Davey Seeks Answers on ‘Detrimental’ Labour Energy-Tariff Plan

U.K. Energy Secretary Ed Davey said the country would be at risk of blackouts if the opposition Labour Party’s energy policy is ever put into practice.

Labour’s proposal to freeze energy bills for 20 months if they’re elected in 2015 would sap investment in new power plants, drive smaller suppliers out of business and exacerbate climate change, Davey said today in a letter to party leader Ed Miliband.

In a speech to his party conference last month, Miliband promised to claw back profits from utilities as the cost of living comes to the fore as an election issue. Combined power and gas bills rose 9.1 percent from 2011 to 2012, according to the Department of Energy and Climate Change. SSE Plc said Oct. 10 it will raise household energy prices by an average of 8.2 percent, a move other members of the so-called Big Six suppliers are likely to follow, history shows.

“This policy raises a number of serious issues that I believe would be detrimental to consumers and businesses,” Davey said in the letter. It would “hit the smallest suppliers the hardest - it damages competition and helps the Big Six.”

He asked Miliband to answer 10 questions including how he’d prevent companies putting up their prices before and after the freeze to compensate for the lost revenue.

Caroline Flint, Labour’s energy spokeswoman, said in an Oct. 11 e-mail that investors needed long-term certainty on policy rather than short-term returns based on “overcharging.” Labour’s reforms would rebuild trust in the market and attract investment, she said.

Flint said Labour would introduce a 2030 target to cap power sector emissions after the government failed to include one in energy legislation progressing through parliament. Flint said her party would stick with the proposed system of supporting renewable projects with guaranteed prices for power, known as contracts for difference.

To contact the reporter on this story: Sally Bakewell in London at sbakewell1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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