Ed Davey’s speech to Energy UK today has been well trailed in the media. The headline features a much quoted soundbite: “Customers are not just cash cows to be squeezed in the pursuit of a higher return for shareholders”.
It was one of those occasions when the whole discussion took place ahead of the actual event, with Energy UK (which represents the energy industry) posting a ripost before the speech had been delivered.
Here is an extract from Ed’s speech:
We need our energy companies to be profitable so they can invest in our energy infrastructure, secure the energy supplies of the future, develop more energy efficient technologies, and create jobs.
But those profits cannot come at the expense of the elderly, the vulnerable, and the poorest in our society. Customers are not just cash cows to be squeezed in the pursuit of a higher return for shareholders.
Trust between those who supply energy and those who use it is breaking down. It is so difficult for people to work out what exactly they are paying for that they fear the big energy companies are taking them for a ride when bills go up.
Fair or not, they look at the big suppliers and they see a reflection of the greed that consumed the banks. So this is a ‘Fred the Shred’ moment for the industry. You deliver an essential public service, so your industry must serve the public – and the public must have trust in what you do.
So we have opened up our books and we are looking at how we can reduce the impact of government policies on bills.
But our commitment must be matched by a commitment in industry to open up your books and set out exactly how you are bearing down on your own costs to make bills as low as possible.
The industry must be much more transparent and Ofgem will have our full support to introduce whatever regulations are necessary to deliver that greater transparency.
Even the Daily Mail quotes him with some approval, describing him as furious and the energy companies as greedy. It also reports that Energy UK said that 95 per cent of rising costs were out of the hands of the industry, and quotes a spokesperson as saying:
The energy industry is already working hard to ensure everyone can keep the lights on and stay warm this winter.
The best way to do this is for everyone to work together which is why this tit for tat Punch and Judy show of insults is so unproductive.
The energy industry is vital to the UK. It is a major employer, a serious investor and a significant taxpayer.
* Mary Reid is a contributing editor on Lib Dem Voice. She was a councillor in Kingston upon Thames, where she is still very active with the local party, and is the Hon President of Kingston Lib Dems.
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23 Comments
“We need our energy companies to be profitable so they can invest in our energy infrastructure, secure the energy supplies of the future, develop more energy efficient technologies, and create jobs.”
This is different take on profitability compared to the next sentence:
“But those profits cannot come at the expense of the elderly, the vulnerable, and the poorest in our society. Customers are not just cash cows to be squeezed in the pursuit of a higher return for shareholders.”
We need our utilities to be profitable, but to invest those profits in the business so that they end up with little declared and taxable profit. Hence the questions we need to be asking the utilities is firstly what investment in the business are they planning that requires them to accrue declared profits over multiple years and secondly are they actually running their business efficiently. For example, by now a utility should have a reasonable idea of what it’s P&L and balance sheet will look like and hence plan investments accordingly – which is effectively what companies like Amazon do (once you strip away the international movements of monies) .
Currently, it seems that there is room for the utilities to invest more in the business without it having any impact on customer bills.
Can I just say how totally unacceptable it is that we cannot make comments on the pro-Heathrow expansion post? What is that doing on Lib Dem Voice?
Living in North West London I am horrified about the prospect of more noise and pollution from an expanded Heathrow. While I live ten miles from the airport, it still can have a major impact on quality of life in my area, with heavily laden jumbos roaring overhead as they take off for the Far East late at night, often stopping me from getting to sleep.
Heathrow should not be expanded because it is in the wrong place.
The full text of the speech is here:
https://www.gov.uk/government/speeches/opening-up-the-energy-markets-speech-to-energy-uk
Ed Davey
“Customers are not just cash cows to be squeezed in the pursuit of a higher return for shareholders”
Sorry, once energy provision is privatised, that is exactly what they are. Free market theory says that’s fine, because competition drives up quality blah-de-blah-de-blah. If this is not something leading Liberal Democrats, or at least leading Liberal Democrats whom Nick Clegg chooses to promote believe any more, well let’s have an honest admission of that. Much of current government policy is based on just that notion, and leading Liberal Democrats Whom Nick Clegg Chooses to Promote rarely seem to dissent from it, and in some cases seem to be great enthusiasts for it.
Competition. That would be nice. As it is, it’s hardly worth switching from someone who just put their price up 10% to someone else who’s about to put their price up 11%. One price per unit for gas and one for electricity, no matter whether it’s direct debit or prepay meter, no standing charge… rather like how we pay for road fuel. Then you might be able to compare. And the ability to change once a month, say.
RC – comments are now open on the sponsored post from Heathrow Hub
They do not need to bear down on their won costs they can simply reduce their currently vary healthy profits. What we need is a proper regulator which will actually control prices and prevent profiteering from the cartel of the big 6 energy companies
Proper regulation would be good. I cannot see how the current option to switch can produce meaningful downward pressure on prices.
Also, more energy supply (like from new government-financed nuclear) would allow prices to fall.
