Energy for the millions …not the millionaires

Energy bills - Dividend payout rate -  percentage of profits paid in dividends as a proportion of net income

Energy bills – Dividend payout rate – percentage of profits paid in dividends as a proportion of net income   (Click to enlarge: opens in new window)

From 23 November, fuel prices are rising steeply. Days after one power conglomerate Scottish and Southern Energy (SSE) put its prices up by 8.2% on average, British Gas (BG), the biggest of them all, increased its electricity charges by 10.4% and gas charges by 8.4%.
People ask what on earth is going on in the energy industry? Kate Jones of Llanelli and West Wales Socialist Party investigates.

One in four households regularly has to choose between heating their homes and eating. Confronted with anger at rapidly rising energy prices Prime Minister Cameron merely advised us to switch suppliers. But all members of the Big Six energy cartel are putting up prices!

A British Gas spokesperson suggested customers could get round the increase by consuming less power, though their adverts were still telling us exactly the opposite. Lib Dem energy secretary Ed Davey advised us to wear a jumper.

He echoed the 2008 comments of Centrica’s then managing director Jake Ulrich. When announcing huge rises then, he suggested his customers should wear two sweaters rather than one to reduce their bills! In fact, many people do wear several sweaters and many old people already spend much of the coldest months in bed to try to save money.

At September’s Labour Party conference, Labour leader Ed Miliband announced that he would freeze energy prices for 20 months and introduce a new system of energy industry regulation.

Miliband pulled this policy like a rabbit out of a hat with no details of how it would be implemented. But what would stop companies simply ratcheting up prices before the election, or what kind of regulatory system would replace Ofgem?

The main problem is who controls the energy industry. The privatised companies’ main goal is to get as big a profit as possible.

The ‘Big Six’ duplicate each other. They don’t have separate electricity or gas supplies, they don’t have separate electric cables or gas pipes, their main function is to send out massive bills.

The Big Six energy companies protest against the very idea of a price freeze, but they still make inflation-busting price increases.

Before the latest round, one company (E.ON) announced it will scrap its ‘Stay-Warm’ tariff for older people, meaning higher bills for tens of thousands of pensioners.

Fastest price rises

The Big Six supply gas and electricity to over 50 million homes and businesses, with over 95% of domestic customers.

They emerged from the energy sector’s privatisation in 1990 and are now largely owned by European multinationals.

French and Spanish-owned companies are free to hammer customers with big price rises in the unregulated UK market, but in France and Spain prices, though high, are tied to inflation.

UK electricity and gas prices are rising faster than anywhere else in the EU, doubling in just seven years.

In addition to the Six, National Grid Plc operates the transmission of electricity throughout the UK, making £2.3 billion profit last year.

Big Six profits rose from £2.15 billion to £3.7 billion in the last three years, with around 60% of profits going straight to shareholders, rather than into new capacity or keeping prices low.

Before the latest price rises, the typical domestic dual fuel bill stood at £1,420 a year, up from £1,100 in May 2010, an increase of nearly a third, while most workers’ wages are flat-lining or being cut. British Gas made a post-tax profit of over £1 billion last year.

As well as extortionate profits from our bills, these companies benefit from massive tax-breaks and subsidies, which keep the UK hooked on fossil fuels.

The Con-Dems ramped up tax breaks for fossil fuels and now for shale gas (‘fracking’). So, while the industry moans about high taxes, some enjoy multi-million pound tax breaks, and escape the real costs of economic and environmental damage caused by pollution, waste and climate warming.

The Big Six bleat that freezing energy bills will mean less investment in renewables. But they hardly invest in renewables already – over half the £13 billion invested in new electricity generation since 2006 was in new gas plants.

The UK currently ranks 25th out of 27 EU member countries in the renewables league table. Ironically, four of the Big Six are owned by European companies from countries higher up the league table than Britain!

In 2012, small solar panel systems owners contributed a 14% share of renewable energy generation, bigger than any one of the Big Six.

