs £100 – pricey when inflation has been rising faster than wages for 39 of the last 40 months.

#2. Put a jumper on

British Gas announced yesterday that bills would go up by an average of 9.2 per cent for 8 million customers. Unwilling to do anything meaningful about rising gas bills, Cameron did have one piece of advice for pensioners feeling the chill this winter: wear a jumper.

“He is not going to prescribe the actions that individuals should take but if people are giving that advice that is something that people may wish to consider,” a spokesperson for David Cameron said.

#3. Let them use i-pads

If you’re finding retirement lonely, Cameron won’t provide you with better publicly funded social care, but instead will give you an i-Pad. This would provide lonely pensioners with a “link to the outside world” by allowing them to hold “video conferences with friends and family”, ministers have said.

A potentially good idea is hamstrung slightly by the fact that very few 90-year-olds know a thing about touch-screen tablets, e-mails and video conferencing.

#4. Fracking

Cameron believes that communities will receive £1 million each “immediately” from fracking. In reality, they will get £100,000 – a tenth of Cam’s estimate – if they allow fracking in their local area.

Don’t worry about the earth tremors, mind.

23 Responses to “Why Grant Shapps doesn’t know what he’s talking about on energy prices”

  1. robin_carbonbrief

    Hi, a comment on one particular figure – you make it sound like the Conservatives predict that bills will rise by £125 by 2020. In fact, they predict that consumer bills will rise by £125 by 2030, if the power sector is decarbonised by 2030.

    The figure is sourced to a report by consultancy Poyry, for the Committee on Climate Change. The CCC estimate that a 2030 decarbonisation target will add £20 to bills by 2030 – six times lower than the Conservatives’ figure. It says the Conservatives are misusing Poyry’s figure. We have blogged this here:
    http://www.carbonbrief.org/blog/2013/08/conservative-estimate-for-cost-of-decarbonisation-target-six-times-higher/

  2. Trispw

    Isn’t the reason that fuel bills go up and up that, private companies, operating in a cartel are there to make a profit from their shareholders.

    That is their function in life. In reality they don;t give a shit about pensioners or children or anyone else, because that is not the job of a limited joint stock company.

    Nor should it be.

    Apparently energy companies have a responsibility to, and presumably have been given money to, insulate poor people’s homes. But they haven’t actually bothered their backsides and have only done 16% of the work.

    Ideally we should nationalise all things that are utterly essential.

    Housing, domestic fuel, water, sewerage, transport, education and health.

    If it is left to people who have no interest in the consumer, only in his money, we are bound to be stuffed.

    A few years ago the French power company Electricite de France wanted to put up its prices. In England, Wales and Scotland, it did. In France the president (who was actually right wing nut job Sarkozy) said “inflation only”, and it happened. Because the government in France cares, and it helps that it owns a majority of the company.

  3. Chris Kitcher

    But Shapps is a tw#t anyway so why are you reporting what he has said?

  4. Chris Kitcher

    But Shapps is a tw#t so why are you reporting what he says?

  5. Neil

    But if you agree that profits only account for 5% of the price, then increasing profits can’t account for much of the increase in prices over the last few years. Even if profits had doubled since May 2011, that would only account for about a 3.5% increase in the overall nearly 30% price increase. If wholesale prices haven’t risen much, the rest must be the other charges: green, network etc. The amount of room for reducing prices through reducing profits seems to be limited – no more than a couple of per cent I would have thought at most. this is why John Fingleton, previous head of OFT, thought the price freeze idea was harmful for consumers.

  6. LB

    Lets axe carbon taxes completely. And no replacement with other taxes either. It’s not a choice of what to steal, just a moral one of not stealing at all

  7. LB

    Neither does the state. It’s taxing and it doesn’t care about the results.

    Look at Clegg. If we don’t tax power, we will tax something else its place.

    The state has the choice. Don’t tax.

  8. LB

    Why are you ignoring VAT?

