Energy policy not thought through

Friday 19 October 2012

DAVID Cameron's announcement during Prime Minister's Questions earlier this week that energy companies will be required in law to give customers the lowest available deals prompted immediate questions about how this would work.

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Unfortunately, Energy Secretary Ed Davey had no idea because there had been no prior discussion with the department responsible for implementing the scheme.

Mr Davey carefully distanced himself from a developing row yesterday, providing unspoken confirmation that the announcement was another example of policy made on the hoof. It led to a day of confusion focusing on whether making sure customers "get" the lowest tariff available meant that would be the rate they were charged or whether the entitlement would apply only to information offered. The eventual announcement that the Energy Bill would contain an obligation on the energy companies to offer the lowest tariffs to more people was, if not a U-turn, a considerable rolling back from Mr Cameron's initial claim.

As shadow energy secretary Caroline Flint observed, this had all the appearance of a panic-inducing clanger from the political satire The Thick of It. But it's not funny. As more major energy suppliers announce price rises, large numbers of people are increasingly worried about how they are going to pay their utility bills. Mr Cameron was correct in identifying the cost of electricity and gas as a major concern and the need for the Government to require the suppliers to give consumers a better deal. His off-the-cuff solution, however, betrayed only a nodding acquaintance with the failings of the system, although these have all been well publicised for years. Mr Cameron has recognised the unnecessary confusion caused by the multiplicity of tariffs on offer. But the "big six" energy companies have reduced the number of options available and already have a voluntary agreement to provide customers with annual advice on the best tariff for them. This is a step forward, which should be made compulsory in next month's energy bill, but it does not tackle the more fundamental problem of those on the lowest incomes paying higher tariffs. This is because the best deals are available to those with access to a computer and the ability to make comparisons; those with sufficient regular income to pay by direct debit; and those on dual fuel agreements. Compelling companies to charge the lowest available tariff would help some elderly householders but the sanction does little for those on benefits, the increasing number on short-term contracts and those in rural areas with no mains gas. The most significant obstacle to a system of automatically charging lowest tariffs, however, is that it would erode competition, the mechanism which is supposed to keep prices down. Energy prices must now be added to the blunderlist of announcements requiring hasty amendment or embarrassing U-turns. Conservative ministers seem to seize on policies without thinking them through or telling their Liberal Democrat partners in the Coalition. It is not the mark of competent government.

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Energy policy not thought through

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