Small local projects’ success shows that people are prepared to move to green power, jumping through planning, legal and regulatory hoops to do so, with local cooperative wind, solar and hydro schemes generating power – and income – for communities.

Future renationalisation of the power industry need not cut across such schemes – indeed by providing a proper system of tariffs, and grant assistance, democratically determined – public ownership could help boost local projects.

However, by themselves, they cannot offer a solution to the British economy’s energy needs.

Private profit or public good

In a capitalist ‘free market’, companies such as the Big Six will only invest where it brings them profit.

Electricity and gas were first nationalised by the 1945 Labour government, who saw central, long-term planning as vital.

Their manifesto stated: “Public ownership of gas and electricity will lower charges, prevent competitive waste, open the way for coordinated research and development.”

But since privatisation, there has been no planning or coordination to keep prices low or convert effectively to low carbon energy.

Even the proposed carbon-capture to allow a ‘cleaner’ form of electricity from coal and gas was quietly abandoned.

Meanwhile highly polluting coal power stations are having their lives extended, thanks to the Con-Dems throwing the Big Six yet more subsidies.

Miliband’s price-freeze is a popular move. Four out of five people agree that the Big Six maximise their profits at consumers’ expense.

However, it is just tinkering with the problem. If it were possible to effectively regulate the energy market then wouldn’t the last Labour government’s energy secretary have done so – his name was Ed Miliband!

Even a threat of minor tinkering with their profits prompted the Big Six to threaten to turn the lights out – effectively a capitalist strike against British society.

If Miliband is serious about tackling energy prices he would renationalise the energy industry – but New Labour is ideologically committed to defending capitalism and supporting big business, whatever its conference rhetoric.

If these capitalist firms claim that the money is not there or refuse to cooperate, the unions should build on their own members’ anger and that of the wider public to create a mass campaign for the renationalisation of this industry. It should never have been sold off into private hands in the first place.

They should take up the call: “Open the books!” This means we need to look at the accounts of the energy giants.

Where have all the profits gone? At the top, money vanishes into massive salaries and bonuses for top employees and huge dividends for shareholders. The cash is there to prevent this double-figure inflation in price hikes.


Let elected workers’ representatives run the nationalised energy industry under democratic control. The only way to get cheap, sustainable energy is to return the industry to public ownership with immediate nationalisation of the ‘Big Six’.

A Mirror online poll found 94% would like to see energy returned to public ownership. There is no need to compensate the fat cat owners, although small shareholders would be compensated in cases of need.

Across the country trade unions and protest groups are organising to oppose fracking and environmental destruction.

Linking up with all who demand nationalisation will be key. We should also fight for a socialist society in the interests of consumers and workers rather than capitalists’ profits.

We could aim for a properly planned, carbon-free energy system, not run bureaucratically as it was in the past, but managed democratically, centred on committees of elected representatives of energy workers and the wider community.

Decisions on major projects, like the proposed Severn Barrage, would be made democratically.

A publicly owned Green Energy company would construct solar panels and wind turbines and research new forms of renewable energy.

A nationwide programme to ensure every home is properly insulated and fitted with energy-efficient appliances could reduce domestic energy demand by 40%.

Similar measures in shops, offices and factories could save even more. This would also create thousands of much-needed jobs.

The government’s aggressively free market attitude towards energy is summed up well in their deal with EDF and Chinese investors for Hinkley Point nuclear power plant.

This protects shareholders’ profits while boosting unsafe nuclear power and risking sky-high electricity prices for decades (see link below).

In rural areas, where mains gas is unavailable, many currently depend on oil for heating, at the mercy of an unregulated market and causing high rates of fuel poverty.

A nationally controlled and owned oil supply system would address this, until green alternatives can be implemented.

These measures would create thousands of skilled jobs in construction, power generation and distribution and in making equipment.

