Government faces a perfect storm over energy bills

Soaring prices, the Archbishop’s censure... and now a new demand to guarantee profits
  • @andymcsmith

What was supposed to be a week dominated by good economic news has begun with the row over energy bills deepening still further, as new figures showed gas and electricity prices have gone up by 152 per cent in 10 years – even before the latest hikes.

Ministers had looked forward to an announcement today that they had clinched a deal to build two nuclear power stations in the UK – the first in 20 years – and figures later in the week showing increased output.

Instead, an analysis by researchers at the TUC published today shows that even before these rises were announced, gas and electricity had gone up at four times the rate of inflation – threatening to ruin the Government’s hopes of persuading the public  that they have the economy under control.

Deputy Prime Minister Nick Clegg was on the defensive yesterday as he faced questions about British Gas’s announcement that it is following Scottish and Southern Energy by imposing price hikes that will push up the average domestic fuel bill by 9.2 per cent from next month – well above the rate of inflation.

Mr Clegg implied that the Government can do nothing to stop the Big Six energy companies pushing up prices, but expressed his exasperation that they did not make a better  job of telling the public why they are doing it.

“Clearly the companies need to justify the bill increases that they are now announcing,” the Liberal Democrat leader told Sky News yesterday.

“It cannot be right that people who are really struggling – many, many people still struggling to pay their weekly, their monthly bills, where electricity and gas bills for this winter are a looming worry – it can’t be right that those bills are increased for those households in our country and yet it is all rather opaque about what drives these increases.”

His remarks followed a plea from the Archbishop of Canterbury to the energy companies to “behave with generosity” rather than use their market dominance to reap maximum profit.

Justin Welby, who was an oil executive before he was ordained as a priest, warned that the latest rises  will have a “really severe” impact on people living on low incomes, and urged the energy companies to be “conscious of their social obligations”.

“They have control because they sell something everyone has to buy. We have no choice about buying it,” he told the Mail on Sunday. “With that amount of power comes huge responsibility to serve society.”

The debate over energy policy will take a new turn today when the Government reveals details of an agreement with the French nuclear giant EDF and with two Chinese firms to build two new nuclear power stations at Hinckley Point.

EDF has made it clear that it is not prepared to invest unless the Government guarantees it a minimum price for energy once the power stations are built. An agreement to set a minimum price will – even though its effect will not be felt until the 2020s – will make it harder for Tory and Lib Dem MPs to attack Ed Miliband for promising that an incoming Labour government would freeze the price of energy for consumers.

They have attacked the policy as a “con” and a 1970s-style interference  in the free market. Instead, some  Tory MPs are pushing for an end to green taxes in order to bring prices down. But in a speech today, the TUC’s  General Secretary, Frances O’Grady, will say: “Caught on the back foot  by Ed Miliband’s pledge to freeze energy bills, some MPs are now trying to twist this cost of living issue into one that fits their anti-green agenda.

“Consumers want action from politicians to tackle the excess profits and undeserved bonuses of the Big Six energy companies.”

And yesterday, Maurice Saatchi, the advertising guru who helped Margaret Thatcher to her election victory in 1979, warned that attacking Ed Miliband as a “1970s socialist” is not necessarily a vote winner.

Writing in the Mail on Sunday, he warned that because of the rise in energy prices and the “huge imbalance of power” between the individual customer and the giant energy companies “people may conclude they need someone to protect them from that kind of ‘free market’, such as, perhaps, the state”.