Caroline Flint is running late. It’s an occupational hazard for an MP, particularly a shadow secretary of state. This morning, shadow cabinet has overrun; but soon enough, after a couple of frantic calls to her parliamentary assistant, the striking Flint appears next to the security gates at Westminster’s Portcullis House to greet Utility Week.
It’s all smiles this morning, but Flint embodies what may become a very big problem indeed for the energy sector. As shadow secretary of state for energy and the environment, she is spearheading the development of Labour’s energy policy. And she’s gunning for headlines. Already, Labour has committed itself to scrapping Ofgem if it gets into power and forcing the market to return to an energy pooling system, all in a bid to increase transparency over pricing.
That’s just for starters. Flint has also been outspoken in her attacks on the big six and makes no secret of her desire to break their stranglehold on the market. As will become clear in the course of the interview, Labour’s policy on the Energy Bill is as yet less detailed, and less confrontational. But on the retail market, the gloves are off.
First up, Ofgem: “One of my first questions in one of my first meetings with Ofgem reps was why is it that these massive energy companies have treated their customers so badly – whether it’s prepayment meters, doorstep selling, the complexity of the tariffs. The response I got was, ‘that’s a good point’, and I’m thinking to myself, ‘what have you been doing about it?'”
There’s more in this vein. Flint obviously thinks Ofgem is a pretty hopeless outfit that has failed to protect customers. “I’ve asked Ofgem – given the difficult situations that have happened and the bad reputation these companies have got – if it needs some more powers. I don’t think I got an answer to that…” The parliamentary assistant pipes up from the other side of the room. Ofgem promised to write, apparently, but never did.
Failing to keep your promises to ministers is never a good idea, and if Flint gets into Whitehall, Ofgem will pay the price. What will replace it? “Where are the areas where we would expect greater teeth? Some of that does involve clarifying the role for a department such as the Department of Energy and Climate Change and the role of regulators. Again, looking at the regulator’s job to make sure we have a functional market that is much more mindful of how consumers are treated. That’s key given that Consumer Focus is being abolished, but also what are the policy areas that government might need to give direction on?”
It’s no surprise that Flint was similarly unimpressed with Ofgem chief executive Alistair Buchanan’s recent foray into the media spotlight: “What I thought was disappointing about the speech was that as the outgoing head guy at Ofgem, he didn’t spend a little bit more time talking about some of the problems with the market in terms of liquidity and some of the reforms we need to see, and maybe something that could provide perspective on what has changed since privatisation and what the implications are for a regulator.”
An Ofgem spokesperson said: “We have successfully made the case to the current and previous governments for powers when there is clear evidence that we need them. Our new powers to ensure generators do not abuse their position when constraints occur is an example of this.
“We are taking forward work to improve power liquidity. Suppliers responded to our call for them to address liquidity problems by auctioning around 30 per cent of their generation volumes on day-ahead platforms. However our objectives for a more liquid power market have yet to be fully met. This is why we have consulted on proposals for a licence condition to secure progress and promote further improvements.”
Flint’s beef with Ofgem doesn’t stop there. She fundamentally disagrees with the way it has allowed the market to structure itself. As she notes, the Energy Bill will enable future secretaries of state to intervene in the market where it’s not functioning – “which is interesting for me if I should be so lucky to be in this job after the next general election” – but in the meantime, she suggests an energy pooling system.
“We think a pool arrangement does open up the situation in which it’s much clearer and more obvious about how energy is bought and sold and that would open up opportunities for new players.
“Of course if that were the case under a Labour government, that would be another area that a future regulator would have some role in, in terms of making sure is functioning.
“Other things that we’ve raised are about monitoring wholesale and retail energy prices. Ofgem itself has said that when wholesale prices go up, prices go up like a rocket and when they come down, they come down like a feather. Some recent evidence shows wholesale prices in both gas and electricity have gone down in recent times, what we haven’t seen is that complemented by the regulator getting on to the companies and asking where we are seeing that passed on to customers. That is something we would give a power to a new regulator to address.”
These comments prompt a snort of laughter when later relayed to an industry expert, who points out that it was the last Labour administration that did away with the pooling system, under trade and industry minister John Battle in 1997. That doesn’t mean that reintroducing it is necessarily a bad idea he adds, but it’s fraught with practical difficulties.
Flint’s thoughts on the Energy Bill are rather less detailed. She points to the lack of detail the government has provided on a potential capacity market, but refuses to be drawn on whether a Labour administration would implement one. She toes the party line on nuclear – Labour is in favour – but mentions a proposed Labour amendment to the Energy Bill that would allow for the strike price to be revised downwards if the build costs are lower than expected.
She’s in favour of contracts for difference, recognising the need for some guarantees on security of supply. It’s unspoken, but essentially Labour has committed itself to supporting the Energy Bill to provide certainty for twitchy investors who would be frightened away from the UK by any suggestion that the overarching framework would be torn up after the next election.
Is Flint confident she would be able to have a constructive relationship with them if in power? She laughs, then says: “Yes, absolutely. Look, I do have a constructive relationship with the energy companies and in my speech at party conference I made the point very clearly that these companies keep our hospitals warm, they keep our factories open, they keep the lights on in our homes and they are a massively important part of the British economy.
“But that doesn’t mean that we shouldn’t recognise that there have been failures in the way this market has been operating and failures in terms of how customers have been treated, that need to be addressed. Energy – probably along with water – is an essential-to-life product and I think you expect a particular standard of care and attention to how they operate. It can done in a competitive market, but it has to be competitive, it has to be fair, it has to be more transparent.”
When asked if she has any closing message for energy companies, she says: “I want to restore public confidence in the energy sector. There’s no gain without pain in this.”
Come 8 May 2015, these could be the words of the energy secretary. They may not be what energy companies want to hear – but there’s no choice but to listen.
This article first appeared in Utility Week’s print edition of 8th March 2013.
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