Privatised energy has failed – we need to take back the power

While the Big Six’s profits from us increased fivefold from 2009-2013, one in four people struggle to pay their extortionate fuel bills

 

Yesterday a new report once again made it abundantly clear that the corporate-controlled energy system is a catastrophe for the UK. The report by the Competition and Markets Authority (CMA) shows that the Big Six energy companies are charging their most loyal customers up to £234 extra a year.

As usual the people hardest hit by this are also the people most vulnerable in cold winters: pensioners, disabled people, single parent families, and people on low incomes.

The energy market has failed. And it has failed the hardest for the people who need energy the most. Yet Ofgem, the government regulator of the energy utilities, sees no other solution to the problem than providing even more market.

In Ofgem’s logic the problem is the Big Six’s virtual monopoly on energy provision. Therefore splitting up the big energy companies into smaller entities would be the only change necessary to right the wrongs of privatised energy.

It doesn’t take more than a quick look at the current situation for millions of people in the UK to see that splitting up the Big Six doesn’t even begin to address the problems of the current energy system. While the Big Six’s profits from us increased fivefold from 2009-2013, one in four people struggle to pay their extortionate fuel bills.

In the past few years fuel bills have risen eight times faster than our wages and Which? have calculated that our bills were £145 too high last year because energy companies failed to pass on savings from falling wholesale energy prices to consumers. That’s just the financial tip of the iceberg of problems with our energy system.

Every year thousands of people die in cold homes because they are unable to afford adequate heating. And it is estimated that more than one in five of us has had to make the difficult choice between heating and eating this winter.

Break up the system, not just the Big Six

The corporate-controlled energy system has not just made us all worse off by increasing our energy bills in general; it has also constructed a system where the poorest consumers subsidise the bills of the richest. People on prepayment meters pay more for their energy and people in debt pay more again.

Every day the Big Six break into people’s homes across the country to impose more prepayment meters and more than four million people are already in debt to their energy provider.

Yes, maybe splitting up the Big Six could provide some benefits for some of the richer part of the population who’re paying their bills via direct debit. But people forced onto prepayment meters and people indebted by energy bills and unable to change providers have nothing to win from this exercise.

Splitting up the big energy companies is not going to provide any support for the people who really need it – or even stop the exploitation of some of the most vulnerable groups in our society. Yesterday’s report from the CMA is just another proof that the ‘free’ market is not bringing down our bills, but instead contributing to more inequality and fuel poverty.

For everyone who wants a more equal society and for everyone that wants to see an end to fuel poverty, the only solution is an end to the corporate-controlled profit-driven energy system.

Taking back power

The solutions to our energy problems are already being created here in the UK and across the world. Instead of looking to big business for solutions, we should look to Germany where the people of Hamburg are taking back control of their energy. We should look to Indonesia and Costa Rica where rural energy coops are providing green, affordable energy and jobs to local communities.

If we want to create an energy system where everyone can access the energy they need and where energy does not destroy our climate, we must take back power from big corporations. More than two thirds of people in the UK want to bring back energy under public control. If our ‘representatives’in Westminster cannot see the need for real change of our energy system, we need to show them the way.

Join the fight for a democratic energy system at www.fuelpovertyaction.org.uk.

Morten Thaysen is part of Fuel Poverty Action and Reclaim the Power. He also works for Global Justice Now.

49 Responses to “Privatised energy has failed – we need to take back the power”

  1. madasafish

    So where is the investment required to renationalise the Power Companies going to come from?
    Not even discussed.I cannot believe such a key item is not even mentioned.

    . And where is the investment needed for replacement power stations going to come from?
    Not even discussed.

    Frankly this could have been written by a 15 year old who would have done a better job.

  2. ForeignRedTory

    By taxation.

    -As we have noticed, there is a lot of corporate profit being sluiced to tax-havens. The solution is elementary: whenever dosh changes hands from 2 related corporate entities, tax it.
    -As we have also noticed, derivates cause havoc. Obviously, irrational markets are no good whatsoever to the capitalist system, right?To reduce their irrationality, a .25% trading tax is just the thing. Really, the Market ought to be grateful for such protection. Considering that the size of the derivate market s something like 20 times that of the normal economy, that is 5% of GNP waiting to be added to the Treasury per year.

    The single most important benefit of a free market s that it generates information. And when the information is ‘Off to the Bahamas’, we use it wisely to tax!

  3. Dave Stewart

    I find peoples complete lack of imagination when it comes to overwhelming supported renationalisation programs remarkable. How do you think we manged to nationalize things in the first place after the two great wars. Our economy was in a much worse state not to mention the physical assets of the country were also in a pretty bad state at the time as well. Yet despite this we managed to do it. What we need is political will which we lack because politics has been captured by corporate interests and the wealthy.

