The cost of energy can put a lot of pressure on family budgets and businesses alike and prices continue to increase as wages fall behind. The Labour Party wants to reform the energy market to make it more competitive and fair for customers.
The six biggest energy companies currently supply 98% of homes and run 70% of Britain’s power stations. A lack of competition means people can’t shop around to get a fair deal and so get overcharged. A lack of transparency with firms generating and selling electricity to themselves means that the Big 6 can get away with putting up bills when energy prices rise and not reducing them when they drop. When energy prices went up in 2008, bills went up. But when energy prices fell by 45 per cent in 2009, household bills only fell by 5 per cent.
Labour will reset the energy market by doing three things:
- Getting energy companies to separate the parts of their businesses that generate energy from the parts that supply to the public with different licenses and separate operations.
- Requiring all energy companies to trade their energy in an open market by selling into a pool.
- Introducing a simple new tariff structure so people can compare prices.
We would also scrap OFGEM and introduce a tough new regulator with new powers to make sure that companies can no longer abuse their position.
However, these measures will take time to kick in. That is why Ed Miliband also announced that a Labour Government in 2015 would take immediate action upon entering office to freeze prices until January 2017 when our reforms will be in place.
This could save the typical household £120 and the average business £1,800. This would be achieved by introducing legislation immediately to give the Secretary of State the power to modify energy suppliers’ licences to require energy companies to freeze their prices.