Long term security

The UKIP paper ‘Keeping the Lights on’ (http://www.ukipmeps.org/uploads/file/energy-policy-2014-f-20-09-2013.pdf) offers a practical way forward for the sustainability of our energy provision but there is more that can and should be done within the existing structures of the exploration, distribution and marketing of energy to reduce the price to both domestic and commercial users.

There are long term and short term issues. Over the longer term we have to migrate from fossil fuel based energy sources to alternative ones. Whichever side of the global warming debate one might be on it is clear that fossil energy will become more expensive to produce, and then eventually run out. During this process we may become dependent upon other countries for an essential national need. The global warming argument is irrelevant as renewable energy sources will be the future for these other reasons and must be in the plan over the longer term when we have developed technologies that reliably work. If this can be done without the nuclear option then so much the better.

I’m not a fan of nuclear power generation in its current form, for all the obvious reasons, and I’m not convinced by spurious ‘safety’ analyses. Simply it’s a Pandora’s box that, when opened, can make huge sections of the country uninhabitable for eons. Uncontrollable waste and the devastating consequences of disaster make this option unattractive forever and we shouldn’t really need it if we construct a Renewables plan over the medium to long term. The UKIP approach of retaining coal and expanding gas exploration, particularly from shale, is a must for the next 20 – 30 years whilst encouraging development of natural and reliable technology to take over before reserves are depleted.

There can be no underestimating the boost to the British economy that would ensue with the halving of energy costs, were that to be possible, so a new approach to this problem has more benefits that one might initially suppose.

The world market.

The workings of the world energy market lead inevitably on artificially high prices. Firstly, it is nothing like a ‘free’ market. Prices are regularly fixed for non-market reasons so raw costs fluctuate even when production costs are stable. Beyond that the supply of UK national energy is operated by a cartel of six large companies who spend much of their time creating an illusion of competition where there is none. Quite simply their respective market shares remain more or less static over time. They work for the good of each other and not for the benefit of the people or the economy.

The world view of an energy market no longer suits out needs. As a country with significant natural resources we should be exploiting those for our own benefit and withdraw from the concept of a world market. Why should we freely sell energy we’ll need for ourselves? After all it won’t be forever and in the intervening period we still have to replace the capacity with renewable sources over time so the longer we can make it last the better. The price of such home produced energy must simply be based on production, distribution and retail costs. The net effect of that would be to reduce the price dramatically.

The control of energy production and distribution must be effectively regulated with ownership remaining within the UK. Retail of domestic, commercial and industrial energy can then be open to such competition as is possible. Usually the smaller, cheaper providers are more efficient with better systems and consequently a lower cost base. The big 6 are, by comparison, Neanderthals in this area.

What goes in a Manifesto?

The long term view on energy provision is all very well but we also need an approach that captures the imagination of the people in a way that is easily understood. British energy for British people is a sensible and arguable concept but the current model of supply and retail provision isn’t working and steps need to be taken to alleviate the worst excesses of the current system.

VAT is currently charged at 5% on residential energy and the full 20% on commercial and industrial energy. The take from the non-domestic sector isn’t as much as one might think because of the vagaries of the VAT system. Oddly this bizarre roundabout of taxation where companies routinely declare and re-claim money (what a way to make unnecessary work?) means that for all VAT registered companies the VAT they pay on fuel is simply claimed back so one has to question the validity of charging it in the first place. For domestic customers it is a regressive tax.

The whole justification of VAT in the first place is that its payment is by choice. It is regressive in that the rich pay the same as the poor and its justification for imposition on energy fails because it simply is not an optional purchase. UKIP should, therefore consider the removal of VAT on energy.

However, simply providing more leeway for the energy companies to maintain excess profits and eye-watering remuneration packages won’t help. The regulation of their operations must also be changed.

The pricing game 

The energy pricing game is one of obfuscation masquerading as clarity. There are hundreds of tariffs for exactly the same thing and it is so complicated that nobody can tell you what they pay for their electricity or gas per unit and nobody has a chance in hell of working out what their monthly bill will be even when given a tariff guide. How on earth can we expect prices to be influenced by customer will when no one even knows how much they pay or how to calculate their monthly bill? It is a system open to abuse and abused with impunity. The tactic of confusion marketing is designed to achieve the above fog about cost exactly. It is the reason why the vast majority of us have never switched and has, therefore been incredibly successful for the companies it benefits most. But, it’s wrong.

Ironically the concept of quantity discount lives on with domestic energy pricing when the incentive, if any, should be the reverse. Quite unacceptably those on low incomes who pay in advance through pre-payment meters consistently pay the highest rate of all for the smallest usage. One price would be fair to all.

It is the same electricity today as you buy tomorrow and it is the same whether you live but there are a multitude of pricing options on supplier’s websites creating artificial variances and hiding the true cost to the consumer.

To aid this illusion of choice we have a plethora of middle men we all know as meerkats, opera singers or singing cartoons. These middlemen add to the cost of boiling a kettle and aren’t necessary.

Simply there should be one price for on-peak electricity and one price for off-peak, similarly just one price for gas. The absence of an off-peak concept for gas is negated because it can be stored. Standing charges and all such costs that masquerade as such should be abolished. The headline and only price must be displayed prominently on every home page and every communication between suppliers and their customers. What competition then exists may flourish as people will then know how much they are paying and how much the others charge. Your bill will suddenly become auditable. Imaging the simplicity of N Kwh * price per KWh = Bill Total. What a revelation?

In this burst of fairness and consumer power, term contracts for energy should be abolished and the act of switching suppliers therefore unimpeded by artificial and secretive contractual conditions. Switch in three days should be the norm.

Profitablity guaranteed?

Recent committee appearances suggest that energy companies are untruthful. In such a highly fiddled and regulated sector anyway it is incumbent upon any government to legislate to restrict profitability to a reasonable level with breaches attracting consequences such as windfall taxation and possibly others. These are industries with guaranteed success no innovation is required to simply make money. The measure of energy giants must be aligned more to the needs of the country and its peoples and less to its directors and shareholders.

Ownership

It can never be in the interests of any sovereign nation for its essential needs to be under the control of foreign owned entities whether they be states or corporations. Ownership of UK assets involving the production, distribution and supply of energy fall into this category. It is perfectly reasonable for the state to be in control, through legislation, of who owns critical industry in the UK. Not only is this a further reason for self sufficiency in energy, as far as is possible, but also a means to protect from the pursuit of the advantage of others detracting from the need of our nation.

Summary

  • The UKIP principles on long term energy provision are sound but more need to be done now.
  • There is much that can be done by more effectively regulating the present structure principally with simple pricing and easy switching.
  • VAT is an anomaly on energy. It is just right for it to be abolished. The effects will be less than first thought because of the low rate on domestic energy and the VAT claim backs on non domestic fuel.

Longer term UK energy should remain under UK ownership and control.

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