Local community schemes could become part of a national plan with guaranteed tariffs to sell electricity to the grid, money to use for the benefit of their communities.

New homes and businesses would be built with much improved energy efficiency as well as being fitted with solar and other energy-generating technology, while older buildings would be retrofitted to similar levels.

Bills would be kept affordable, no one would be ‘cut off’ as a result of poverty. Energy could be planned for the benefit of us all, not for the profits of a few.

A socialist programme includes:

  • Freeze fuel prices now but don’t stop there! We call for the immediate nationalisation of the energy industry with compensation only paid to shareholders on the basis of proven need.
  • A democratically controlled, publicly owned, energy industry should put lower prices and protection of the environment first, not the vast profits, dividends and pay-outs to rich bosses and shareholders.
  • A democratic socialist plan for energy should be worked out internationally involving workers in the energy sector, scientists, community and environmental organisations and the wider working class.
  • This plan should aim to replace fossil fuels with massive investment into renewable energy – such as wind, wave, solar and geothermal energy sources. No to nuclear power.
  • For a democratic socialist plan of production based on the interests of the overwhelming majority of people, implemented in a way that safeguards the environment.

A Socialist programme to solve the energy crisis

Pete Dickenson, author of Planning for the Planet, wrote in the Socialist that “the wider adoption and further development of existing technology, such as wind, wave and solar power” can only be realised “by eliminating the power of the big corporations.

“This means nationalising the main industries that dominate the economy. This will need to be done throughout the world, encompassing the 147 multinational corporations that recent research has shown dominate the globe.

“Two related factors underlie nearly all environmental threats – the quest for profit by big corporations and the inevitable tendency of competitive markets to degrade the environment.

“The task is urgent. It must involve the political rearmament of the workers’ movement in Britain and internationally with a socialist programme.

“As a first step, this will require the creation of new mass workers’ parties to replace the discredited former workers’ organisations.

“These parties, such as the Labour Party in Britain, have totally failed over decades to implement programmes to reverse the degradation of the planet…

“To avoid the worst effects of climate change, decisive action needs to be taken now, but there is no sign of this happening due to the rivalries between the main industrial powers.

“It falls on the shoulders of the international workers’ movement to implement a programme to tackle climate change [and the energy crisis] – replacing capitalism with a democratic socialist system.”

Planning for the Planet: How socialism could save the environment, by Pete Dickenson

Order from, £9.95 plus p&p

Big profits, low investment

The ‘Big Six’ are:

  • Centrica/British Gas – one of Thatcher’s flagship privatisations. Centrica CEO Sam Laidlaw pockets a whopping £36,000 a week (and is fighting to retain his £2 million bonus) while the outgoing British Gas boss is walking away with over £13 million in pay shares and pension.
  • EDF Energy – French-owned, with coal and gas-fired facilities, and eight nuclear power stations.
  • E.ON Energy – German-owned. Although claiming to be ‘one of the world’s leading renewables companies’, it invested just £2 billion in UK capacity since 2006, two thirds in renewables.
  • npower – also German, owns and operates nine power stations, the biggest investor – including renewables – in the UK over the last several years.
  • Scottish Power – owned by Spanish multinational Iberdrola, which claims to be global leader in wind energy. Iberdrola is currently trying to shed its 50% stake in the UK nuclear consortium NuGen, which owns Sellafield. Must have seen which way the wind is blowing!
  • SSE – formed from the old Scottish Hydro-Electric, Southern Electric, and SWALEC. The second largest supplier of electricity and natural gas in the UK. Britain’s largest generator of renewable energy, but this is mainly Scottish hydro-power, constructed in the 1950s, under public ownership!

2007-2011 Dividend payout rate

  • Centrica/British Gas 74%
  • EDF 58%
  • E.ON 56%
  • npower 57%
  • Iberdrola/Scottish Power 24%
  • SSE 63%

Source: Bloomberg report for Greenpeace

See also: Big business lines its pockets from nuclear power bonanza