London Calling : Sold, and Cold

Selling off state-owned energy companies has been a disaster in Britain

by Rory MacKinnon

Here in Glasgow, the only mighty river power is the nuclear submarine fleet docked in the Clyde. But John Key’s breezy assurances about carving up New Zealand’s state-owned power companies seem ever more absurd, viewed from half a world away.

Admittedly they must look even more absurd up close back home too. The plan is going ahead, despite there being a consistent majority of the public against the sell-off, in polling conducted years apart: and as indicated previously on Werewolf the whole idea makes no fiscal sense either. And here in Britain, two decades after the Thatcher government smashed the electricity boards and privatised the shrapnel, electricity prices have become, for many, something that is literally a life-and-death issue.

Around a fifth of the country’s households are in a state of fuel poverty, meaning they need to spend more than 10 percent of their annual income just to keep their home at a safe temperature. Shivering within those walls are more than three million pensioners, and an estimated 1.6 million children. One in four households receiving a winter fuel subsidy cut their weekly food budget – already a meagre median of £27 – by more than a third during cold snaps just to tide them over. And as the government’s Fuel Poverty Advisory Group warned a scant few months ago, some 300,000 more households have joined them in the last year alone.

It is a lot of numbers, but the math really isn’t difficult. Between them Britain’s ‘Big Six’ retailers – E.ON, EDF, Npower, Scottish Power, British Gas and Scottish & Southern Energy – raised their gas and electricity prices by 6 to 10.8 percent last year alone. The year before they leapt a galling 15 to 19 percent, even as median household income actually shrank by 3.5 percent in real terms.

But if percentages aren’t your thing, you can also measure in lives. The Office for National Statistics also publishes an annual record of ‘excess winter mortality’, which – soberly and without comment – tots up the number of people who succumbed to cold-related illnesses. In 2011, 24,000 people died of the cold (this treated as a welcome reduction from 26,000 the year before). Figures for the winter just ended are still pending, but you get the picture. Those are just the deaths, mind you: it’s much more difficult to track pensioners who can’t bear to leave their beds or babies screaming themselves hoarse with bronchitis.

None of this passes without comment — but the stock response from any given press officer is that as private enterprises they simply must raise prices to ensure Investment and Security and other serious, frowny-face words. As Centrica CEO Sam Laidlaw said of their British Gas subsidiary’s double-digit price rise:
“People have to work out whether they feel energy companies need to make a return to invest, or whether they’d rather there was no investment and we had a less secure supply.”

However, after twenty years of vigorous, jostling free markets, Conservative energy secretary Ed Davey had to huffily admit last May that there hadn’t been much investment at all. In a terse foreword to their proposed energy reforms (a column all in themselves), he insisted privatisation had “delivered reliable and affordable energy”. Yet the industry had inexplicably forgotten to set aside enough cash to develop the renewable energy technologies that successive governments had promised, and now Britain faced “significant challenges” in the form of overwhelming dependency on volatile imported gas prices and bugger all to show for its climate change targets. A kind of ‘market failure’, if you will.

And yet the legislative response here – from Labour, Lib Dems, Tory and Scottish Nationalists alike – has been a ubiquitous cooing over the need for ever more arcane and expensive “incentives”. Their hands are tied, after all: these are publicly traded companies whose ultimate responsibility is to their shareholders, and private shareholders are responsible to no-one.

Make no mistake: even with every assurance of mixed ownership, National’s share float is by definition inviting a chorus of speculators who will agitate for short-term profits before the national interest, whether environmental or social. The entire UK energy sector is proof of this. And for every ‘mum-and-dad’ investor, real or imagined, there will be thousands more who can no longer afford to keep their children warm, let alone set them up with an investment portfolio.

The great shuck-off will ultimately cost lives. Controlling interest or not, it’s not worth it: two percent is too small a margin for error.