Power struggle: Critics of predatory energy firms must not conflate prices with investment

Consumers have every right to feel angered by price rises just announced
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Energy is rising up the political agenda as fast as bills themselves are soaring. The Government feels pushed on to the back foot, shaken by the welcome that many people gave Labour’s proposed price freeze. Today ministers will strive to seize the initiative with the announcement of a deal to build the first nuclear plant in a generation. David Cameron’s team will hail the agreement with France’s EDF as an important component of a broader energy strategy designed to secure our needs in this field for decades. But ministers will not get an easy ride. Aside from concerns generally about nuclear power – and about the implications of China’s growing involvement in EDF – criticism will focus on the size of the effective subsidy that Britain has agreed to offer the company for the proposed £16bn plant.

At roughly double the current price of electricity, the figure is bound to stir complaints that ministers have given in to a  foreign energy giant at the expense of hard-pressed British consumers by whom the subsidy will inevitably be paid over time in the form of yet higher bills.

Consumers have every right to feel angered by the swingeing price rises announced by Scottish and Southern and then British Gas, which the other big power companies are bound to follow.

But we must be careful to separate out what is at stake here. The existence of what operates in practice as a cartel in the energy sector is unquestionably a problem that needs addressing, although whether the 20-month price freeze that the Labour leader  Ed Miliband has floated is much of a remedy is debatable.

However, our need to attract investment to nuclear power is a separate matter, and critics of the Big Six and their pricing practices should not conflate the two. Britain’s coal power stations are coming to the end of their life. Green power alone cannot fill the void, which does not mean we should not invest more in it, merely that we need to remain clear-eyed about our expectations. That leaves nuclear power, which provides almost 20 per cent of Britain’s total generating capacity. The problem is that this sector has been left in virtual limbo for decades, and the plants have now either closed or face decommissioning. Hinkley A shut back in 1999 and Hinkley B must follow suit by 2023. Britain last built a nuclear plant, at Sizewell, in the mid-1990s. 

To avert the danger of the lights going out, we need urgently to ensure an increase in the available supply of power. One new plant at Hinkley C, which could supply about 7 per cent of UK energy needs, is not going to solve everything but is a start. Meanwhile, the argument about whether the guaranteed price offered to EDF is an incentive or a subsidy is semantic. If it takes a subsidy to get a new nuclear plant built, so be it.