    If we can create £200 billion through QE in less than a decade to effectively give to banks to pay down their balance sheets why can’t we do something similar but actually acquire something in return for devaluing every persons salary, savings and assets?

    That’s just one suggestion. I’m sure there are plenty of other ways to achieve the same ends. You just need to think about it a little and actually want to do it.

  4. madasafish

    Right you have now trashed the London Financial Services Companies and they have all upped sticks and gone to Frankfurt where they are greeted with open arms.

    UK tax revenues fall by 15% and on top of that London becomes a ghost town..

    Oh and your taxation measures have gained no extra tax..

    If you are going to propose measures make sure they will work. As it is, your proposals are so risible..you must be a Green supporter..

    There is freedom of movement in the REAL world and financial services are the most likely to move.

  5. madasafish

    If so easy, why did Morten not mention it?

    You are just reinforcing my criticism of a piss poor article.

  6. ForeignRedTory

    ‘Frankfurt where they are greeted with open arms.’

    LOL. Euroland is recommending imposing the same. I copied the basic proposals care of one those ECB papers. Why do you think that the financial swag that oppose One Single Euope are so het up?

    Time to completely deprivatise the very last penny of profit made by private energy industry .

  7. ForeignRedTory

    Because he hsd more important things to write about than meeting the triffling objections you are sucki ng out of your thumb.

  8. danash123

    Madasafish, I’m interested, do you think all is fine and dandy with the energy market as it stands? If not, what do you propose?

  9. madasafish

    You really are totally deluded. No-one is going to trade with that level of tax… the French have tried it and seen volumes collapse.

    But hey ho, ignore reality…

  10. Hugh Small

    Times are getting tough for corporates who sell captive stored energy (fossil, nuclear, hydro) to captive householders. The reason is the rise of technology that makes intermittent energy out of free resources: sun, wind, and air (for heat pumps). The problem for the utilities is that they can’t capture this ‘free energy’ in industrial-scale storage. It is easily storable in distributed batteries in each home, and Bosch already offers one. Bye-bye ‘fuel’, hello consumer energy technology, as a recent Bloomberg article put it. Global Divestment (of fossil fuels) Day was not a plea to morality, it was the best stock market tip ever. Yes, we may have to nationalise them to save them going bust, like the banks, but let the profit warnings fly and the shares bottom out first.

  11. ForeignRedTory

    You been reading the wrong papers: the French overtaxed income at a whopping 75%.

    Instead, the ECB is suggesting a mild 0.25% tax on transactons of derivates. That is a cost of 1 pound in 400 pounds – a bit of a trifle compared to brokerage fees.

  12. Keith M

    How did the 1945 Labour government do it? The trouble is most of these companies are owned by foreign states.

  13. Guest

    No, most 15 year olds would realise how silly your post is.

    The suggestion is not, of course, to stop charging for utilities.

  14. Guest

    So trashed companies syphoning cash off the UK. And you say they’ll go leech elsewhere (where they are not welcome), and you make wild claims about revenues, as you claim no tax is gained from work.

    Keep claiming your “REAL” “right” to leech off the UK and pay no tax.
    Go on then, move if you don’t like it here so much.

  15. Guest

    Yea, nobody will trade if they’re paying completely normal levels of tax!
    The French didn’t introduce that kind of tax.

    Yes, you keep ignoring it.

  16. Guest

    Nonsense. There’s a 75% marginal rate, for salaries only.

  17. Guest

    Er…no. They’ve made record profits.

    And no, massively expensive “distributed” systems, for which the inflated subsidy bills are being passed on 100% to the consumer, are a major reason for the rise. Especially when combined with the fact that the end-users of those technologies are not paying for connections, grid balancing, etc.

    You want to be bailed out again I see.

  18. ForeignRedTory

    Aye, that is what I meant with income. That was le suck of ze French.

    Now, the important thing is the taxation of the trade in derivates at a 25 pence on the hundred pounds.

  19. Leon Wolfeson

    It wasn’t really the issue.

    Studies have shown that the really rich don’t depend on salaries for income in the first place, but rather capital – and they manage to avoid most tax anyway. You hit people like footballers with that sort of income tax, and not many others.

    Also, again, it’s a marginal rate and there’s no actual evidence of a Laffer effect. France’s problems were caused because the government *waffled* and caused major uncertainty! That’s always an economic sin no matter what the economic ideology.

    Transaction tax rates are more complex. Simply put, profits can be quite low and you have to be careful not to hit i.e. pension funds heavily. Transaction taxes might be due, for instance, only on short-term holdings. It’s not quite as simple as saying it’s a low rate.

