Labour considering ‘limited’ energy cap

Opposition also looking at network licenses similar to rail franchise agreements

Labour is exploring moves to rail franchise-style time network licenses and a “limited” cap on household bills, the party’s energy spokesman has told Utility Week.

Alan Whitehead, in an interview conducted during the pause in campaigning following Monday night’s terrorist attack in Manchester, fleshed out details of Labour’s energy manifesto.

The document states that an incoming Labour government would “regain control” of energy supply networks by altering national and regional network operators’ license conditions.

Under the current licensing regime introduced by the 1989 Electricity Act and entrenched by the 2000 Utilities Act, Whitehead said there are no cut off dates for network operating licenses.

Whitehead, who is battling to retain his marginal Southampton constituency, said Labour would explore introducing termination points for network licenses akin to those used in train franchises where companies bid to run a section of the rail network for a set period of time.

“You would look at terms of licenses under the act and whether they could be terminated similar to the rail franchises.”

Altering the licensing regime would enable Labour to gain greater control over networks while sidestepping a potentially costly buy-back of infrastructure from the existing network companies which could then lease their assets to the license holders.

“The idea that you would pay a huge amount of cash isn’t necessarily part of the model.”

He said that the introduction of a licensing regime would support Labour’s ambition to decentralise the power network because it would enable council or other not for profit energy companies to take over the right to run local distribution networks.

Whitehead also told Utility Week that Labour, if elected to government would introduce a “looser” cap than the limits mooted in the Conservative manifesto.

Labour states that it would immediately introduce an emergency price cap to keep average dual annual fuel household energy bill below £1,000 during the transition to a “fairer system”.

Whitehead said that any cap introduced by Labour would be “temporary”.

While this was in place, he said Labour would introduce reforms designed to “reset” the market. These would include the introduction of more transparent trading arrangement like the Nordpool system that operates across Scandinavia. The level of the cap, which would allow a few percentage points leeway on top of a recommended figure, would also take account wholesale costs, said Whitehead.

“Once reset, the market would probably have a cap on it but a looser cap in terms of different operating market conditions.”