Energy Rights
Anna Aslanyan
‘If it rains could you pop into ours to switch that thing on?’ my neighbour said before going away for the weekend. ‘And while you're at it, make yourself a cup of tea; you can also do your washing.’ Their flat was recently flooded, and the company responsible for the leaking roof gave them a dehumidifier and offered to pay their electricity bills until the problem is resolved.
On Monday I went to the launch of the Energy Bill of Rights at the House of Commons. The bill, drafted by Fuel Poverty Action (FPA), includes ‘the right to affordable energy to meet our basic needs’ and ‘the right to properly insulated, well repaired housing that does not waste energy’.
John McDonnell, the Labour MP for Hayes and Harlington, suggested some mechanisms for putting the bill into practice: building a parliamentary platform, getting trade unions involved and using ‘creative forms of direct action’. He talked of the number of people in his constituency expected not to survive the winter because of fuel poverty.
Ruth London of FPA said that more than 10,000 people a year die because of fuel poverty in the UK. There are 3000 prepayment meters installed every day; London compared the companies that run them to loan sharks.
The Green MP Caroline Lucas, who tabled the bill as an early day motion on 23 October, urged people to contact their MPs to persuade them to support it. ‘This agenda is a slightly lonely one here in Parliament,’ she said.
Ellen Lebethe, the chair of the Lambeth Pensioners Action Group, said that they are going to make the Energy Bill of Rights an election issue next year. Addressing the young people in the room, she said: 'We are working for ourselves and for tomorrow's pensioners.'
There were stories of tenants in Carlisle being intimidated and blackmailed, and of solar panels being installed on north-facing roofs. The big six energy companies were condemned as ‘rapacious’. Several speakers said that nobody should have to choose ‘between heating and eating’. There were calls for ‘frontline community resistance’ to stop multinationals exploiting oil-rich countries; for a ‘green industrial revolution’; and for two million low-income homes to be insulated by 2020. Community generation schemes were mentioned; fracking criticised as a false economy.
A woman sitting behind me asked me if I knew anything about the Warm House Discount. I didn't, but found an explanation in FPA’s miniguide to energy users’ rights: it's a one-off £140 discount available this winter to people on a low income or on benefits. Not all energy suppliers are part of the scheme, though. ‘I wanted to go green,’ the woman said, ‘but in the end it wasn't worth switching from EDF to Ovo.’
When I got home, I logged onto my energy supplier's website. ‘You used 67 per cent more than efficient similar E.ON homes,’ it told me. Clicking on ‘What type of homes are compared?’ I got an error message. Below it were energy-saving tips: ‘turn off the lights when they're not needed’ and ‘power down your computer’.
Comments
-
30 October 2014
at
10:59am
farthington
says:
At no stage has the public voted for the privatisation of public utilities, but we got them anyway.
-
30 October 2014
at
1:31pm
streetsj
says:
What's it got to do with privatisation? I don't think the gas/electricity utilities are especially profitable. They make about £35 operating profit per £1,000 of revenue.
-
2 November 2014
at
10:24pm
semitone
says:
@
streetsj
Well, it has a bit to do with privatisation: privatising energy supply was a big deal and led to lots of changes in the industry. You're a bit of an expert, streetsj, you'll already know what I mean no doubt.
-
3 November 2014
at
10:08pm
streetsj
says:
@
semitone
Ignoring your edifying sarcasm, why would you expect prices to be lower if the utilities were still state owned?
-
4 November 2014
at
12:25pm
Harry Stopes
says:
@
streetsj
I'm not sure about your claims on energy companies' margins. Ofgem estimated in July that the big six will make on average 8% over the next year. Even if you're right, a 3.5% margin in a sector like energy, where continued custom is basically guaranteed, is pretty healthy. Lots of big businesses - airlines, for instance - happily run on margins less than 3.5%.
-
4 November 2014
at
9:00pm
semitone
says:
@
streetsj
So, two points here. The first, to answer your question: I didn't say that prices would always be lower if the utilities were state owned. But they might be, much of the time. Prices rose (in real terms) during the 70s to a peak in 1984, then fell more or less steadily until 2000. After the privatisation enabled by the Electricity Act 1989 (I used to keep a copy on my desk), this fall in prices was due to price controls by the regulator, though competition may have played some part. Since 2000, during which time competition has supposedly increased but price controls have been relaxed, the cost of energy has more than doubled in real terms. Not really a success story, then.
-
4 November 2014
at
9:08pm
streetsj
says:
@
Harry Stopes
I agree that the margin doesn't necessarily indicate profitability (I couldn't find a return on capital number quickly) but the point is still valid with respect to bills: you couldn't reduce bills much before there was no profit at all. The margin I quoted was for last year.
-
4 November 2014
at
9:29pm
streetsj
says:
@
semitone
Not entirely sure where you're coming from. Energy price went down in real terms for ten years after privatisation due to the RPI-X formula. Then post 2000 the oil price went from $20 to $150 in 2008 and has averaged around $100 for the past few years. It's not surprising that energy bills have doubled. I just think it is highly unlikely they would have been any lower if they were state controlled.
