U.K.’s Labour Vows to Overhaul Energy Market in Push for Votes

The U.K. opposition Labour Party vowed to break up energy companies, replace the regulator and overhaul charges in a program seeking to intensify government discomfort over inflation-busting gains in voters’ energy bills.

Labour leader Ed Miliband, whose party is ahead of the ruling Conservatives in polls before an election in 2015, will today set out details of his energy policy. It includes splitting energy companies into supply and generation businesses, according to a statement.

“Prices are rising year on year without justification, and Britain is not getting the investment in energy we need to secure supplies,” he said in comments prepared for a speech today in Manchester, released in the Labour Party statement.

Miliband is trying to land a knockout blow after an earlier promise to freeze energy prices won popular support and left the government flailing for a response. Prime Minister David Cameron is studying cutting green levies that add to power bills and suggested consumers switch providers to seek better deals, after five of the six main suppliers raised bills within weeks.

The Labour Party, if elected, would replace regulator Ofgem and create an Energy Security Board to ensure supply, it said in the statement. It would freeze prices for 20 months as pledged in September to stem increases in household energy bills that are up 300 pounds ($490) a year since 2010, according to Labour.

‘Bad for Investment’

“Miliband’s intervention is very bad for investment and for green investment in particular, which is quite ironic but also shows how irresponsible he is,” Energy Secretary Ed Davey told The House magazine, distributed to lawmakers.

The government is near a deal in its review of green levies on bills for the Autumn Statement on Dec. 5, he said.

A Labour government would adopt 10 proposals aimed at reforming the market through legislation introduced in 2015, according to a policy document also released today.

Energy companies would be split into separate supply and generation businesses with distinct licenses and reporting arrangements, according to the document.

Utilities have faced criticism that their retail units buy power from generation units at inflated prices, with the effect of shutting out independent generators.

While the move has potential benefits to consumers and companies, ending so-called vertical integration would be a “disruptive change” that could “potentially undermine confidence in investment at a time when we need it,” Andrew Wright, Ofgem’s interim chief executive officer, said giving evidence to parliament Nov. 26.

Tariff Structure

A Labour government would force suppliers to introduce a new tariff structure comprising two charges, a daily standing charge and a cost per unit of energy priced by the company.

It would also replace the Energy Company Obligation, a requirement to improve efficiency at low-income homes that’s part of the government’s review of green levies. In its place Labour would introduce a program led by local authorities to “better target the fuel poor,” it said.

The document reiterated plans to replace Ofgem with a regulator “with real teeth to prevent overcharging.” The new body would be given powers to order energy companies to pass wholesale price savings on to bills. An Energy Security Board would function like the Office for Budget Responsibility to ensure new generation capacity is contracted and built.

Labour would maintain a program to support renewable generation called contracts for difference planned in current energy legislation and allow the U.K. Green Investment Bank to borrow, according to the document.

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