Energy and the EU – EUmatters

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Published on June 21st, 2016 | by frances

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Energy and the EU

By John Stevenson, Prospect Negotiations Officer

An under-estimated threat to the UK’s sovereignty and security is our ineffective energy supply. Without energy, the nation grinds to a halt: no power for hospitals and schools; no power for industry; no power for life. Our last coal mine closed in 2016 needlessly. Coal production was the key to our political independence as a nation.

Since the 1990s., the energy industry in Britain has been ‘liberalised’ and we now as a nation have very little control over energy supply. Overseas-controlled energy companies charge extortionate rates for what is a basic requirement of living in a modern society and there is little investment in the future of greener, more efficient cheaper supply. Constrained by neo-liberalism and the interference of the European Union, we are closer now to black-out Britain than ever before.

The European Union’s energy policies are driven by three main objectives: security of energy supply; competitive markets; and sustainability. All would appear to be admirable aims but, in reality, it is the very policies of the EU that are damaging security of supply and thereby the sovereignty of the UK.

It is clear that the energy market in Britain is a failure. It is evident that the market does not encourage competition or lower prices and neither does it incentivise innovation. The woeful level of switching by consumers demonstrates that people are not interested in chasing the cheapest tariff – that is, if one can be found amongst the confusing price structures – rather, consumers want the lights to work and their home to be heated when they need it.

Nothing goes to show how the market is failing the UK more than the research by the Debt Advisory Centre, which found that 4.7 million people are regularly cut off from pre-paid electricity [http://leftfootforward.org/2015/05/4-7-million-people-are-regularly-cut-off-from-electricity]. The market is effectively robbing people – the most vulnerable in society – of the basic necessities of gas and electricity. Furthermore, one in ten have arrears on all their utility accounts and 25 per cent of consumers rely on the more expensive pre-paid meters to permit them to juggle tight finances and pay their bills.

An early 2015 analysis from the House of Commons Library highlighted that the average household’s annual energy bill is now £260 more than it was in 2010 [http://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN04153] and that electricity and gas bills for the most vulnerable of households  rose by 40 per cent and 53 per cent in cash terms between 2010 and 2013.

A recent CBI survey of businesses and of the wider public[i] highlighted that the priorities of both groups were energy security and affordability. It could, therefore, be argued that the policy of the UK government and that of the EU is out of step with the concerns of the British people.

The independent energy supplier, First Utility, identified that the ‘big six’ were over-charging their customers an average of £293 per year [http://utilityweek.co.uk/news/first-utility-accuses-big-six-of-overcharging-customers-by-4bn-per-year]. The only comment that the Energy Secretary, Amber Rudd, could make was: ‘If you think you are paying too much for your energy bill, I urge you to switch supplier.’ Recent surveys[ii] state that trust in utilities and overall consumer satisfaction are some of the lowest in Europe and have been declining since 2010.

The European Commission has admitted that natural gas prices for industry, including taxes, were on average 241 per cent higher in EU states than in the USA. There are a number of reasons for this, the main one being attributable to the regulations imposed by the EU on member states.

The crisis in the steel industry is a prime example: Tata cited the high cost of energy as one reason for selling off its plants across the country and the EU did not blink an eye: state aid is, after all, prohibited by EU regulations. The NHS spends millions per year on unnaturally inflated energy costs at a time when such resources would be better directed towards patient care and provision.

In 1990, the Central Electricity Generating Board was dismantled into three companies: Powergen; the National Grid Company; and National Power. This was followed later by the twelve regional electricity companies.  The ideology was sold on the notion that it would bring benefits to consumers through competition that could lead to reduced prices. But, energy prices have rocketed.  Any savings made, mainly through job losses and the sweating of assets far beyond their design life, went into the hands of shareholders and not those of consumers.

According to a recent YouGov Poll, 68 per cent of the public believes that energy companies should be run in the public sector [http://www.ibtimes.co.uk/left-wing-price-controls-nationalisation-yougov-poll-519684], but this policy can never be enacted by a UK government as EU regulations prevent this from actually taking place.

The UK government is committed, for very good reason, to new nuclear stations; this commitment forms an integral part of cutting the UK’s carbon emissions. But the reliance on the market and private sector capital, and in its inability to deliver on time, threatens the legally-binding emission targets the government has set itself.

The UK has now reached a position where two-thirds of all existing power stations are expected to close by 2030, which highlights the threat to security of supply and the failure of the market. Consequently, those advocating changes to the market and pleading with the government to provide a route map for the future are clearly missing the point. For security of supply and price affordability, the supply of energy has to be removed from the dogma of the EU and neo-liberalism, and radical change implemented.

There are a number of models that could be adopted as alternatives to the current flawed arrangements; for example, a similar model such as Transport for London could be created, where profits are ploughed back into the energy infrastructure instead of shareholders’ pockets.

None of this is out of the question, or indeed new. For example; in Nottingham, the City Council has created a new not-for-profit energy provider, Robin Hood Energy. Bristol has a municipal energy services company which will be owned by the people of Bristol. London also has plans to provide 25 per cent of the city’s energy demands by 2025 through a small municipal energy company and ‘Our Power’ is a new non-profit energy supply company aiming to sell electricity and heat to 200,000 people across Scotland by 2020.

Further afield, there is the example of Denmark, which has electricity distribution grids that are, on the whole, owned by local co-operatives and mutual organisations whose management boards have democratically-elected members.

None of the examples from Britain or Norway are possible on a larger scale, given that it is EU policy to create an ‘integrated energy market across the EU’ [https://ec.europa.eu/energy/en/topics/energy-strategy]. Everything from the EU is about profit and the market, not about people, cost and security. The UK cannot radically alter its basis of how energy is produced and consumed as it is tied to EU regulations which ensure the ‘market’ rules.

EU Energy policy has the aim of ‘A European Energy Union that will ensure secure, affordable and climate-friendly energy for EU citizens and businesses by allowing a free flow of energy across national borders.’ There is nothing wrong with this aim – co-operation between nation states is a positive thing – but this can be achieved without being a member of the EU. The UK currently has gas and electricity interconnectors with Belgium, Ireland, France, Netherlands and Norway, the latter of which is not a member of the EU. In addition, the National Grid and Statnett, the Norwegian Transmission System Operator, have recently signed an ownership agreement which signals the start of the construction phase of a new 730 kilometre interconnector between the UK and Norway. A connector with Denmark is under construction and the National Grid is also at the feasibility stage of developing a further interconnector with Landsvirkjun in Iceland: again, Iceland is not in the EU. None of these interconnectors are under threat from a Lexit.

There is an alternative to the EU’s energy strategy, one that can be developed by the UK for the UK; one based on values not profit. This change need to take place now; the first step is for voting to Lexit from the EU.

[i] Business and Public Attitudes Towards UK Energy Priorities. CBI July 2014

[ii] Reiner David & He Xiaoping Why Do More British Consumers Not Switch Energy Suppliers? The Role of Individual Attitudes EPRG Working Paper 1515 Cambridge Working Paper in Economics 1525


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