Time to take on the energy Monopoly – and win!
Date: 18 February 2015
Today’s news that the Big Six are overcharging its most loyal and vulnerable customers up to £234 a year is just the latest evidence that energy privatisation doesn’t work. Since 2010, our fuel bills have risen a staggering eight times faster than wages. As a result of these high bills and a toxic mix of low pay and cuts, a scandalous seven million of us are living in fuel poverty, and each winter an older person dies of cold every seven minutes.
The energy companies would have you believe that high prices aren’t their fault: the gas supplied to our homes and used to generate much of our electricity has been expensive, so they have had no choice but to raise prices. But this argument has started to look rather thin in light of the failure of the Big Six to pass on recent falls in wholesale gas and electricity prices. Research by consumer group Which? suggests that the average household would be saving £140 each if they did.
What the the big energy companies conveniently omit to mention is that they are making killer profits: £2.8 billion in 2013 alone. The amount of profit they’ve made from our bills has increased five-fold in just four years since 2009.
But that’s not it. The same Big Six energy companies that try to blame high prices on our dependence on fossil fuels and green levies have done nothing to wean us off our addition to the fossil fuels that are trashing our climate and other people’s backyards: two-thirds of our electricity still comes from coal, gas and oil.
No content with that, our government is actually pushing the same failed privatisation model around the world. One of the main ways it does this is through the aid budget. We have found that the Department for International Development (DfID) is currently supporting energy privatisation in India, Nigeria and Sierra Leone. The biggest is in Nigeria, where around £100m has been spent since 2002 on a privatisation scheme DfID describes as “far more ambitious than anything ever attempted in Africa”. So far the results have been massive price hikes, redundancies and an actual decrease in the amount of power generated. With around half of the Nigerian population lacking access to electricity, it’s clear that change is needed – so far but privatisation has made things worse not better.
It’s not just in the UK and Nigeria that people have paid the price of energy privatisation, as our recent briefing shows. It’s not surprising that energy privatisation has been such a disaster. After all, one of the main arguments for privatisation is that competition between different providers will lead to lower prices to consumers they fight to win business. But energy supply is a natural monopoly: it’s impossible to create meaningful competition for supplying gas and electricity from power stations to our homes since it’s expensive and pointless to build more than one set of pipes or wires. The result is a corporate monopoly (or technically oligopoly) where, like the famous game, the owners reap mega-bucks as they come to control more and more.
These failures are clear to all, including the energy regulator Ofgem who asked the Competition and Markets Authority (the people behind today’s findings) to hold an investigation into the state of the sector in the UK. With energy prices looking set to be a key issue in the run-up to the election, it seems politicians have started to wake up to the fact that there’s a problem – but they seem a bit short on solutions. So far, their best suggestions have consisted of trying to create more competition (apparently we should be switching suppliers every couple of months – never mind the fact that the bureaucracy involved would actually increase costs) or a short-lived freeze on prices (which itself concedes that privatisation has failed to lower prices).
Perhaps our politicians just lack imagination, or need to get out a bit more. According to polling a year ago (the figures are likely to be even higher now), two-thirds of the British population want energy back in public hands. But many people understandably don’t view the solution as big publicly owned energy companies that act much the same as the corporations that are fleecing us now. (That said, there are successful examples: in Uruguay the public energy utility has achieved virtually universal electricity access and is making a radical shift towards renewables, with workers now looking at how the system could be run more democratically.)
But round the world, people are finding new ways of taking back control of their energy systems in order to meet their energy needs in a fairer and more sustainable way. From German citizens voting to take back their electricity grids in Hamburg to the co-operatives that are providing power to rural communities from Indonesia to the Scottish island of Eigg, there are lots of solutions – as our new booklet shows.
