17 Oct 2012

Why Cameron’s energy promise has a whiff of desperation

At PMQs the prime minister said: “I can announce that we will be legislating so that energy companies have to give the lowest tariff to their customers.”

Really? How? Not my questions but the questions of Whitehall folk who should know something about it.

It has a whiff of a panic announcement in response to Ed Miliband‘s promise at Labour conference that he wanted to see every pensioner over the age of 75 pay the lowest energy tariff available by law.

But the mechanisms for achieving this are a little vague – even vaguer if you imagine rolling out a compulsory arrangement for the whole country.

How do you decide what is the best tariff for someone, and bring the weight of the law to bear on a company to provide that tariff? Hardly anyone has a smart meter. How can a company know what is best for you, your off-peak usage, your energy usage in a cold spell?

Competition could easily be stifled if all suppliers felt under legal pressure to provide a minimum tariff. Oh, and for good measure it’s probably illegal under EU law.

It’s possible that you could compel companies to provide all relevant information about tariffs, as Nick Clegg has already promised, but that is very much not what the prime minister said.

I hear DECC was asked at the weekend if this announcement was a good idea and said absolutely not. From what I can gather, energy companies were not consulted.

This has a whiff of a rather desperate announcement to show the government is “on the side” of struggling households.

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15 reader comments

  1. Peter Lawless says:

    The cynic in me says that the energy companies will use the idea to help them, rather than the customer.

  2. Andrew Dundas says:

    What’s being proposed is a government organised cartel. The OFT would be obliged to investigate. The EU ‘Competition Commissioner’ may need to ‘interfere’ too!
    One of the causes of our higher fuel bills is the huge subsidy given to wind, solar & tidal electricity generation and paid for by consumers. Please will C4 make sure that those very high costs are broadcast whenever there’s a news item for the claims of these new technologies.
    The most cost-effective ways of reducing noxious emissions is by reducing fuel consumptions: taxing gas-guzzlers off our roads would be a good start.

  3. Dan says:

    They’d probably be able to achieve a fudge by asking consumers to enter what they think their usage habits are before purchasing a particular energy plan. Or by gathering average usage data over a few quarters. The companies could then offer up the best plan based on the information received. Not ideal, but a start, I guess. That said, this does sound a tad like an on-the-fly promise…

  4. les says:

    Sounds more like Gary Gibbon has a whiff of desperation!

  5. bruce benson says:

    No government or law can decide what product, service or “tarrif” (for a service, like gas, electricity, telephone or water) is “best” for each individual consumer.

    As consumers we all have our different preference priorities, eg:

    (a) using direct debiting to pay is convenient and appealing to some, but anathema (for rationale reasons) to others who will never authoriseva third party to access their bank account.

    (b) using internet to disclose any personal ID or financial information – even by some who have internet access and ability to use it – is an absolute no-no, irrespective of how much less an internet billing tarrif compared with quarterly bill settlement by means totally under control of consumer may be.

    (c) fixed rate guarantee tarrifs have pluses and negatives, some of which can only become apparent after the end of the rate guarantee period, ie they are a speculative bet by the consumer against the utility company provider (with all their economists and knowledge!).

    (d) some consumers are happy to have administrative inconvenience of researching and changing tarrifs &/or utility company provider, while others just want the peace of mind, simplicity…

  6. Pat Duncan says:

    All utilities should be publicly owned as was the case pre “tell Sid” etc…

  7. Em Squared says:

    At the moment the default tariff for many of the energy providers (I exclude Ebico and the Co-op) is the non discounted standard tariff. It’s this default that many of the bait and switch deals hope that people will be be switched to by defualt when the switch deal/ price promise period ends.This way the providers eventually claw back the temporary bait discount because many users hate the hassle of having to continually check that they’re getting the best deal.
    Other than forcing a standardised transparent pricing structure layout (something still be thrashed out) and legislating against the higher pricing of the first tier tariff which penalises low energy users together with removing the barriers to smaller energy providers entering the market (who no choice but to have to partner with one of the big six because of the way energy is purchased in bulk on the open market) then I’m unsure that much will change. But then we probably knew that already.

  8. Philip says:

    Cameron gives the phrase “empty vessels make the most sound” a massive endorsement virtually every PMQs. (Not that Milliband is far behind). He does so often that he is either a consummate, practised and amoral liar or he just says what he wants to believe and hopes it will happen, without having the faintest clue how it can be achieved. It’s almost as though he can’t allow himself to lose a debating point to an “erk” like Milliband, so he just says what gets him a draw or a points win. I suspect it’s a bit of all of that – but it continues to contribute to the decline in respect people have for politicians.
    When will they realise that the first party to start speaking the truth regularly – even when it hurts them – looking to what’s best for the country not their short term tactical (sound bite) advantage, will reap massive electoral reward?

  9. Tubby Mike says:

    Gary,
    I’ve just seen your piece on this subject on the programme. My first thought is that this is the Government tacitly admitting that the ‘competition’ in the market has failed and that the energy ‘market’ is really just a cosy cartel. Just look how, when one of the “big six” changes their pricing all the others soon follow suit. Isn’t what’s required a complete overhaul of the system by which energy is generated and supplied in this country?
    Best regards,

  10. Gillian says:

    He being David Cameron does not give a rats arse about the people of this country… Thatcher and now this waste of space has proceeded to do more damage to this country than Hitler did in the second world war. We are all sick of his lies and any fool would know that to boost the economy isn’t by cutting back but by people spending!

  11. Peter Breuer says:

    That is what you get from government by sound bites

  12. Philip Holloway says:

    All mouth no do

  13. Philip Edwards says:

    Gary,

    There is only one way to stop this economic thuggery and profiteering:

    Return essential utilities to community ownership by renationalising them. Then get shut of the spivs and Suits, preferably by locking them up for theft.

    Until that happens these crooks will carry on doing to energy what they did to the banks and everything else they touch.

    As for Cameron…….he best beware. Before Heath got binned he spoke of “the ugly and unacceptable face of capitalism.” Before Major was ditched he spoke of “a classless society.” If Cameron thinks he can be remotely fair he better think again. The knives are already out for him after the Leveson Inquiry and his Hillsborough apology, Rupert and co have seen to that. They won’t have liked his self manufactured near-tears at their conference either. You can bet there will be whispers of “weakness.”

    And Georgie Boy’s coming up on the rails. You can tell by his air of thugishness.

  14. F-John Tompkins says:

    Why doesn’t the Government just threaten to bring the Utility Companies back into public ownership? .. let the profits come back into the public purse!

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