Labour Pledge Energy Price Cap and Break-Up of Big Six

A Labour government would cap British gas and electricity prices until the start of 2017 if it wins the 2015 election, party leader Ed Miliband said.

The limit would allow time to set up a new energy regulator with powers to cut prices, Miliband said today at Labour’s annual conference in Brighton, southern England, as he sought to position his party as the champion of people struggling with the increased cost of living. The proposal would cost energy companies 4.5 billion pounds ($7.2 billion), the Labour leader’s office said.

“The next Labour government will freeze gas and electricity prices until the start of 2017,” Miliband told delegates. “The companies won’t like it because it will cost them more. But they have been overcharging people for too long because the market doesn’t work. It’s time to reset the market.”

The proposal threatens Prime Minister David Cameron’s effort to lure 110 billion pounds by 2020 to replace aging power plants, a policy regulators have said is essential for Britain to avoid blackouts toward the end of the decade.

“The proposed energy price freeze will deter much-needed investment and is at odds with Labour’s pledge to decarbonize the economy and create a million green jobs,” John Cridland, director-general of the Confederation of British Industry, said today in an e-mail.

Nuclear Closures

Electricite de France SA is in talks with the government about building the first nuclear power station in two decades in the U.K., where all except one of the existing atomic plants are due to close by 2023. The House of Lords, the upper chamber of Parliament, is considering energy legislation proposed by Cameron’s Conservative-led administration and until now backed by Labour, including measures that would spur nuclear power.

The Labour proposal would save the average family 120 pounds a year and an average business 1,800 pounds a year, Miliband’s office said, without saying how it had made the calculations.

Instead of freezing tariffs, the government should recoup the cost of promoting energy efficiency and renewables through general taxation rather than by adding them to household energy bills, Brian Lironi, head of media for SSE Plc, said today in an e-mail. “This would wipe 110 pounds off the average persons’ bill and shift the cost away from those who can’t afford to pay and on to those who can.”

EDF and Centrica declined to comment when contacted.

Big Six

Consumers are paying 3.9 billion pounds more for their energy each year by not being on the best deals, the consumer campaign group Which? said in a report yesterday.

The party’s energy spokeswoman, Caroline Flint, told delegates earlier today that a Labour government would split up Britain’s six largest gas and electricity companies and force them to trade all their power on the open market to drive down prices.

“We will break up the big six; the power stations will be separated from the companies that send you your bill,” Flint said. “Just as the banks will have to separate their investment and trading arms from the high-street branches, so we will make the energy companies separate their production from the companies that supply your home.”

More Transparent

The six largest energy companies -- Centrica Plc, EDF Energy Plc, EON SE, SSE, Scottish Power Ltd., a unit of Iberdrola SA, and RWE AG’s nPower unit have different units generating, trading and supplying energy. In a July 29 report, Parliament’s cross-party Energy and Climate Change Committee said energy regulator Ofgem should act to make company profits more transparent.

“I promise with a Labour government the most radical, comprehensive reforms since energy privatization,” Flint said. “No more price setting in secret. The energy companies will be forced to open their books and do all their electricity trading on the open market, in a pool.”

Labour has been using its annual conference to spell out a range of new policies with 20 months to go to the election, as the party’s lead over Cameron’s Conservatives has narrowed. Both Miliband and his Treasury spokesman, Ed Balls, have said they have no problem calling themselves “socialists.”

While Labour was right to commit itself to a “dynamic market economy” in the 1990s, the government should intervene when necessary, Miliband told delegates.

‘Powerful Interests’

“When competition fails, government must be prepared to take action,” he said. “Some people want to blame the companies, but the blame lies with government for not having done anything about it, for not having called time on the powerful interests, for not having the strength to stand up to the strong.”

The new regulator would enforce a single standing charge, similar to the line rental on a phone line, with a cost per unit for energy used, similar to call charges, Miliband’s office said.

The legislation creating the new regulator would also set up an energy security board to draw up strategy for meeting Britain’s energy needs and give additional powers to the Green Investment Bank to meet a 2030 decarbonization target.

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