Letter: Further Capping of Electricity Prices Would Be Eminently Sensible

Published on: 19 Aug, 2022
Updated on: 19 Aug, 2022

From: Anthony Mallard

The local Labour chairman Brian Creese’s suggestion (see comment on: More Are Worried About Fellow Guildfordians Facing the Cost of Living Crisis Than for Themselves) of keeping the energy price cap at its current level of £1,971 until April, a move he says would save the typical household £1,000, appears eminently sensible.

The Conservative Party has a philosophy that opposes nationalised industries – largely one suspects because the government would then have to address the lack of investment into those utilities.

However, one of the major energy suppliers EDF or Electricite de France, is presently 84 per cent owned by the French Government and will shortly be fully owned by them. So one of our major suppliers of electricity and gas is nationalised but by the French government not the UK’s.

Users of this company’s services in France will see their price rise by only four per cent whilst UK customers’ price rises are far in excess of this increase.

Whilst this and other crises continue to emerge the UK government fails to govern on the premise that they are waiting for the election of the new Prime Minister. What a farce!

I am not a supporter of the Labour Party, and just for the record, nor the Conservatives after the many scandals of the past year.

Responses to Letter: Further Capping of Electricity Prices Would Be Eminently Sensible

Ricky Sonn Reply

August 19, 2022 at 1:11 pm

Very true. And, of course, the same is true of many of our other privatised industries, from water to the railways.

Many of the privatised companies are either wholly or partly owned by state-owned operators from other countries. We effectively subsidise their cheaper utilities and railways and I have never seen a reasonable explanation for why that is a good idea.
Ben Paton Reply

August 19, 2022 at 4:22 pm

Mr Sonn says: “We effectively subsidise their cheaper utilities and railways and I have never seen a reasonable explanation for why that is a good idea.”

There is absolutely no objective evidence to support this statement.

Electricity costs are transparent. They include: 1) cost of gas/coal/uranium 2) cost of conversion ie capital cost of the plant/turbines 3) distribution costs ie transformers and cables across the country.

It is irrelevant who owns the plant – the UK government or a “private” company. The private companies are usually quoted on a stock exchange and subject to quarterly reporting requirements which vastly exceed any disclosure by any government.

Profits are regulated ie determined by the regulator.

If the system is politicised – as happened in South Africa – then investment in plant is cut back. In South Africa that finally led to power blackouts.

If the plant operator cannot make a fair return on the capital invested – there will be no further investment.

OFGEM exists to regulate returns so that they are objectively calculated and “fair”. Those who don’t like the way it works can complain to it.

France has the cheapest electricity in Europe. Why? Because many decades ago the French made a strategic decision not to be reliant on imported fossil fuels. It has the largest installed base of nuclear power generation. It exports its cheap electricity – to us among others. Its safety record, so far as I’m aware, is exemplary.

The government does not set the input or raw material prices or conversion costs. All government can do is 1) create a decent regulatory framework, 2) subsidise prices for people suffering real hardship.