Leading article: This is no time to tread softly around the energy companies

Related Topics

The great energy rip-off continues. The wholesale price of gas has risen in recent months so the large household energy suppliers are raising their consumer prices.

British Gas has become the latest to do so, announcing a 7 per cent increase yesterday. This comes after a similar price hike by Scottish & Southern Energy last month. And the rest of the "big six" UK energy suppliers are expected to follow soon.

The problem is that the energy sector is only selectively responsive to fluctuations in market prices. Wholesale energy prices are 50 per cent below their peak in 2008, yet consumer bills have fallen by just 10 per cent in that time. It is a familiar story: consumer prices are sticky on the way down, but well lubricated on the way up.

But the fact that we are used to these gouging tactics by energy firms does not make them any more acceptable. This represents a market failure. Competition should hold down consumer prices. But the number of household power suppliers has fallen from 20 to six since privatisation in the 1990s. A competent regulator would not have allowed this situation to develop. But Ofgem, which supposedly oversees the industry, has repeatedly shown itself to be unwilling to bring the energy giants into line. The result is an energy sector that is uncomfortably similar to a cartel.

And the Coalition has, so far, been no more willing than the previous administration to address this problem. The Energy Secretary, Chris Huhne, has warned firms to give customers ample warning of price rises. But he has not indicated a desire to force structural reform. And the Coalition's decision to abolish the Consumer Focus watchdog, transferring its function to the Citizens Advice Bureau, will only make it more difficult for consumers to resist the excesses of the energy giants.

The suspicion is that ministers are treading softly around these firms because they are relying on them to invest some £200bn in low-carbon energy infrastructure over the next decade. Yet a failure to tackle the vested interests of the energy sector would represent a strategic mistake by the Government. Consumer energy prices will inevitably need to rise over the medium term as firms make investments, under Government pressure, to decarbonise our energy supplies. Massive investment in wind, wave and nuclear power is necessary if Britain is to meet its target of generating 20 per cent of our energy from renewable by 2020.

There will be transitional costs as we, as a nation, wean ourselves of our reliance on fossil fuels such as gas and coal. If the authorities allow this type of customer gouging to take place on top of the rise in prices to pay for green investment, the entire shift to low-carbon energy risks being discredited by association. The price of a failure to bring the energy sector into line could be the failure of the Coalition's green agenda.

The previous round of energy bill hikes came before the recession. These latest increases will hit at a time when many households are under intense financial pressure, as state spending cuts begin to bite and VAT is poised to rise. Opinion polls show that the energy firms are already deeply unpopular. If ministers are shrewd they will send a message to the energy giants this winter that it is time for the rip-off to end. This is a rare chance for the Government to be both popular and right.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: Senior Digital Marketing Consultant

£28000 - £45000 per annum: Recruitment Genius: A Senior Digital Marketing Cons...

Recruitment Genius: Assistant Stores Keeper

£16640 - £18500 per annum: Recruitment Genius: An Assistant Stores Keeper is r...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Software Developer - C# / ASP.NET / SQL

£17000 - £30000 per annum: Recruitment Genius: Developer required to join a bu...

Day In a Page

Read Next
Mosul falls: Talk of Iraq retaking the town, held by IS since June, is unconvincing  

Isis on the run? The US portrayal is very far from the truth

Patrick Cockburn
Ed Miliband:  

Ed Miliband: I pledge to make Britain a more just and equal country

Ed Miliband
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk