Hot on the heels of the news of the £8 billion stumped up by taxpayers to buy new stock for the “privatised” railways, comes news that the privately-owned energy suppliers have reported record profits as millions of Britons slump into fuel poverty.
The rampant profits generated by the Tory and Labour party-supported privatisation of the energy industry has risen by 38 percent over the last financial year.According to a report by the taxpayer-funded watchdog Ofgem, the average margin on a standard dual-fuel tariff had risen from £65 to £90 since September.
Most energy suppliers, including British Gas, Scottish & Southern and Scottish Power, have recently increased their prices to consumers once again after claiming that prices in the “energy wholesale market” (wherever that might be) left them with no choice.
Ofgem's chief executive Alistair Buchanan was quoted in media reports as saying that he wanted to “make sure [energy] firms were playing it straight with customers.”
Ofgem, set up by the government to monitor the energy market after its privatisation, will now launch an investigation into the accounts to the energy companies to determine if there has been excessive profiteering.
One of the biggest problems facing the energy industry, just like with the privatised rail network, is capital investment.
Only a tiny amount of £200 billion infrastructure investment which is needed before 2020 to meet current demands has been made so far.
Their obligations to shareholders, which has driven profit before investment, has meant that most of the companies simply do not have the cash reserves available to make the investments which are needed to literally keep the lights on.
Earlier this year, Ofgem even drew up proposals which would in effect lead to the renationalisation of major parts of the energy industry so that Britain would be able to provide for the projected increased demand.
Then, Mr Buchanan (previously an enthusiastic supporter of privatisation, told the media, that “"We live in a different energy world" and that he had “revised his view on the market's ability to deliver the investment required.”
Media reports went on to quote Professor Dieter Helm, an expert in the economics of energy at the University of Oxford, as saying that it was an “extraordinary volte-face to admit that a liberalised market won't achieve its objectives. They have argued against intervention and said markets would engage with the issue of security of supply. The irony is incredible."
The revised Ofgem position was a realistic assessment that Britain will suffer power shortages from 2015 onwards unless the way energy companies operate is overhauled. Large investments are needed to repaly old coal and nuclear power plants which are due to be closed down, and North Sea gas reserves are also dwindling, making Britain more dependent on imports.
Mr Buchanan said there was a "two-year" window in which to act, otherwise consumer bills would have to rise steeply to pay for the last-minute investment needed to maintain energy supplies. "Crisis tactics will be paid for by the consumer," he was quoted as saying.
Ofgem’s proposal is to create a new state-owned central energy buyer, identical to the old Central Electricity Generating Board, which would require power plants to sell it electricity at fixed rates, which it would sell on to customers.
This plan would ensure that the "Big Six" energy companies — Centrica, E.ON, npower, Scottish and Southern, Scottish Power and EDF — who own most of the UK's power plants, would not be able to profit take to the consumer’s disadvantage.
(The irony of EDF’s ownership of part of the UK’s energy industry is made even more bizarre by the fact that it is in fact the French state-owned power supply company. No-one has yet been able to explain why it is bad for the British state to own the energy supply industry in Britain, but it is perfectly acceptable for the French state to own it).
Ofgem’s proposals have, of course, been ignored by the ConDem government, which still clings fanatically to the Thatcherite vision of letting profit come before infrastructure or the interests of the state.
The British National Party is all in favour of private enterprise and privatisation where clear benefits can be shown to the consumer. However, where it is clear that this process has been detrimental to the consumers, there is no justification to continue with that policy and it must be reversed.
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