  20. steroflex

    I am staggered.
    Mr Miliband himself, ably supported by the leader of the opposition, Mr D. Cameron and the rest of the Commons all voted for the climate change bill which, in conjunction with the EU and the Green Lobbies, set targets for Renewables that simply cannot be met.
    What happens when the wind doesn’t blow?
    What happens when, in winter, the sun doesn’t shine?
    What happens when we close down all the coal fired power stations?
    Where are the promised new nuclear power stations?
    Please do not pretend that all the above is not true.
    Oh – I nearly forgot – the Green blob has also forbidden fracking because a HIGE GREEN GOBLIN comes out of the taps. This is proved scientifically in America in a University!!!
    Are we surprised that prices go up. Things that are getting harder to obtain tend to cost slightly more…

  21. Guest

    Yes, you keep rejoicing in how you’re making power harder to obtain for the poor, by a policy of maximising profits.

    You keep NIMBYing nuclear plants, though, as you ignore the real issues relating to renewable energy, instead using simple-minded whining which isn’t even logical.

    But hey, less power for the poor suits in, in many regards, but you want to raise profits by fracking and making the taxpayer clean up your messes anyway. Thanks, Mr. Goblin, anything but the British in your world as ever.

  22. Hugh Small

    Interesting to read your argument against distributed power generation. The power generated at the point of use does not need the grid, and distributed storage will use the grid when capacity is available. You also argue that ‘subsidies’ are a major reason for the increase in power prices and excess profits. You don’t blame the failure to regulate prices or create real competition, which is not of course a ‘subsidy’ but simply an outright gift.

  23. Dave Stewart

    Also I have no idea why he didn’t mention it. I don’t know him and have never spoken to him and in fact before this article had never heard of him. It’s not my job or even within my ability to know the whys and wherefores of what the author wanted to say.

    I note you had no comment on the substance of what I said.

  24. Leon Wolfeson

    You’re not aware of the technical issues, I see.

  25. Hugh Small

    In my personal (not Green Party) submission to the CMA Energy Market Investigation (available on CMA website) I have called for abolition of these subsidies and explained why. They have already been reduced as solar panel costs continue to fall by 25% annually so abolition is the continuation of a trend. I don’t think my proposal conflicts with Party energy policy but even if it does I am still free to propose it under Party rules.
    What we will need and eventually have is the ‘Open Grid’ regulation called for in Green Party policy EN810, which is already happening in the US. This is similar to the new regulation imposed on British Telecom in 1992 (‘Open Network Provision’). I don’t know that it makes a lot of difference whether we nationalise the existing industry, as long as we don’t do it until the share price bottoms out under the new regulation and we can get it cheap.

  26. madasafish

    Yes: money is unimportant.

    No wonder socialism does not work., The supporters of it either think money is unimportant or don’t understand it.

    Money is a “trifling” matter. See what happens when you don;t have any.. Greece is a horrible example. But no doubt it’s “trifling”…

  27. littleoddsandpieces

    The only way to get nationalised utilities with affordable energy for all is to vote for it, and none of the so-called big parties offer bringing back from privatisation the energy companies.

    Renationalising power companies would cost a lot.

    But there is a way that people and government can get round buying power from privatised companies altogether and so make them unprofitable.

    And that is self generation, which was where electricity came from in the beginning.

    See how at:

    http://www.anastasia-england.me.uk/free-energy-wish-list/4588115250

    But again no so-called big parties would have the political will for this.
    There are alternatives to vote for out there in this general election, which is the best election for small parties due to it going to be the lowest voter turnout in UK election history.

  28. Kevin Stall

    And government run energy was so successful? Wasn’t there a serious problem with brown outs and energy short falls? Yes Coop energy is good and there is no reason they couldn’t compete. The main thing is to keep it our of government hands. The worse management in the world is government run. They are inefficient and tend to politicize everything and ruin it. ,

  29. ForeignRedTory

    Piffle. Taxation. As amply explained.

  30. ForeignRedTory

    These derivatives are an insurance against fluctuations. So far so good. Unfortunately, as recent History reminds us again, this kind of insurance does involve placing burdens from private to public shoulders externalisation of cost. Hence, we issue a levy as compensation.

    Yes, me bucko: it is that simple. The costs will once again be internalised.

    ‘ Simply put, profits can be quite low’

    That is no excuse for the current externalisation of costs.

    ‘Transaction taxes might be due, for instance, only on short-term holdings’
    I think that is a silly paradigma. Remember the basis of taxation: if money changes hands, we, the Fiscus, get a cut. If assets can be measured on the balance sheet, we, the Fiscus, get a cut.Since there is no property* without the consent of the State, we insist that the State has a lien on any form of assets, fluid or fixed. Property of any nature or description exists only at our pleasure.

