Our energy bills are the highest in the world

We’re paying more for energy than anywhere else in the world.

So, while the government and energy industry try to pass the blame on — to Russia, the pandemic and so on — the reality is far closer to home. It’s a story of deregulation, greed and profiteering.

Sunday 27 November 2022

In a story uncritically reproduced across the mainstream media, energy companies play the victim: they couldn’t possibly not charge extortionate prices for the gas and electricity they sell to us. It’s the invasion of Ukraine, says the government, as they pump billions in to prop up the profits of the energy industry.

But we have the highest energy bills in the world — and well before the onset of the current cost of living crisis, we already suffered some of the highest energy bills in Europe.

A broken energy market

The UK is exceptional for the outsized concentration of its retail energy sector, with domestic provision dominated by a small number of multinational corporations. The consequences have been those characteristic of any highly concentrated market – widespread inefficiencies and price-gouging practices by the “Big 6” energy companies.

However, the medicine would prove worse than the malady. Consistent with the market-orientated mandate of Osborne-era economics, rather than reigning in corporate greed, efforts to address this problem doubled down on it.

Since 2010 Ofgem –the UK’s energy regulator– was tasked with enhancing competition, ironically intended to bring prices down. What followed was an era of revolving-door regulation, since described as “negligent” and “unfit for purpose” by the government’s own auditors.

Free to pursue reckless business strategies, and with financial arrangements glaringly inadequate to weather volatility in the energy market, when the inevitable storm eventually hit, the energy sector was scuppered. What followed was a deluge of defaults with 29 of these newer retailers collapsing since 2021 alone.

And, in a formula which should by now be familiar, while the profits had been privatized, the costs of collapse were borne by the taxpayer. Eye-watering sums of public money have been used to keep the energy sector afloat, with the bailout of Bulb alone costing £6.5 billion. Households have shouldered the burden as these costs have been surreptitiously added as a £164 surcharge to their bills – a significant and largely ignored contribution to the energy inflation currently wreaking havoc nationwide.

Make no mistake: this crisis amounts to a failure of market provision.

In fact, the 2021-22 market contraction is merely the latest in a litany of failures which have left UK consumers exposed to energy inflation with a ferocity unparalleled amongst our European neighbours.

From inadequate investment in the nation’s energy storage capacity – contributing to the daily wastage of enough power to support a population the size of Liverpool – to an inability to insulate Britain’s infamously energy inefficient housing stock, the failings of the private sector have been comprehensive.

We can’t afford to waste any more energy propping up this system

If this portrait of regulatory failure, recklessness and rentierism sounds familiar, it should be. The failings of our energy sector are just the latest example of a system which systematically privileges shareholders above society and has left the reckless impulses of the market unchecked.

Just as the financial crash exposed a rot at the core of the financial sector, the invasion of Ukraine is less the unambiguous cause of the current crisis as much as a catalyst for deficiencies already at the heart of our energy model. The parallels don’t stop there: the bailout of Bulb, which collapsed in November 2021, was the largest undertaken in the UK since the Royal Bank of Scotland in 2008. But this time, we cannot afford to let the crisis go unanswered.

The truth is that, much like water, roads, housing or healthcare, energy access is a basic precondition for participation in modern society. Accordingly, unlike market commodities, its distribution isn’t respondent solely to questions of efficiency, but rather raises more pertinent issues of inclusion and social need. Put differently, it is manifestly unsuited to governance by a system preoccupied with profit over people.

The energy companies know this. Much like the banks pre-2008, their recklessness was conditioned by their knowledge that the government simply couldn’t let them fail. And this expectation was borne out: from the bailout of Bulb to an “Energy Price Guarantee” which guarantees little more than corporate profits, the government has done everything they can to prop up an ailing energy system, demonstrably unfit for purpose.

But it is clear the only way to address the cost of living crisis in a way which amounts to more than an exercise in can-kicking is in fundamentally reforming our energy system. We’re not policy-makers. All we can do is fight for a more drastic intervention. And the most effective tool at our disposal is the demonstration of our strength in numbers.

That’s why we’re saying don’t pay: end the profiteering and greed.