Fuel prices: the power of Britain's energy giants must be reined in

http://www.theguardian.com/commentisfree/2013/oct/20/observer-editorial-energy-demands-privatisation

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In the short term, the question for many people is clear and urgent – how can less well-off Britons keep themselves warm this winter as fuel prices soar while wages and benefits stagnate? But there is a long-term question we must address. How long can privatisation, along with light-touch regulation, remain the business model for the electricity and gas industries in an era of high base energy prices, massive investment needs and urgent demands for environmentally friendly services? The fierce reaction to British Gas's proposed 9.2% tariff increase this winter highlights that change is needed. Never-ending tariff increases are unsustainable, especially in a country where 20 million people earn less than the average wage of £26,500.

In part, the big six energy companies have a point. Wholesale energy prices are rising (although not enough to warrant such big increases); there are colossal investment requirements; renewable sources are expensive, as are measures such as smart metering and promoting energy-efficient homes. Most of the big six make some effort to provide discounts for needy customers. But this is not enough.

Quoted companies such as Centrica and SSE offer mouthwatering remuneration to senior executives. Centrica has felt able to spend £500m supporting its share price by buying back shares, rather than investing in new capacity. But most important, energy requires investment with 30- to 50-year time horizons. Nobody knows the future of energy prices. Private companies have to please shareholders in the present. Ed Miliband's proposed price freeze and reorganisation of the market is the industry's last chance saloon. There has to be more transparency, a refocus on the consumer and a recognition of just how difficult paying bills can be – and a declaration by government of a long-term energy policy.

Otherwise, nobody should be surprised if the unsayable soon becomes sayable. Privatisation was a mistake – and should be reversed.

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