UK energy: Tory electioneering clobbers the “Big Six”
When the former Labour leader Ed Miliband pledged to freeze UK gas and electricity bills in 2013, then-pm David Cameron accused him of inhabiting a “Marxist universe”. How times change, said Jillian Ambrose in The Sunday Telegraph. Shares in energy firms were clobbered this week on news of a Tory manifesto pledge to cap prices for the two-thirds of British households currently on standard variable tariffs. Voters are being wooed with promised savings of more than £100 a year. It’s hard to avoid the conclusion that the “Big Six” have been “set up as the fall guys” in a cynical ploy that risks “skewering investment and stifling competition”.
The biggest market casualty was British Gas owner Centrica, whose shares are now down by more than a third since 2014, noted Lucy Tobin in the London Evening Standard. That seems harsh, given it is the only one of the Big Six not to have raised prices recently. But investors were spooked by the figures. Bernstein analysts reckon the cap could “swipe £322m off Centrica’s operating profits in just the first year”.
You could argue that Britain’s grasping energy suppliers had it coming, said Nils Pratley in The Guardian. But they are “basically correct when they say price controls harm competition”: they give consumers no incentive to switch. And people on fixed-rate tariffs (which aren’t affected by the crackdown) could end up paying more if suppliers try to claw back losses. It’s actually “anyone’s guess” how this thinly-detailed scheme would work, said Alistair Osborne in The Times. But given that a similar measure was rejected by the Competition and Markets Authority last year, it looks, at best, “revisionist”. Analysts at Macquarie are quite right to warn that utilities are once again becoming a “political punchbag”.