Ed Miliband today announces that Labour will give the energy regulator the legal duty to ensure prices are fair and the power to cut bills this winter.
The new legislation is being drafted to put an immediate end to the overcharging by the Big Six energy firms which consumer groups estimate is costing families and businesses £2.5 billion a year.
The Government has admitted there is a problem with consumers being ripped off, but it has refused to act against the big energy firms.
Over the last year wholesale energy prices have fallen by an average of 20 per cent but the Big Six energy firms have reduced gas bills by a meagre one per cent to five per cent - while electricity bills have not been cut at all.
Labour has already declared that it would freeze prices – so they can only fall and not rise - for 20 months while the energy market is reset.
But the new legislative plans being announced today goes further by setting a clear timetable for changes so that consumers pay fair prices this coming winter.
In one of the first Bills of the new Parliament, Labour will give Ofgem a legal duty to review prices by the autumn – and the power to order price reductions in time for the winter.
The consumer group Which? says that further cuts of up to 10 per cent in gas and electricity bills should be made this year.
Such a reduction would save the typical family at least £100 this winter, on top of the savings they will get from Labour’s plan to freeze gas and electricity bills until 2017.
Mr Miliband’s announcement comes as he prepares to unveil the fifth pledge on Labour’s five-pledge card at its pre-election Spring Event in Birmingham on Saturday.
Ed Miliband is expected to say:
“Britain can only succeed when working families succeed.
“Our economy is at last growing again. But the vital link between the wealth of our nation and working families has been broken.
“We live in a country where you can’t fulfil one of the foundations of family life - keeping your home warm – without being overcharged by one of the big energy firms.
“It’s been 18 months since I announced the next Labour government would freeze energy bills – so they can only go down and not up – until 2017 while we reset this broken market.
“In those months we first heard loud protests from the Big Six energy firms and their PR men in the Government.
“Then we saw prices continue to rocket upwards, unchecked by the Government.
“Now something else is happening. The costs of energy are tumbling down, not because of anything the Government or the Big Six energy firms have done, but because of global changes in oil and gas supply.
“The cost of energy to the Big Six firms fell by 20 per cent. But the sky-high prices that families pay have only fallen by a fraction of that. Gas bills have declined by between one per cent and five per cent. Electricity bills haven’t fallen at all.
“What better evidence do we need of the chronic over-charging, the broken market and the rip-offs being faced by millions of families and businesses across Britain?
“Even David Cameron and George Osborne admit this is a problem. But they have not acted and the whole country knows why. It’s because they will never stand up to powerful interests and they never stand up for you.
“My government will be different. We will stand up to the big energy companies. We will go ahead with our price freeze. We will reset this broken energy market for the long term so that proper competition and regulation can ensure fair prices are charged in the future
“And we will go still further. We will pass a law to ensure falling costs are passed on to the consumer this winter; a law giving the regulator a legal duty to ensure fair prices this winter; a law giving the regulator the power to cut prices and keep homes warmer this winter.”
The energy market isn’t working for working people
The typical household energy bill has increased by over £300 since the last election, the number of families with children who can’t afford to heat their homes is at an all-time high, while three out of four families are being overcharged.
Energy companies hike prices when the cost of energy rises but don’t cut them properly when it falls.
The energy market is dominated by six companies that supply to over 90 per cent of homes and generate 70 per cent of the power we use. Limited competition and weak regulation has weakened the incentives to keep prices low. When the wholesale price of energy rises, energy companies have passed this on to consumers but when it drops consumers don’t see the benefit of this through reductions in bills.
Since David Cameron entered Downing Street energy companies hiked up bills by an average of 10.4 per cent a year between 2011 and 2013, blaming rising energy costs. In the last year, wholesale gas prices have fallen by an estimated 22 per cent whilst electricity prices have fallen by 17 per cent. But the Big Six have only passed on a fraction of this to consumers who have seen reductions of just between 1 per cent and 5 per cent for gas and nothing for electricity.
The Government knows there is a problem but has failed to act:
In Opposition, David Cameron said: “You have to give the regulator the teeth to order that those reductions are made and that is what we will do.” As recently as January this year, George Osborne admitted: “We need to ensure falls in wholesale prices are properly passed on to all consumers and we will continue to monitor this very closely.”
But the Government has voted against Labour’s plans for a regulator with the power to order energy companies to cut bills when wholesale prices fall and they opposed Labour’s price freeze.
Consumer groups say more can be done:
Which? estimates that a further eight to 10 per cent cut in gas bills and 10 per cent cut in electricity bills are possible this year. This would save families a total of almost £2.5 billion a year – at least £100 off their annual fuel bill.
We will introduce legislation in the first months after taking office to freeze prices, so they can fall and not rise, and give the regulator the power to cut prices and a duty to review prices and act in time for winter.
We will then reset the market so that it delivers a better deal for working families by forcing energy companies to separate out the parts of the business that generate energy from the parts that sell to homes and businesses; requiring them to trade their energy on a pool; introducing a simple new tariff structure; and creating a tough new energy watchdog with new powers to police the market.
Also available from http://press.labour.org.uk
Ed Miliband today announces that Labour will give the energy regulator the legal duty to ensure prices are fair and the power to cut bills this winter. The new legislation...