Utility Week

Utility Week 11th October 2013

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

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Policy & Regulation Analysis In quotes Parties push energy agenda Big six The party conferences saw the emergence of energy – especially its affordability – as a front-line issue, says Mathew Beech. Number of companies Michael Fallon is unhappy about leaving "the entire market to" "We need competition. Competition is what keeps this thing honest; competition and transparency" Millions of families and millions of businesses will benefit "If we win that election in 2015, the next Labour government will freeze gas and electricity prices until the start of 2017" – Ed Miliband Three Number of major problems with Labour abolishing Ofgem "First, it was Labour who set Ofgem up. Second, it was Ed Miliband who 'strengthened' Ofgem. Third, their policy after Ofgem is, wait for it, Ofgem II" – Ed Davey 14 | 11Th - 17Th OcTObEr 2013 | UTILITY WEEK " W hat's different now is that energy has become a real full-frontal economic issue," says Angela Knight, chief executive of Energy UK, reflecting on the past four weeks. Reg Platt, senior research fellow at thinktank IPPR, agrees, saying: "It's a whole new, different environment than we were in before. Energy policy has gone front and centre, especially energy affordability." Labour leader Ed Miliband, in particular, will feel as though he made the most of the party conference season, with his promise to freeze energy prices for 20 months while a future Labour government made significant changes to the wholesale market. This included a promise to reintroduce a pool system and replace Ofgem. It struck a cord with the electorate and gave Labour a bounce in the polls. In his keynote address, Miliband said: "The market is broken and we need to fix it." He added: "The companies aren't going to like this, because it will cost them more, but they've been overcharging people for too long in a market that doesn't work: we need to reset that market and have a regulator on the customer's side that also enables the investment we need." After the Brighton conference, Labour polled 42 per cent, giving them a lead over the Conservatives of 11 percentage points. The policy is one of the main drivers of this swell in support, with 62 per cent of people saying they support the idea of the price freeze, and only 26 saying against. However, the policy has provoked a strong reaction from the industry. Ian Peters, managing director of residential energy at British Gas, said Miliband's policy could lead to blackouts if the price of wholesale gas spiked, because suppliers would not want to sell electricity or gas at a loss, while it would also threaten investment in the sector. Knight agrees: "The announcement at the Labour party conference has made a number question the degree of consensus that exists across all three political parties. "I appreciate Labour are saying they are still going to support EMR, and I think that's good. The question of what does the consensus look like now – well, there is certainly a lot of external questioning going on now." Platt, too, notes the response from the industry: "From when it was first announced you got immediate push-back from industry and from inside government crying blue murder about it – the lights are going to go off, security of supply is being threatened, investment is being threatened. "I think very, very quickly it was interesting to see those kinds of things died down." Many were waiting for a response in Manchester at the Conservative party conference, and the Tory fight-back consisted of the minister slamming Labour's plans. Energy minister Michael Fallon said the Labour price promise was "bogus" and the best way to drive down prices is to increase competition in the market. Climate change minister Greg Barker said Miliband's policy was "not just a gimmick, it's a con", adding it is "all the worst features of the 1970s in one". Barker did rule out removing green levies from the energy bill, which would remove about £130 from the average bill – adding it into general taxation. However, he sounded more positive and open about the idea of extending the Energy Company Obligation (Eco) by 18 months, saying: "We're are certainly looking at the future of Eco and we understand that the industry would like an extension but we haven't taken a decision on that yet. "We are a government that instinctively looks for long-term strategic planning and abhors the stop-go short-termism that so plagued the last Labour government." Platt said this response to Miliband's energy policy – of criticising Labour, but not announcing anything of their own – was expected and that something is likely to come when the party manifesto is drawn up ahead of the 2015 election. "There's clearly pressure to make some kind of response," said Platt. "Doing something at the Tory conference would look very rash and reactive, so

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