UKERC's report launch at the House of Lords was a success and sparked a lively debate.
To begin proceedings Rob Gross, report co-author, presented the findings of “What’s in a bill? How UK household electricity prices compare to other countries.” The following headlines provided key insights:
Rachel Reeves MP provided the political context. She explained her role in pre-legislative scrutiny, and reiterated that in 2015 all parties committed to a cap. She also attributed the heightened public focus on energy to stagnant wages and benefits.
Reeves said she was surprised to learn that 2/3 of the elderly and those on benefits and in social housing were on Standard Variable Tariffs, which are worst in terms of value. She raised the question of fairness – “people don’t want to see vulnerable customers paying more.”
Relatedly, a speaker from BEIS noted that if energy is 4% of someone’s income and policy costs are 10%, why was there so much fuss about a figure as low as 0.4%? Rachel Reeves MP rebutted that 0.4% is still a lot if you are on a fixed income and it was noted that 0.4% was an average, with some groups paying much more.
Richard Hall of Citizens Advice set the energy bills debate against the wider context of the global financial crisis. He pointed out that relatively high electricity prices are “not good news if decarbonising relies on electricity”.
John Penrose, MP for Weston, Worle & The Villages noted that UK energy policy is “on a slow motion seesaw” playing the role of “a political football”. He suggested that the political risk premium goes into the cost of capital, and wished that “fewer people like me” were in the debate. His note that energy debates would be better depoliticised, away from the halls of power and “in a converted warehouse in Strathclyde” raised a laugh amongst attendees.
Rob Gross commented the balance of who pays policy costs was a clear political choice on behalf of the German government, he argued. German domestic electricity users had higher prices because of their generous feed-in tariffs for solar. Another point was the principle in question: “polluter pays” versus general taxation.
On the price cap, the temporary nature was questioned – it will be “very difficult politically to take away” Gross commented.
Richard Hall of Citizens Advice raised the need to educate the public about upcoming policy decisions – we could “anticipate public debate and get facts out there sooner”, warning that “if we don’t learn from history we will repeat it.”
The chair, Joanne Wade said that we must not play the “blame game” with energy.
A comparison was made between the markets for energy and food – both necessities of life. If you think energy is complex, “Look at Tesco”, it was commented, citing the multitude of products on offer and numerous regulations on food quality.
In response, Rachel Reeves said that energy is dominated by huge monopolies, whilst food has a vast amount of choice and low entry costs. Energy therefore needs different regulation, she argued. Energy is different because there is less product differentiation; when buying a chicken you can choose between more than ten different varieties.
Rob Gross added that the visibility of energy prices was less than that for bread.
On a positive note Richard Hall highlighted that “energy efficiency is the quiet success story of UK energy policy”, whilst also cautioning that the energy price cap “doesn’t assure the underlying costs won’t increase.
Rachel Reeves noted that we are not doing enough regarding deep decarbonisation but was optimistic overall, with offshore costs coming down, and take-up of electric vehicles so high in Norway.
The report can be found here.