‘End the Big Six Energy Fix’

(January 18, 2012)

Steve Head

End the Big Six Energy Fix’

There is growing public concern about the behaviour of domestic energy suppliers - we believe it is time to end the big six energy fix.

In recent months energy companies have once again been exposed for over charging customers and making excessive profits at the expense of ordinary people, this is even more unfair at a time when the incomes of those on lower and middle incomes are being squeezed. Energy is an essential human need – we all require affordable energy to light and heat our homes and to run our businesses – yet for many the stark reality is that energy is increasingly unaffordable.

For the first half of 2011 alone the big six energy companies made almost £10BN in profit. At the same time OFGEM revealed in October 2011 that the big six energy companies had increased their profit margins for dual-fuel deals by a staggering 733% (from £15 to £125 per household) with OFGEM’s CEO conceding that ‘we do not have a fully competitive energy market’.

Indeed the average annual household bill for gas and electric has risen from approximately £500 in 2006, to over £1200 in 2011, whilst USwitch has predicted that by 2020 this could rise to a massive £3202.

Furthermore, according to a recent Government report it is estimated that in 2011 4.1M people were now in fuel poverty (up from 1.2M in 2004), with another 400,000 forced into fuel poverty with every 10% price hike.

So firstly, given this context, we believe now is the time for the Government to respond to the excessive profiteering of the big six energy companies by imposing a similar levy to that imposed on the oil companies.

Let’s not forget that windfall taxation was used by the Conservative Government in 1981 to claw back the excessive profits of the High Street Banks, in 1997 by the Labour Government on the privatised utilities and the levy imposed by this Government on the big banks. The Government has also responded to the excessive profits of North Sea oil companies by levying a permanent windfall tax - which has funded a reduction in fuel duty.

Revenues from any levy should be ring-fenced. Part of the money raised should be used to offer immediate help to those living in fuel poverty. However the best strategy to eliminate fuel poverty forever is to ensure every home is insulated and highly energy efficient. Therefore much of the money raised should be used to provide additional investment for home energy efficiency measures - starting with the homes of the fuel poor. Such a Green New Deal would have the benefit of providing jobs for thousands currently out of work.

Secondly, to prevent the energy companies passing the cost of any levy onto customers and to make energy prices fairer, we further call on the Government to provide the regulator with new powers to cap prices, this could be linked to the wholesale price so that energy companies can still make a reasonable profit to guarantee future investment, yet eliminate excessive profit at the expense of people and planet.

Finally I am calling on the Government to launch an independent public inquiry into the big six energy companies so that OFGEM, the Government and the public know what measures are needed to have a market that serves people before its serves profit.

The time has come to end the big six energy fix – we urge the Government to act.

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