Thursday, 11 September 2014

Getting control of energy



Andrew Fisher reviews a new pamphlet - 'It's time to take over the big energy firms' - published by the Fire Brigades Union.

This is another great example of a trade union dedicating itself to political education, and follows on from the FBU's 2013 publication 'It's time to take over the banks', which made the case for public ownership of substantial parts of the banking and finance sector. Like it's predecessor this is another concise, well-argued, and accessible read - and contains many references for those who want to read more.

The pamphlet starts with a section that will be familiar to any household billpayer - the 'naked profiteering' of the the UK's privatised energy system and its toothless regulation.

It points out that UK bills have risen faster than anywhere else in Europe and at nearly twice the rate of inflation between 2009 and 2013. In that same period the big six energy companies' profits have risen by 73%. Not unjustly, the big six are described as an oligopoly, "they may find it more profitable to collude.

The pamphlet dismantles the arguments put by the big six about it's low rate of profit, by exposing the transfer pricing between wholesale and retail divisions and quotes Labour's shadow energy secretary, Caroline Flint, saying that while retail profit margins are only around 5%, in generation they reach 20%.

Privatisation of the energy sector has been a disaster - failing to invest in future supply, hiking prices and, as Oxford energy economist Dieter Helm puts it, they have "focussed on sweating inherited assets, not creating them". A similar story is true in the privatised what industry (see our recent examination of Thames Water).

The pamphlet also considers the proposals of the opposition Labour Party - which brought a hailstorm of doom on leader Ed Miliband for promising an 18 month price freeze and to "reset the market". While welcome, they are deemed "inadequate", because you can't have a proper market in energy.

The cost of this market failure is not just felt in the pockets of the billpayers, but also in the excess winter deaths - 23% higher in the UK than in Sweden, despite our milder winters, with 6.5% saying they can't afford to heat their home, compared with just 1.6% in Sweden.

The dire environmental impications of this are deadly serious too, but these is intrinsic to the market, "private firms calculating what is most profitable to them in the short term, not what is in the best interests of society in the long term". The demands of the One Million Climate Jobs pamphlet are also endorsed.

So when it comes to energy we face three major problems: consumers being ripped off by naked profiteering, while a lack of investment post-privatisation means polluting fossil fuels damaging our environment and the very real prospect of the lights going out.

The case against the energy companies is strong and will be familiar to many, although the pamphlet is full of hard-hitting facts on the subject. But the pamphlet's real strength lies in its final section where it envisions renationalising the big six energy companies with democratic planning and governance.

One option is the Attlee government's model for nationalisation, "shares were swapped for government bonds, one piece of paper for another". Another option is for minimal compensation, "serious government action to take over the big six would see further falls [in share price] as shareholders saw their opportunity to make money out of noething evaporate."

The governance system proposed is similar to that advocated by the late Bob Crow for the rail industry: one-third workers in the industry, one-third consumers and one-third government - with boards at the plant, regional and national level, and ultimately accountable to the government.


As FBU general secretary Matt Wrack pragmatically puts it:
"The market does not and will not provide the investment needed. That's why public ownership and democratic control of our energy system is so important."
Indeed.

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