Leader: The irony of Labour’s ‘radical’ agenda

As Labour confirms its manifesto plans for energy this week, there’s a tangible sense of irony. The party plans to stop price rises for 20 months, force suppliers to pass on falling wholesale prices, and break up the vertical integration of the big six. Ed Miliband has made great political capital out these supposedly radical interventions. The irony? They are all happening anyway.

Labour would argue that the energy companies’ voluntary holding down of prices, and passing on of the fall in wholesale costs, is due to its high-profile intervention in the sector. There may be some truth in this. Certainly, the political and public scrutiny of the past two years has forced energy companies to take clear and decisive steps to protect customer interests. Would chancellor George Osborne have called on energy companies to pass on the fall in wholesale costs if it hadn’t been for Ed Miliband? And would the companies have passed on the savings if Osborne hadn’t publicly asked them to? We’ll never know.

We do know, however, that the market would be changing regardless of political intervention. The energy giants are having to make hard decisions about their future, driven not by politics but by stark economic reality. Eon’s decision to split the company, spinning off traditional, fossil-fuel generation and trading from the renewables and customer-facing arm is a sign that the vertically integrated European energy company business model is no longer fit for purpose.

SSE is already travelling in the same direction and, with a major new strategy announcement expected from Centrica this summer, and RWE revealing this week plans to slash its administrative costs by a third, the pressure is clear. Meanwhile, switching is on the rise and new players are capitalising on their agility and comparatively unblemished reputations.

Add to this the Competition and Markets Authority inquiry, something the energy companies had been calling for even before Miliband made his price freeze pledge, and seismic changes in UK energy become all but inevitable.

Incidentally, the same is true of the water sector, where you have Labour calling for a national affordability policy at the same time as the last few water companies seal their plans to launch their own social tariffs.

It’s great politics to take the credit for changes that are already underway, but let’s not kid ourselves: the utilities market as we know it is over, regardless of the outcome on 7 May.