-
6 November 2014
at
9:56am
semitone
says:
@
streetsj
Sorry streets, if you are unaware of the term "fuel poor", I've assumed you knew more than you do. My mistake. Ditto your breathtakingly ignorant comment that no-one is making "heat or eat" choices: part of my job is to sit around for hours with Government, the Big Six and others talking about how to help these people.
Read moreThis is 'failing forward' in action.
That wonderful phrase hides the fact that this wretched state of affairs has not failed for select beneficiaries.
But the public can't vote, of course, to rectify the failure on its terms because the corporates own the bulk of the political spectrum.
It took a century for the Establishment to work out how to bypass the threat of the franchise, of which it was initially so terrified.
(Have the Miliband offspring ever bothered to read Dad's Parliamentary Socialism? Horrors - perhaps that's where they learnt their trade.)
But now, what a brilliant system. Clayton's democracies as far as the eye can see. And our pundits go on about China, Russia, etc. etc.
Ya hafta laaf.
And that's before these two mega trade treaties kick in, the terms of which eradicate any point of 'representative' bodies whatsoever.
The conflicts of the 19th Century thus have a new relevance.
But the American populists were ahead of the pack in seeing the dangers of the open-ended commercial corporate form. The unrestricted joint stock corporation vitiated the point of the universal franchise, and the currently composed US Supreme Court celebrates that fact.
Let the masses eat cake (if they can afford it).
Bills may be higher due to a combination of things - higher oil prices, green initiatives of all sorts - but energy company profits have been rather dull.
Second point: the utilities are quite profitable, actually. 2014 hasn't been the best year but this time last year profits of the Big Six were reported as five times higher than they were in 2009, as millions of households received record bills. The rate of increase (of bills, not prices) since the last election is three times what it was between 1997 and 2010.
Rate of return is irrelevant in a high-volume industry like energy, so I don't know what to make of your third sentence. And lastly, yes prices can rise due to a combination of things - always grateful for your expert analysis, streets - but changes in the cost of green initiatives are very small compared to changes in energy prices. Furthermore, many such green initiatives (smart metering is the example I know best) are of net benefit to the consumer, largely because they will reduce energy consumption and therefore reduce our energy bills.
So, leaving aside your misinformed rhetorical question, then your incorrect assumption, then your non-sequiteur and statement of the obvious, what's your point?
The relevance of the profit margin is simply to show that however big your bill not a lot of it is profit to the privatised utilities which I thought was reasonably self-explanatory but apparently not.
Furthermore, the point of state-owned utilities is not just lopping that margin off your bill. It's that different parts of the state (general taxation, for instance) can cross-subsidise the provision of services and avoid year on year above-inflation bill increases. (64% on water bills over the last decade, for instance.)
"By moving from a system where public services are supported by general taxation to a system where they are supported exclusively by the fees people pay to use them, they move from a system where the rich are obliged to help the poor to a system where the less well-off enable services, like a road network, that the rich get for what is, to them, a trifling sum."
http://www.lrb.co.uk/blog/2012/03/20/james-meek/human-revenue-stream/
To your second point: if the rise in prices since 2000, particularly the steep rise in bills since 2010, is not increased profit (and actually much of it is), this is cold comfort for the fuel poor who make daily choices between heating their homes or cooking a meal.
I don't buy the cross subsidisation argument. It seems to make more sense to provide services at the normal/market/real price and supply subsidies directly and explicitly through benefits. That way people can adapt their behaviour according to the cost of providing the service.
Nor do I agree with James Meek's argument for much the same reason: the rich are obliged to help the poor through the taxation system. There is no right level of tax but it seems fairer to me if things are explicit rather than hidden.
Or maybe that's the real point: the more ways subsidies can be hidden the more the rich will pay without noticing. The problem with subsidies though is they distort consumption and so become highly inefficient.
The second half of your last sentence is just all wrong: everyone is "fuel poor" who doesn't own a windmill or solar farm or whatever. You just mean "poor". And there is no "choice" between cooking a meal and heating a home. The cost of cooking is tiny compared with heating a home.
None of which means we (the state) shouldn't be looking after the poor and be aware of the rising (or falling) cost of essentials such as heat, electricity and food. It just means that State ownership wouldn't help in the slightest and would probably be substantially worse. Hence my original comment: what's it got to do with privatisation.
So, to finish up (from me, at least) - privatisation and the profit motive have clearly influenced energy prices, but in complex ways and I don't know of any stats of a counterfactual of prices against continued state ownership. I'm not advocating renationalisation of energy supply - that bird has well and truly flown.
Your other point in your other post, that all support measures should be explicit in general taxation, is naïve: the energy industry smears costs across consumers all the time, I assume most other industries do too, it makes for a more efficient market: the alternative would look almost Stalinist in its concentration of control. An example: the initial cost of smart meters will be paid for by energy suppliers, who will pass these costs to their customers. Competitive forces will keep this to a minimum, and the benefits case shows that customers will be better off in the long run because increased control of their energy use will enable them to use less - a good result for energy security, for our carbon targets, and for consumer bills. The alternative you are proposing is that bills stay the same, but that general taxation be increased so that the Government pays, upfront, the entire cost (we are talking billions). That's big government in a very bad way: I'm for a market solution here, which is what we've got.