Energy Secretary: How to cut your bills
ED Davey, the Secretary of State for Energy and Climate Change, does not mince his words when talking about Labour leader Ed Miliband’s Election pledge to freeze energy prices. ‘He was a do-nothing Energy Minister,’ he says.
Davey – and the rest of us – will find out in just four months’ time whether Miliband’s pledge will be fulfilled depending, of course, on the result of the General Election.
At the same time, the Liberal Democrat will hear whether he will continue in his post as energy supremo, a role which puts him at the heart of the cost of living debate.
With average dual-fuel energy bills topping £1,300 now compared with £819 just six years ago, Miliband’s pledge transformed his political fortunes for the better.
‘Do you know what Ed Miliband did when he was doing my job and wholesale gas prices fell?’ Davey asks. ‘He did absolutely nothing.’
The cost of energy is a touchy sub- ject. The wholesale price of gas has fallen by more than a quarter over the past year while the cost of oil has dived by more than half to about $50 a barrel in the past six months.
Sharp drops in both commodities should have resulted in cuts in a range of bills faced by consumers.
Davey’s Cabinet colleague and political rival, Chancellor George Osborne, felt strongly enough to take to Twitter to warn energy companies, petrol retailers and airlines that it was ‘vital this is passed on to families’. He even told Cabinet colleagues to ‘watch like hawks’ to ensure this happened.
He also announced a Treasury investigation to make sure the price falls trickled down to households.
Energy companies are Davey’s remit, of course, less so the Chancellor’s. In remarks which sound directly aimed at Osborne, he pointedly takes time to note that there is little direct linkage between the price of oil and the price of energy.
Coal accounts for more than 33 per cent of power production, gas for a quarter and nuclear for 17 per cent. Wind accounts for 13 per cent.
The divisions between the Tories and the Lib Dems in the Coalition are becoming sharper as the Election approaches and Davey wants to make it clear that he is in charge of energy, not the Chancellor.
Within minutes of Osborne’s tweet, Davey took to Twitter to welcome the Treasury’s involvement while pointing out that he had got there ahead of Osborne.
‘I have not seen the remit of the Treasury report or the timetable,’ says Davey. ‘But the primary report into the energy market – the one with real teeth – is the Competition & Markets Authority investigation, which I backed last year.
‘The CMA has the power to break up companies,’ says Davey, who as Competition Minister created the regulator last year.
He got into trouble when he wrote to the CMA and the regulator Ofgem suggesting that British Gas owner Centrica could be broken up if it had abused its market power.
Davey is staunch in his defence of the regulator’s independence and insists there is no possibility of him carrying any influence over them. Nevertheless, his letter prompted sharp falls in Centrica’s share price.
‘The question is, with the fall in the wholesale price of gas, have electricity prices fallen?’ asks Davey. ‘The answer is that in some cases they have – consumers can save hundreds of pounds by switching energy suppliers.
‘It is a result of the increased competition in the energy market which the Coalition has championed. The Big Six energy suppliers were created under the Labour Government when Ed Miliband was Energy Minister and he was a big fan of them. When Labour was in power the Big Six had more than 98 per cent of the market.
Now, more than 10 per cent of the market is held by independent suppliers and there are some City estimates that it could reach 30 per cent by the end of the decade.’
The Big Six energy suppliers which dominate the British market include just two British stock market listed companies – British Gasowner Centrica and SSE. The remainder are France’s EDF Energy, Spain’s ScottishPower and Germany’s E.On and RWE Npower.
Davey says consumers are switching in a better way than before.
‘Under Labour, switching took place primarily as a result of doorto-door selling which led to high numbers of people switching, but then we discovered all those huge instances of mis-selling,’ he says. ‘We have moved away from that. Now there is more information available, more competition and people are doing it the right way.’
More than two million customers have now switched from the Big Six energy companies to independent suppliers.
‘Switching is the right way forward, though there is more to be done in persuading “sticky customers” who have never switched to move because there is a danger long-term customers are being exploited. We have helped 90,000 of the more vulnerable to switch through our Big Energy Saving network scheme where we work with the Citizens Advice Bureau,’ he says.
Davey helped to engineer an average £50 cut in energy bills a year ago when the Coalition moved environmental targets to allow energy firms to cut prices.
Davey attacked Labour’s plans for ‘pooling’ wholesale energy.
‘That really is just nonsense-onstilts,’ he says. ‘It just shows Labour has no understanding of competition whatsoever.’
He has just four months left to persuade the electorate that he is right.
Consumers can save hundreds of pounds. It’s the result of increased competition
We have moved away from those huge instances of mis-selling to do it the right way