    What about the other taxes that the power company pay? For example, they have to pay their employees gross because they have to pay tax?

    It’s tax all the way.

  9. Sparky

    I love how you headline the piece ‘Grant Shapps doesn’t know what he is talking about’ and then go on to concede that:

    Yes, Point 1 is correct
    Point 2 is partly correct
    Yes, Point 3 is correct
    Yes, Point 4 is correct
    Yes, Point 5 is correct
    No, you disagree with Point 6.
    Yes, Point 7 is correct
    No, you disagree with Point 8
    No, you disagree with Point 9
    Point 10 is partly correct

    Hardly a demolition job is it?

  10. Peter Wild

    Loved the power guy saying that if green tariffs were reduced, bills would be reduced. How come they tariffs rarely go down when wholesale prices go down…..

  11. blarg1987

    No tax = no service provision, efficencies can only go so far, so what else would get ride off after you made all practical and realistic cuts, would you cut elderly care, or nursery care. Defence or security? These things all cost money and ened to be paid for somehow.

  12. blarg1987

    Channel 4 last week did an interesting piece on this, the devil is in the detail. Yes they are making 5% profit on providing it to your home.
    However the profits for extracting the energy, refining it, selling it to itself, burning it to generate electricity, and sell it again to itself to supply to your house are still very opaque as these are all carried out by the same company.

  13. blarg1987

    And then there is a big rush to provide cheap electricity, so oil, coal and gas will be burned. Several decades later there will be a mass panic as it is all running out and by that point the energy companies will go to the goverment we have no money we want you to invest in renewables so we can sell. To pay for this costs on consumer bills and taxation will skyrocket to unseen proportions as no one has done any R and D in renewables for decades.

    I don’t know about you but the above seems like a short sighted policy to me.

  14. LB

    So your solution is to force very expensive electricity on people now so the fat cats can profit.

    Ho hum. Reverse Robin Hood. Steal from the poor to give to the rich.

    Going forward, it may well be that up goes the cost of fossil fuels. At that point, renewables may well become economical. At which point, people will build. Doesn’t take long.

    So what you are doing is forcing people with huge costs now, pushing them into poverty.

  15. LB

    Lots of tax, no money for fuel.

    Great choice.

    No heating, or the money spent by the state on things you don’t want or need.

    So what can be cut?

    Hmmm, lets see. Arts? Yep. Wages? Yep, No need to pay 250K a year for a doctor, when you are the monopoly supplier. Who needs 250K a year, so plenty of room for cuts there. …

    How about a pay freeze for 10 years. If the state stops printing we can control inflation.

    How about making sure migrants make a net contribution? ie. More tax than they consume?

    Cut pilgrims.

    Cut party funding

    Cut SPADS

    Cut regulation – too many people regulating

    No more diversity organisers

    No more form filling for sexual orientation race etc

    Flog off government land if not used.

    Sell surplus assets

    Abolish VED – replace with fuel duty. Lots of jobs not needed

    Cut taxe rates – Laffer curve – more revenue

    Stop state pension – replace with compulsoary savings.

    So what happens on your scheme is you get all the taxes, none of the services because of the debt. Then eventually, you get a government that steals on a grand scale, or a government that says, we default.

  16. blarg1987

    SO cutting doctors salaries and 10n year pay freezes will likely mean people jump ship. And since you obviously believe in paying the market rate how will you attract people to these professions, inclease wages?

    Political parties do not get funding from the tax payer, they have a capped limit during elections. Only the main opposition have funding i.e. access to civil servents etc as the main part of opposition to ensure there is one.

    Cutting regulation, what exact regulations would you cut? Would you say ensuring products and services that are provided to a safe standard to a consumer to much regulation? It is very vague to say cut regulation unless we know exactly what regulations would be cut.

    Flog of surplus land and goverment assets – this is a short sighted policy it would be just like me saying to you flog up your house and rent instead, short term it would net a large amount of money that I agree with, long term it would cost more to the tax payer having to buy the land back at a later date for need e.g. building a new hospital etc.

