Ever-rising household bills are high on the list of culprits behind the prolonged squeeze on living standards which is affecting so many; and, as a result, the energy companies are almost as vilified as the banks. Yet the opposing sides in the debate over Britain’s power supplies cannot agree on the facts.
The Big Six suppliers maintain that they are caught between the cost of upgrading outdated infrastructure, the fluctuations in global markets from which they must buy, and their investors’ (not unreasonable) desire for a return. But their claims meet much scepticism. Such is the Labour leader’s certainty that profits are too high, he promises a 20-month price freeze if he is elected in 2015. Meanwhile, the Prime Minister has tried to prove he is on the right side of the debate by slashing environmental levies. And, in recent weeks, the Liberal Democrat Energy Secretary wrote to Ofgem not only urging the regulator to look at profit margins – particularly at British Gas – but also raising the possibility of a forced break-up.
Of course, if the market is dysfunctional, and consumers are being overcharged, the situation must be remedied. Despite all the rabble-rousing, however, such a conclusion is far from a certainty. Indeed, yesterday’s – far from stellar – numbers from British Gas-owner Centrica might even help make the alternative case. After all, some 2 per cent of customers – 362,000 people, that is – defected to rivals last year after the company jacked up its prices. Although the exodus is now slowing, after the company scaled back the hike following the shake-up of green surcharges, evidence of disgruntled consumers taking their business elsewhere suggests more wiggle room than is often assumed.
Either way, it is time for a debate based on fact rather than rhetoric. Not only has Centrica’s share price dropped by a quarter over the past months of political barracking, the spectre of government interference is putting off the investors needed to take our creaking, dirty power supply into the 21st century. Ofgem is due to report imminently on the state of the market. Until then, politicians should resist the temptation to pre-empt.