Why public ownership is the only solution to the UK’s broken energy market

Logos of French electricity firm EDF are pictured at a press conference in London, on September 24, 2008. British Energy accepted a takeover bid worth more than 15 billion euros from French electricity firm EDF in a tie-up set to transform Britain's nuclear energy sector, officials said Wednesday. The French group announced that British Energy's managers had accepted its offer and would recommend it to shareholders, prompting Britain's Prime Minister Gordon Brown to hail it as "a significant step towards the construction of a new generation of nuclear stations to power the country." AFP PHOTO/Shaun Curry (Photo credit should read SHAUN CURRY/AFP via Getty Images)

Choice is an illusion when it comes to the energy that powers our homes. The electrons coming out of the socket in your wall, and the gas molecules in your boiler and your pipes, are identical to the ones in every other house on your street, and every other street in your town.

We all use the same energy grid. The only difference is the logo on the top of your bill, and the amount companies can get away with charging you. And they definitely make the most of charging wildly varying amounts for exactly the same product.

Despite three decades of privatisation and rip-off tariffs, official statistics show that a majority of the public just don’t engage with the energy market. And who can blame people for being disengaged? Our energy supply “market” operates on the basis that you will be overcharged unless you shop around frequently. Shopping around for a new energy supplier is not like picking a holiday destination or a new pair of trainers. It’s a chore to avoid being stung every time you boil your kettle.

Yes, we want an energy system that is green, secure and affordable. But system change is not achieved through “shopping around”. The supply arms of energy companies don’t actually generate the energy, and they don’t physically supply energy to your house. Getting energy into your house is the role of the distribution networks. All suppliers really do is act as middlemen. They make their profit from buying low and selling high, not from producing anything. And they don’t have good form.

The “Big Six” energy suppliers — British Gas, EDF Energy, E.ON, npower, Scottish Power, and SSE — have a track record of overcharging customers through mislabelling tariffs and billing errors. They have punished loyalty by charging old customers more than new customers. They have passed energy price rises on to customers, but not passed on cost savings when energy prices fall. And they have profited from paying the power plants they own above market rates for energy they sell to customers.

Even in normal times, this would justify a radical overhaul of the supply market. But we are not living in normal times. Tackling the climate emergency requires a huge effort to upgrade our homes — which are the least energy efficient in Europe.

As well as skilled tradespeople, this will take thousands of customer service professionals to persuade householders of the value of getting work done. Yet supply companies are cutting staff by the thousand in order to shore up profits — the latest being devastating job cuts by npower in the run-up to Christmas.

What chance is there of the Big Six suppliers delivering the change we need, if we’re relying on some of the most disliked companies in the country to do the persuading? And do you think that companies which profit from selling energy, have the right incentives to roll out a massive programme that will reduce energy consumption?

That is why Labour will bring the supply arms of the Big Six energy companies into public ownership, guaranteeing customers a fair price. Public ownership of the Big Six suppliers will create what has been referred to as a “Green Army” of workers, tasked with providing the public with the information, advice and guidance that households will need to access home upgrades, which could save households £417 per home.

Existing staff and their terms and conditions will be protected. Only those very senior executive posts where salary exceeds the upper bound of Labour’s 20:1 pay ratio between highest and lowest earners for public organisations will be re-advertised.

Customers that want choice will still have it. The difference is that the default position will be a fair price from a non-profit public supplier, with the choice to go elsewhere if customers prefer. The supply market will continue operating to enable smaller providers to operate like Co-operative Energy, Good Energy, Ecotricity or Octopus. Existing public providers like Robin Hood can continue to operate as they do now, or merge with new regional public suppliers.

You will, no doubt, hear howls of protest in response to this proposal. But when you strip away the rhetoric of the profiteers and privateers, and look at the failings of our energy market — the question on most people’s minds will be: how did they get away with it for so long?