For such a modest proposal, Ed Miliband's plan to freeze gas and electricity prices for 20 months if Labour wins an election that is still 19 months away has had a remarkable effect. The Labour leader has managed the first stage of successful politics: of, as Bill Clinton put it, feeling voters' pain. A distant price freeze may not offer much relief to people feeling the pinch now, but it shows that Mr Miliband knows what matters to many voters.
The response of Ed Davey, the Liberal Democrat Energy and Climate Change Secretary, as we report today, is to encourage consumers to band together to demand a better deal from their suppliers. Tomorrow sees the start of the Big Community Switch and the Big London Energy Switch, schemes supported by local councils in which people can sign up to see if they can get cheaper bills. The switch is open to anyone living in Great Britain through the two websites. The energy companies will then bid for these thousands of customers, who will then be able to switch to the cheapest offer.
This is a good idea. As our exclusive ComRes poll finds, 70 per cent of people think that it is "quite easy" to change gas or electricity provider, and 13 per cent say that they have switched in the past month. If that rate is maintained, the entire population will have switched by next June. But, naturally, the rate of switching will decline, and there are still the 30 per cent who do not think it is easy, or who say they do not know, which may come to the same thing.
The advantage of collective switching is that it makes it easier to involve people who find the idea of even looking at a gas bill intimidating, or who do not have ready access to the internet. The schemes encourage social tenants to organise themselves, and they can be linked with local energy generation, such as the solar panels on the roofs of members of the Wedmore Community Power Co-operative in Somerset.
Next month, we expect George Osborne, the Chancellor, to make his response to Mr Miliband in the Autumn Statement. If, as has been suggested, this consists of taking some of the green or social levies off gas and electricity bills and paying for them out of general taxation, that will simply be the traditional Treasury trick not of robbing Peter to pay Paul but of paying Peter by robbing Peter.
Mr Davey's plan is more important, because even if the immediate gains from switching start to diminish, greater competition will feed pressure for lower prices through the system. Mr Miliband's price freeze, it should be noted, would be a temporary measure while an incoming Labour government tries to introduce more competition in the electricity generation market – a market Mr Miliband describes as "broken" and which needs to be "reset". There are reasons to be sceptical about this, not least that Mr Miliband was the minister responsible for creating the present market, but also because the money for new and low-carbon generating capacity has to come from somewhere.
That is the strength of Mr Davey's policy of encouraging collective switching. It will intensify pressure on the energy companies to keep prices low. If, as the companies claim, the market in electricity generation is working, then more competition at the retail end will make little difference. If, however, the companies are making excess profits in the areas where margins are less transparent, competition will help to squeeze them out of the system.Reuse content