The party leader said competition had failed and government needed to act.
Labour will legislate in its first year in office to fix electricity and gas rates for consumers, Miliband promised. He also reaffirmed Labour’s commitment to replace Ofgem with a “tougher” regulator.
“Government has not stood up to vested interests,” said Miliband. “We need successful energy companies, to invest in the future in Britain, but there will never be public consent for that investment unless you get a fair deal. The system is broken and we need to fix it.”
He went on: “The next government will freeze gas and electricity prices until the start of 2017… Your bills will not rise – it will benefit millions of families and millions of businesses…
“The companies aren’t going to like this, because it will cost them more, but they’ve been overcharging people for too long in a market that doesn’t work: we need to reset that market and have a regulator on the customer side that also enables the investment we need.”
Earlier in the day, Caroline Flint announced Labour would split up the big six vertically integrated energy companies into retail and generation arms.
SSE was the first energy company to react, saying the policy would lead to “unsustainable loss-making retail businesses”.
Instead, it said Labour should pay for energy efficiency and renewables schemes out of taxation, not bills. “This would wipe £110 off the average person’s bill and shift the cost away from those who can’t afford to pay and on to those who can.”
A spokesperson for Npower said prices depend on factors beyond energy companies’ control. “If the Labour Party can commit to reducing policy costs on household energy bills, stopping the smart meter roll-out, preventing commodity cost increases and accept that there won’t be any investment in new power stations and infrastructure, then we could freeze our prices. But will this make things better for Britain?”
Industry body Energy UK said in a statement Labour’s policies would put the brakes on the £110 billion of investment needed in the next decade.
“Freezing the bill may be superficially attractive, but it will also freeze the money to build and renew power stations, freeze the jobs and livelihoods of the 600,000 plus people dependent on the energy industry and make the prospect of energy shortages a reality, pushing up the prices for everyone.
Disbanding Ofgem is “posturing to no purpose”, the statement added. “Today’s announcement is not the adult debate the industry has long been calling for and that customers deserve.”
Climate change minister Greg Barker took a similar line as he tweeted: “EdM’s Red #Energy Plan would mean nuclear winter for new investment, massive job losses and rocketing bills as soon as freeze over!”
The Renewable Energy Association welcomed another of Miliband’s commitments, to decarbonise the energy sector by 2030. However, CEO Nina Skorupska asked: “How can Labour square a major reform of the consumer energy market and a freeze on energy bills with the urgent need for investment in new low carbon generation?”
Consumer Futures was not won over by the policy, either. Director Adam Scorer said: “The prospect of a price freeze may ramp up prices in the short term and dismantling the structure of the market may put off decisions by energy companies or others to invest in new, cleaner generation capacity.”
He also called for “a radical vision” to make homes more energy efficient. “In the long run this will be the answer,” he said.
Other commentators reacted with bemusement, with many questioning whether such a move would be compatible with competition law.
Tim Rotheray, chief executive of the CHPA, tweeted: “It will sell well with voters but I struggle to understand how Ed Milliband can guarantee a price freeze on energy bills for 2 years. #lab13”
David Powell, lead economist at Friends of the Earth, agreed: “2 ways I can see to freeze prices. (1) price caps (2) pay difference out of tax. (2)’s out. (1) is communism. This’ll be fun.”