The Conservative manifesto commitment to a regulated cap on standard variable tariff energy prices is “fraudulent” and will not fix underlying problems in the energy market, shadow energy minister Alan Whitehead has said.
Speaking to Utility Week, Whitehead explained: “If you just put an energy price cap on and you don’t do anything else to reset the reasons for the price rises you think justify a price cap, you are actually doing something quite fraudulent. Because you are just kicking those price rises down the road.”
He said that this seems to be exactly what the Conservative party intends.
“When all the fuss about price rises has died down. Then that cap would magically disappear,” and price rises would recur. The Conservative party’s proposed approach “is not any kind of an attempted long term solution to energy price rises,” he insisted.
Whitehead said that Labour, which also advocates intervention in the energy market, would take a longer-term approach to “fundamentally” address market issues that “allow price rises to go ahead without any effective control on them”.
This would comprise a temporary price cap, to be imposed while two major strands of work to overhaul market operations were pushed forward.
The first would be to introduce a “pool system” for energy trading which would provide “complete transparency about power purchase down the curve, ahead of time”.
The second, would be to establish a publicly accessible Ofgem-administered database of all registered tariffs on the market, with clear segmentation of the component costs in each.
This would “make tariffs entirely transparent in terms of the features in them that don’t relate to wholesale prices or environmental or other obligations”.
Whitehead said these policies were put forward by Labour in 2013 when then-Labour leader Ed Miliband pledged to freeze energy prices if the party won the next general election. “And no doubt it is what Labour would do today.”
In answer to arguments put forward by energy company leaders that price regulation will be a “deathknell” for competition in energy retail and force them into unsustainable loss-making territory, Whitehead said that depends “entirely” on the duration of any proposed cap and accompanying measures to “reset” the energy market.
The opposition’s election manifesto is due to be published shortly. Whitehead said it can be expected in the early part of next week.
Alan Whitehead will be speaking at the 2nd annual Utility Week Energy Summit (29 June, Westminster) – the annual meeting place for policymakers, investors, energy producers, distributors, retailers and wider stakeholders shaping the UK energy landscape. For details visit: http://events.utilityweek.co.uk/summit/