Outlook: Heated Huhne won't save us from chilling bills

Click to follow
The Independent Online

The word is that seniorLiberal Democrats are jockeying for position in expectation of a leadership battle before the next general election. In which case, one can hardly blame Chris Huhne for playing the populist card yesterday, having seen potential rival Vince Cable do so 24 hours previously. For Mr Huhne, the bad old energycompanies represented the fish in the barrel to replace the overpaid company directors shot by Mr Cable on Monday.

Let's not be unfair. At the margins, the measures outlined by Mr Huhne yesterday will offer some additional protections to cash-strappedconsumers. He's also quite right to point out that households need to take some responsibility too forchasing down cheaper gas and electricity prices. Competition doesn't function if consumers don't demand the best deals.

Still, anyone who thinks the Energy Secretary is offering them amandate to turn up the radiators to full-blast this winter is going to be in for an expensive surprise when the bills arrive in the spring. It may be that the Big Six's price rises have run ahead of wholesale energy price inflation in recent months – though they would deny the charge – but that inflation has been very substantial nonetheless.

In any case, there is going to be another huge driver of prices in the coming years. As the Department of Energy press release accompanying Mr Huhne's speech yesterday pointed out, Britain's energy companies are being asked to invest £200bn in power plants and other infrastructure projects over the next 10 years as our ageing capacity reaches the end of its life.

Though it was ostensibly given more tools to drive down bills yesterday, Ofgem has to date been doing its best to explain why bills are inevitably going to increase as those investments are made – for it will be customers who have to pay for them in the end.

Nor will the pain end there – the green commitments that Mr Huhne has already made will also result in higher bills. The carbon price floor, for example, will add an additional 4 per cent to bills within five years, while the feed-in-tariff regime will also weigh heavily. These measures may be justified on environmental grounds (though they also raise some handy revenues for the Treasury), but they will be expensive.

None of which is to say that we should not bother with measures to improve competition in the energy industry. Just that promising to get tough with an industry people think only marginally more highly of than the banks is a much more palatable theme for a rousing party conference speech than an honest explanation of why domestic energy bills are set to continue increasing for the foreseeable future.

Comments