Parties push energy agenda

The party conferences saw the emergence of energy – especially its affordability – as a front-line issue, says Mathew Beech.

What’s different now is that energy has become a real full-frontal economic issue,” says Angela Knight, chief executive of Energy UK, reflecting on the past four weeks.

Reg Platt, senior research fellow at think-tank IPPR, agrees, saying: “It’s a whole new, different environment than we were in before. Energy policy has gone front and centre, especially energy affordability.”

Labour leader Ed Miliband, in ­particular, will feel as though he made the most of the party conference season, with his promise to freeze energy prices for 20 months while a future Labour government made significant changes to the wholesale market. This included a promise to reintroduce a pool system and replace Ofgem. It struck a cord with the electorate and gave Labour a bounce in the polls.

In his keynote address, Miliband said: “The market is broken and we need to fix it.” He added: “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’s side that also enables the investment we need.”
After the Brighton conference, Labour polled 42 per cent, giving them a lead over the Conservatives of 11 percentage points. The policy is one of the main drivers of this swell in support, with 62 per cent of people saying they support the idea of the price freeze, and only 26 saying against.

However, the policy has provoked a strong reaction from the industry.

Ian Peters, managing director of residential energy at British Gas, said Miliband’s policy could lead to blackouts if the price of wholesale gas spiked, because suppliers would not want to sell electricity or gas at a loss, while it would also threaten investment in the sector.

Knight agrees: “The announcement at the Labour party conference has made a number question the degree of consensus that exists across all three political parties.

“I appreciate Labour are saying they are still going to support EMR, and I think that’s good. The question of what does the consensus look like now – well, there is certainly a lot of external questioning going on now.”

Platt, too, notes the response from the industry: “From when it was first announced you got immediate push-back from industry and from inside government crying blue murder about it – the lights are going to go off, security of supply is being threatened, investment is being threatened.

“I think very, very quickly it was interesting to see those kinds of things died down.”

Many were waiting for a response in Manchester at the Conservative party conference, and the Tory fight-back consisted of the minister slamming Labour’s plans.

Energy minister Michael Fallon said the Labour price promise was “bogus” and the best way to drive down prices is to increase competition in the market.

Climate change minister Greg Barker said Miliband’s policy was “not just a gimmick, it’s a con”, adding it is “all the worst features of the 1970s in one”.

Barker did rule out removing green levies from the energy bill, which would remove about £130 from the average bill – adding it into general taxation.

However, he sounded more positive and open about the idea of extending the Energy Company Obligation (Eco) by 18 months, saying: “We’re are certainly looking at the future of Eco and we understand that the industry would like an extension but we haven’t taken a decision on that yet.

“We are a government that instinctively looks for long-term strategic planning and abhors the stop-go short-termism that so plagued the last Labour government.”

Platt said this response to Miliband’s energy policy – of criticising Labour, but not announcing anything of their own – was expected and that something is likely to come when the party manifesto is drawn up ahead of the 2015 election. “There’s clearly pressure to make some kind of response,” said Platt. “Doing something at the Tory conference would look very rash and reactive, so it’s understandable that didn’t happen, but something’s got to happen on energy.”

Knight would welcome the Eco extension, saying: “If there are ways in which one is able to address Eco over a period of time that still gets the work done but prevents some of the cost ramping taking place, I certainly think that would be beneficial as far as the bill is concerned, and does not walk away from the commitment to improve our housing stock.”

Independent analysis of the costs reveals that extending Eco by 18 months could help reduce the cost to the consumer by as much as 40 per cent – or £40 per year on the average bill.

However, one of the biggest and most significant announcements for the UK energy industry came at the Liberal Democrat conference in Glasgow: the Lib Dems voting to end their opposition to new nuclear generation.

“What it’s done is certainly make it clear that there is a greater deal of cross-party approval for building nuclear – and I think that’s good and I think the nuclear industry has taken that as being a strong positive,” Knight says.

Richard Nourse, managing partner at Greencoat Capital, also believes the vote in Glasgow could be the turning point in the negotiations between the government and EDF over a new nuclear power station at Hinkley Point. “Don’t you think there is a positive spin on it, which is why would Ed Davey take to the Lib Dem conference voicing support for new nuclear if he thought they didn’t want to get on now and close the EDF discussion?”

Nourse adds: “They are now in the same position as the Tories and Labour – they weren’t before. It’s something psychological in there and the vigour of which the coalition readdresses this pressing issue.”

With a deal expected between the government and EDF in the next few weeks, it could be that, rather than Miliband’s price promise, the Lib Dem vote on new nuclear – right at the start of the party conference season – could have the biggest impact on the UK energy sector.