    *nor any other kind of right. To quote the libertarian Bentham: natural rights are nonsense on stilts.

    The length of the holding is no specific parameter in this case.

  31. Guest

    Ah yes, they don’t make you profit. Ruin!

  32. Guest

    There has been some adjustments down for new installs, but not for the index-linked 20 year provisions for existing installs (can’t remove them? Offset them with a tax)

    Open Grid sounds like Ireland’s system, which I’m not keen on.

  33. Guest

    So you’re defending high-frequency trading.

    And you’re a good stateist. Right.

  34. Hugh Small

    “Offset them with a tax”. Now there’s a great idea to keep in reserve. G Brown’s best idea was the 1997 windfall tax on privatised companies. Nobody thought it would be legal but it was and it worked. Can someone give me one good reason why Government doesn’t use it on today’s energy companies?

  35. Kevin Stall

    In Alaska there is a mutual energy company supplying power to Anchorage and surrounding areas. There rates are low but not that low. But the nice thing is as they pay off capital improvements they send checks out to their customers. It doesn’t offset it that greatly but every little bit helps. I also use to get my insurance through a mutual insurance company. No one could beat their prices plus you got a dividend every year end if they didn’t have any major payouts. The problem with Coops is who is paying for the initial construction, assuming they aren’t buying the power from existing companies. Its an economy of scale.. If they can produce the power cheaply they need to do it for as large an customer base as possible. And where do they get that power from? And where do they get the expansion base that would be needed? POPULATION OF UK EXPANDS BY ABOUT A MILLION PEOPLE EVERY YEAR, SO YOU NEED TO BE CONTINUING TO INCREASE YOU POWER GENERATION AND replace old equipment.

  36. Kevin Stall

    If they don’t provide you with services, I.e. power, what happens? Maggie and privatization.

  37. Kevin Stall

    Have you priced the batteries and the life costs? I have heard that some of these batteries need to be replaced yearly. They have a short life if regularly used.

  38. Kevin Stall

    We are just one state within the EU negation. We can not change the tax laws that allow this.

  39. Kevin Stall

    Yet the real rich are not confined by borders. Look at the Facebook partner who gave up American citizenship to avoid paying us taxes. They tax you no matter where you live and where you make the income. And before you start thinking that is a good idea, they also must maintain a massive police force with accountants to maintain it. And few people pay all the owe.

  40. Hugh Small

    I just checked the Tesla car site and they say a replacement 85 kwh battery is $12,000 if you’ve had one for 8 years. That’s about £80 per kwh (say £1000 for 1 day’s home electricity in UK), but it’s a very cunning marketing proposition when you think about it. It easily beats the 2012 McKinsey forecast of price decline. It seems the Tesla battery is just a skipload of laptop batteries packed in fire-resistant goo. There is a Bosch home system that’s posher. Home batteries need less acceleration/structural strength/lightness and it’s clear that the market for home energy is so enticing given the current high price of grid baseload that a lot of development is going on. Google and Apple are involved. Lifetime of batteries responds to careful charging management.

  41. Guest

    You want them to be unconstrained, unlike the 99%.

    Keep saying that only a few people of your social status pay all they owe, you’re just restating well-known facts.

    As for America, I didn’t call for their system. Taxing companies on business done here, now…

  42. Guest

    “negation”

    Ah yes, trade is evil blah blah.

    And you don’t WANT to change the tax laws, because it lets you pay so little. Difference.

  43. Guest

    I wasn’t talking about taxing companies. I was talking about offsetting the individual’s index-linked return with a tax.

    (Also, it’s LEGAL for Parliament to pass anything, I’m trying to avoid setting certain bad precedents)

  44. Guest

    So…..You can’t allow Coops to borrow like other companies. I see.

  45. Guest

    Greece is an example of what you want, when tax isn’t paid, socialist. You keep saying that cash is unimportant because you have so much of it!

  46. Hugh Small

    Yes, got your point which was a good one. Tax could be used to recoup unfairly-generous pension benefits and things like that. But it suddenly made me wonder why nobody has suggested using it against energy utilities making windfall profits.

  47. Kevin Stall

    They also don’t meet demand or care about being efficient. Waste is the watch word for government run business.

  48. Kevin Stall

    Green fees are making power harder for the poor to afford. They say that the renewable energy cost each uk family £250 per year in higher utility bills. There has been a stated policy of Labour to regularly raise the price of automotive fuel to discourage car use. Of course this has hit everyone and as a result raised all prices including food.

  49. Kevin Stall

    Bonds work better than loans. Besides who is making them? The banks or some other large corporation are the most likely maker of the loan. Isn’t the idea to get away from profit making organizations?

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