I agree with the sentiment, but the appearance is that Millibland is setting the agenda…
I’m with Matthew Huntbach here. The name of the neoliberal game is to squeeze every last drop of cash out of ordinary folk for the enrichment of a few. The energy companies must know – from the rising tide of anger if nothing else – that their customers are just about wrung out. The only way they can get more is if the green levies are moved into general taxation leaving the customers a little more cash which the energy companies can then hoover up with the next round of increases. Of course the cost would still have to be picked up by the Treasury – that is until Osborne decides it’s unaffordable.
Then there is the question of what is happening to the green levies. A big chunk of them, around £57 on an average bill, goes not to supporting renewable generation but to improving insulation for poorer customers. Yet last night’s Newsnight revealed that the energy companies are spending little of this money, the worst offenders being NPower and British Gas who are among the loudest complainers. Are they trousering the money or what? I think Ed Davey needs to send in some heavies to ask pointed questions. Here’s the link – the relevant bit starts at around 11:45 minutes in.
http://www.bbc.co.uk/iplayer/episode/b03hn7jw/Newsnight_11_11_2013/
Lecturing about ethics is just nauseating. I know I lecture about honesty, but that is for pragmatic purposes, not just for honesty sake.
So I partly agree with Matthew Huntbach here – energy customers are just cash cows , where I disagree with him is that I think it is probably best kept that way.
“But those climate change levies cannot come at the expense of the keeping the lights on, or crippling British industry which competes in a global market. Energy companies are not just cash cows to be squeezed in the pursuit of a higher return for Gov’t spending.”
Nothing wrong with speech, it just failed to say very much of consequence.
Feel free to insert “motherhood” and “apple-pie” wherever it please into the quoted sentence above…
I believe in the free market, but companies like these, who operate without real competition and whose businesses and terms of trade are in any case creations of government policy, are not the free market.
ED.
EDF disagree.
The directors of the energy companies have a fiduciary duty to maximize shareholder value. Their customers are just “cash cows”. It is the role of the minister and the regulator to ensure that the public are not held to ransom by the “cartel-like” behaviour of the private, profit-making suppliers of an essential utility. Mr. Davey has been singularly underwhelming in that role to date, as has his volte face on nuclear subsidies.
Ordinary domestic consumers are being used as cash cows by Ed Davey. He has changed his mind on nuclear power generation and the ordinary consumer is going to pay for it. For the next twenty years there will be year on year increases in gas and electricity bills to pay for this nuclear folly. Ed Davey used to say until a few months ago that nuclear was “unsafe and uneconomic”. He may have changed his mind about nuclear from the position he has taken at four general elections but he is not giving the consumer that choice.
If there is any “profit” it will go to the Chinese state. How strange that coalition ministers who seem to hate anything that is not privatised in the UK are so keen on state-run monopolies from C hina.
Moooo
I for one am proud to be supporting lower energy bills for Germany and China.
The humbug and hubris from the energy companies is unbounded. Much of the green levy for renewables/low carbon goes to companies that are subsidiaries of the power companies themselves, even more so when Hinkley Point comes expensively into service.
@ Paul in Twickenham.
“The directors of the energy companies have a fiduciary duty to maximize shareholder value”.
That’s a view very commonly expressed in the press and one that certainly suits the political right and business establishment because it means that they can weep crocodile tears while putting up prices: “We’re so sorry but we had no choice”. Actually, I don’t think it’s anywhere in the Companies Act. If it were shareholders would have wonderful basis to sue directors who overpay themselves even as their companies underperform – certain high profile bankers come to mind but there are plenty of others to choose from.
In any case it is hardly the proper exercise of a supposed fiduciary duty to run the company in such a way as to invite regulatory retaliation.
G Stanley
It is SOOO obvious that EDF were leaned on – shame the coalition didn’t have the leverage with the other five
Mary Reid 12th Nov ’13 – 4:39pm
RC – comments are now open on the sponsored post from Heathrow Hub
I guess the glossy adverts from the campaign “Expand Heathrow Now and ignore the people who will suffer” appear here on Liberal Democrat Voice because a large sum of money as been handed over>
Does this undermine the claim of Liberal Democrat Voice that it is – “The most-read website by and for Lib Dem supporters. Not paid for by trade unions or millionaires.”
It certainly undermines Liberal Democrats like Robin Meltzer who are campaigning against expansion of Heathrow.
To add insult to injury, the glossy adverts for Heathrow expansion seem to be omnipresent and popping up all over Liberal Democrat Voice. Any comments on them seem to be hidden away in a corner which I cannot access.
“It certainly undermines Liberal Democrats like Robin Meltzer who are campaigning against expansion of Heathrow.”
If that is a valid argument then surely it can be reversed, and it reinforces the argument of Lib-Dems campaigning in favour of expansion at Heathrow?
There needs to be an enquiry into how much profit the companies generating make on the selling of the power that they buy. I understand that these are the same people who sell to different arms of their company, who then levy more profit on top. It sounds like double profit to me. The way the energy market is set up appears to be very dysfunctional.
The energy companies appear to be acting like predators and thus appear to be unable to behave in a responsible fashion. The way the market is set up is not working. A fairer and better system needs to be carefully considered.
I also find it despicable spin that the Green and social responsibility levies are being used as responsible for the high prices and profits.