The power sector in UK is gearing up for the almost eminent energy crisis. As…
The controversy surrounding energy prices, competition in the market and investment in renewables is showing no signs of abating. It seems that the only consistency in the UK energy market relates to the operating profits of the big 6 providers. Tinkering with the system by politicians and an avalanche of criticism from the media doesn’t seem to have had much of an effect, so perhaps it’s time for some radical measures.
Put a cap on profits
Despite the economic turmoil in recent years, the profits of the big 6 energy companies have been relatively stable and healthy. Because they make profits from something essential to human health, they can protect their profits in a way no other industry allows. A statutory cap on profits would force companies to drop their prices, or use excess cash for investment in energy infrastructure projects and renewables.
Force energy companies to put consumers on the cheapest tariff
Millions of customers are paying more for their energy than they need to – simply because they are on the wrong tariff for their circumstances. Energy companies know this is the case, yet they are reluctant to help their customers make the right decisions. A law stating energy companies have to put all their customers on the cheapest tariff available has the potential to save hundreds of pounds on millions of annual energy bills.
Provide subsidies for smaller energy suppliers
The stranglehold the big 6 energy firms have on the market is making it incredibly difficult for smaller suppliers to grow their business. It is also precluding new firms from entering the UK energy market. However, if smaller energy companies were subsidised for a limited period, or given significant tax breaks, they could invest in their business, pass on savings to customers and become serious competitors in what is a highly uncompetitive market.
Impose a one-off windfall tax on suppliers
The huge collective profits of the UK’s big 6 energy companies have been relatively protected since privatisation of the industry. While people can stop buying holidays, clothes and consumers goods when times are hard, they can’t stop heating and lighting their homes. This fact should be recognised, and the companies who have been paying more in shareholder dividends than in infrastructure projects should be forced to part with some of their profits. A windfall tax would give charities money to tackle energy poverty, provide investment for infrastructure and help to subsidise renewable energy projects.
Operate a maximum of three tariffs
A major reason for consumers’ reluctance to switch gas and electricity suppliers is the huge number of tariffs on offer by the big 6 suppliers. With little guidance available for choosing the most appropriate one, consumers are either sticking with what they know or making the wrong decisions for their circumstances. If the law were changed, forcing energy providers to offer a maximum of three tariffs, the choice for consumers would be far simpler.
The only way to tackle the dysfunctional energy market in the UK is with changes to the law. Energy companies are there primarily to make a profit, so only drastic action from our politicians will lead to an energy market that is fair, green and planning for the future.
Colin Urquart is a political commentator and energy blogger. He works with various agencies to support change in the energy sector.
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