Star comment: Good aim but shot may not be on target
David Cameron seems to have caught everyone by surprise, including the energy firms and his own colleagues, with his on-the-hoof policymaking about energy tariffs.
But perhaps it should not be so much of a surprise that a politician is attempting to tap in to popular sentiment – that sentiment being that in a time of very low inflation, the energy companies are ripping consumers off with successive huge price hikes.
It is a gamble. History is littered with examples of governments which tried to mess with the markets and got stung as a result.
The markets are by their very nature unruly and dynamic, and highly resistant to attempts to tame and control them.
Already there has been a qualification by the Department for Energy of Mr Cameron’s headline announcement that he would force gas and electricity suppliers to offer customers their lowest tariffs.
The department says it is looking at “all options” to help customers get the best deal.
Would the Cameron plan be feasible? If companies are to be forced to give customers the best deal, it follows that there has to be somebody to judge, presumably independently, what the best deal is.
Energy companies will argue that the cheapest tariff is not necessarily the best deal.
And what about householders who, for environmental or ideological reasons – they may perhaps only want energy from “green” energy sources – may actually opt to pay a little extra?
While Mr Cameron is straying into a policy area fraught with practical difficulties, he has at least started a debate and fired a much-needed shot across the bows of the energy companies.
The problem is that it smacks of opportunism and shooting from the lip rather than an exercise of joined up policy thinking.
Comments for: "Star comment: Good aim but shot may not be on target"
Dio
The problem I see with this move is that the cheapest deal available at the time may not be the cheapest deal in the long run.
I have switched often, but the last couple of years have stayed with EON - not that I am actually recommending them specifically. But from last year they automatically put me on their cheapest deal. But, upon transfer, I found I could switch internally to a slightly cheaper contractual deal, but with a small charge if I decided to leave before the end of the 12 month contract.
However, when I came to do this I found another contractual deal with a fixed rate for 2 years, which cost exactly the same as their cheap deal, but again with a small charge if I decided to leave early. From my reckoning, by switching to this deal instead of their 'cheap deal' I will already be on the lowest tariff come the new year when all the big 5 have increased their prices, and will probably save a couple of hundred quid over the 2 years - unless of course energy prices suddenly drop!
As I began with - the cheapest deal on offer is not necessarily the cheapest deal in the end.
Roger
The problem is not which tariff or too many tariffs the problem is that on any tariff it is too expensive. Tinkering with the tariffs will only create a cartel to preserve the supplier’s profits.
We need to understand where these well above inflation costs are coming from and who controls them.
Distribution costs - National grid
Low Carbon supplements - The government.
Fuel costs - The open market (Investment Bankers)
Profits - the suppliers
Administration - the suppliers
VAT - the Government.
The government is financing its low carbon future through applying a regressive charge on energy bills with no respect to the affordability or impact on inflation. They do this without reference to the finance bill in parliament so have no mandate for this charge.
The cost of fuel on the markets is affected by our friends the investment banks who wheel and deal in futures to set this price and make profits. We pay for those profits in our bills.
The administration costs are buying gas, advertising and administration of the ever ongoing need to switch suppliers wasting incredible amounts of time and money to achieve short term marginal savings.
The distribution costs are a charge but who controls how much? Where are the accounts for the grid charges?
On top of all of these charges the suppliers add their profits to produce margins on top of every elemental cost even though in most cases they are only collecting the money and passing it over as if it were tax.
Finally the government takes another 20% in VAT. WHY? We did not pay VAT on energy when the privatisation was set up and we don't need to charge it now. We could zero rate it. It is a regressive tax which is adding to the inflationary cost of energy. It takes no account of the customer’s ability to pay.
So what are the government doing about controlling their share of the inflationary pressures of energy and to whom do they answer?
What are we doing about the way the suppliers profit by not reflecting the cost of fuels in the cost of energy?
Who is controlling the distribution costs?
The proposed tinkering by no means addresses the fundamental problem that energy charges are too high.
Re- Nationalisation should be seriously considered if the government and suppliers are not prepared to moderate the inflationary effect, as this is so significant it represents a threat to the economy and its recovery.
twiggo
"David Cameron seems to have caught everyone by surprise... with his on-the-hoof policymaking"
No surprise to me - it seems that this is how he is running the country, making it up as he goes along.