    VED and cutting taxation would still leave a shortfall, laffer curve may not work unless you have tax reform, as billions of pounds is shipped off shore in tax heavens so you would still have a shortfall that needs to be made up somehow or other services would need to be cut.

  17. blarg1987

    No renewables should be cosy neautral not generate profits for fat cats. What should happen is a target set to encourage then to invest in new technologies by using shareholder dividens (which they have not done).

    How do you know it would not take long to build renewables? If there is no renewable industry there would have to be research carried out (takes time), the grid will need upgrading for it (again takes time) and to put the facilites in place to build renewables that will take time it won’t happen magicallyy over night would it?

  18. Dakiro

    One practical step is to invest into new nuclear technologies research, a few years of decent research will no doubt improve on he tried and tested Thorium Fluoride Molten Salt reactor, or some other simple and safe molten fuel nuclear reactors. In 10 years we could have a few working small scale prototypes, in 20 years coal energy could be replaced. A bit optimistic but not impossible.

  19. TM

    ‘Isn’t the reason that fuel bills go up and up that, private companies, operating in a cartel are there to make a profit from their shareholders.

    That is their function in life. In reality they don;t give a shit about pensioners or children or anyone else, because that is not the job of a limited joint stock company.’

    All the Tory, and any other, propaganda BS that gets spouted about it all, and yet you have it all in two paragraphs!!! They don’t give a flying f*** for anyone other than themselves and their shareholders and why should they? That was never the intention, it was and always will be about rich people profiting at everyone else’s expense and if 1000s of pensioner die because they can’t afford to heat their homes and millions of houses are cold and children are cold, well they are poor aren’t they, and nobody seems overly concerned about the poor and the Working class at the moment do they? As long as the rich live in splendour and all the affluent Middle classes have got their wonderful careers and a rosy future, who cares about the underclass?

    ‘Ideally we should nationalise all things that are utterly essential.’
    Ultimately, that has to be Labour’s agenda and in their manifesto, because although a price freeze is a step in the right direction, unless they are renationalised they will just keeping putting the prices up again after the price freeze. They HAVE to be renationalised!!! Or few of us will have any real future. And we know what happens when millions of people fear for their future don’t we???
    Finally, the French government are made to heel by the majority of people, we are the prisoners of our government and they all have far too much power and little real accountability. That has to change too, or we will continue to be cash cows or impoverished.

  20. TM

    There’s always money for rich people’s tax breaks isn’t there, and always high wages for the affluent and compliant and complicit Middle classes hey?! Oh they never seem to suffer do they? But somehow inevitability poor people and Working class people are fleeced all ways and have to manage on very low wages. Ask yourself why that is. We need to question the whole system of doing things in this country and why a wealthy country has foodbanks and 1000s of pensioners die each year because they can’t afford to heat their homes. In 20 or 30 years time, that may be some of you facing that bleak end to your life. No such thing for the affluent hey?? Plenty of wealth and food and heating for them, and lots of wonderful careers too. Ask yourself and then get angry.

  21. TM

    Because he is in power. And their voices are always heard.

  22. Chris Kitcher

    Only because we have right wing papers that are determined to keep such t#ats in power. We can challenge these idiots and restore some sanity to this rotten country but apathy seems to reign supreme at the moment.

  23. TM

    Bang on Chris! We have to challenge them and my way is to rail against them all and try to raise debate. It’s all I can do; I have neither the time or the money to go on protests in London. It offends me deeply that Shapps and his ilk are in power and they are so smug and not concerned at all that their policies have driven people to such despair they have committed suicide. In a decent world such people would get nowhere near any kind of power, but we do not live in a decent world. The wealth gap has grown again, and when that happens all the BS and vile propaganda seems to follow doesn’t it? At least we can counter it just by being honest mate; that’s the biggest weapon we have: the truth. Remember, Gandhi brought down the British Empire.

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