Editorial

Renationalise the energy industry

With the price of oil going over $100 a barrel, the main energy suppliers are using it as an excuse to increase fuel prices and boost their already bloated profits.

Flooded with Debt, photo Suz www.squashdonkey.co.uk

Household fuel prices have nearly doubled in the last four years, yet Npower, Britain’s fourth largest energy provider, is now putting up gas prices by 17% and electricity prices by 13%, affecting 6.8 million customers immediately. Npower households will suffer an average rise of £95 a year for gas and £64 for electricity, bringing the total annual spending for dual-fuel households to over £1,000.

The five other major power companies are set to follow suit, so household energy costs for everyone are likely to rise by 10-15%.

What you pay depends on where you live, as the power companies are tending to introduce regional variations. Npower is charging its highest prices in London and the East Midlands.

The energy multinationals are quick to pass on increases in wholesale fuel prices, but deliberately slow to pass on reductions. Gas wholesale prices have fluctuated widely, so they make large sums of money out of these tactics.

When wholesale prices fell in January 2006, it took them over a year to start cutting prices to customers, and then it was by only half what it should have been. Even when Npower announced price cuts in February 2007, it did not implement them until 30 April.

Not inevitable

Much of the media portrays the price increases as tough but inevitable. But they are not inevitable. There are no shortages at present of gas or oil and in any case, the energy companies negotiated their present wholesale prices months or years ago.

The energy conglomerates are not innocent victims of wholesale prices, as they have interests in the oil and gas industries that mean they benefit directly from high wholesale prices. For instance, Npower’s parent group, Germany-based RWE, owns and develops its own gas and oil fields.

Last year the European Commission declared that some of Europe’s energy firms were deliberately holding back gas supplies in order to drive up prices.

Also last year, RWE declared post-tax profits of over 4,000 million euros for 2006, almost double their 2005 bonanza. Centrica, the parent of British Gas, made an operating profit of £533 million in the first six months of 2007.

Meanwhile rising debts are hitting ordinary people ever harder at a time when the credit crunch is making loan providers less sympathetic to those with poor credit histories. Nearly ten million people reached their maximum credit limit on one form of credit at some time in the last six months and research suggests that over a quarter of people find their debts ‘unmanageable’.

With this background, an estimated 3.5 million of the poorest households will be spending over 10% of their income on fuel. There were over 23,000 cold-related deaths last winter, mainly of pensioners; this tragedy could worsen this year as more people are forced to choose between heating and food.

Six million people have to live with fuel pre-payment meters and are particularly penalised, as it costs up to £300 a year extra to pre-pay than to pay by direct debit. A third of households – mainly the poorest – do not have home internet access and one in twelve has no access to a bank account, effectively excluding them from the cheapest energy deals.

Privatisation

Fearing that anger over fuel prices will be directed at the government, chancellor Alistair Darling berated the industry ‘regulator’, Ofgem. But this privatisation-worshipping government cannot control fuel prices, as the gas industry was privatised by the Tories in 1986 and electricity in 1990.

Before privatisation, elected parliamentary representatives could exert some control over how these industries were run, what prices were charged to households and how profits were reinvested back into developing power production and supply. As nationalised industries, they were never run in a genuinely democratic manner with full public accountability as they would be in a socialist society, but there was at least some check on the play of ‘market forces’.

Privatisation has deliberately allowed big business vultures and parasite fatcats to extract maximum profit for themselves. This is at the expense of adequate investment to develop the power industry and to do it in an environmentally friendly way. It is also at the direct expense of every household in Britain, now being forced to feed the insatiable greed habit of the power industry owners.

Privatisation was presented as a way of introducing competition and lowering prices. But price increases are outweighing reductions, from all the ‘competitors’, and the last thing most people want is a confusing array of energy providers who all supply exactly the same energy.

The socialist demands urgent re-nationalisation of the power companies for the provision of affordable, environmentally clean energy and for free fuel for pensioners. It will also continue, during 2008, to argue the need for a fundamental transformation of society, to socialism, so that such vital services are never placed in private hands again.