Public ownership of energy retail companies would reduce bills, speed up energy efficiency improvements to UK homes, and cut carbon emissions faster, according to a new TUC report published today (Monday).
The TUC’s Affordable Energy Plan would keep bills down by:
The plan is published shortly before next month’s announcement from Ofgem of a new increase to the energy price cap, which is expected to bring average bills to more than £3,200 – a rise of over 150% in just one year.
Cost of failed privatisation
Since June 2021, the UK government has spent £2.7 billion bailing out 28 energy companies that collapsed after putting short-term profits ahead of long-term stability – companies like Bulb and Avro Energy.
Ministers have also had to allocate £12 billion to directly cut the cost of household bills.
However, the TUC says that if energy firms had already been in public ownership, bills could have been kept down without such a high cost to the public purse.
In France, where national provider EDF is currently 84% publicly owned, household energy bills rose by just 4% this year. The French government as the main EDF shareholder was able to instruct the firm to cut profits to keep prices down. The TUC says if energy retail was publicly owned, the UK would be able to take a similar approach.
The long-term burden of privatisation
Even before the current energy price crisis, families were already paying the price of privatisation through higher bills to fund private profits.
Research by Common Wealth shows that UK energy retailers paid shareholders more than £23 billion in the last 10 years. And most of these dividends went overseas to large foreign shareholders.
A publicly owned energy provider could have used this wasted cash to reduce bills and bring forward energy efficiency measures to make family homes cheaper to heat and power.
But the TUC says that privatisation has held back energy efficiency home improvements. Energy companies are incentivised to sell more energy to make profits for shareholders – not to invest to cut energy use.
Public ownership is affordable
Based on payments for shares in recent market transactions, nationalising the Big Five energy retail companies (British Gas, E.ON, EDF, Scottish Power and Ovo), would cost £2.85 billion.
By contrast, the government has already spent £2.7 billion over the past year bailing out failed private energy firms, including £2.2 billion for just one firm alone – Bulb.
Taking these five companies into public ownership would move more than 70% of households out of the failed private energy retail system.
And it would cost only around a quarter of what ministers will spend this year protecting families from the soaring prices charged by private energy retailers.
Public ownership can make bills affordable
Once in public ownership, the burden of paying shareholder dividends would no longer be carried by UK households, allowing lower bills and more investment in energy efficiency.
Publicly owned energy companies would have a strong incentive, and the capacity, to roll out energy efficiency improvements to all UK homes, significantly reducing bills.
And they will have the power to set energy prices aimed at affordability for customers, rather than maximising profits for shareholders.
The TUC plan sets out how a publicly-owned energy retail system could deliver a social pricing structure that lets everyone afford the energy they need to cook, clean, and stay warm all year round, while those with extravagant energy use pay more per unit.
Under the TUC’s plan, every household would receive a free band of energy to cover basic lighting, heating, hot water and cooking. And bills for low-income families would be capped at 5% of typical household income.
TUC General Secretary Frances O’Grady said:
“Families should be able to afford their basic energy needs.
“But energy firms rinsed us for private profit in the good times, then doubled our bills when the going got tough. That’s why bills are soaring now.
“It is time to lift the burden of failed privatisation off families. No more shareholder pay-outs. No more fat cat bonuses. No more take-the money-and run-companies that collapse overnight. Just fair prices from an energy company owned by us all and run for our benefit.”
On social pricing, Frances added:
“Everyone should have enough affordable energy to cook, clean and keep their home warm.
“But anyone heating a private swimming pool should expect to pay a higher rate for their luxury lifestyle.”
- TUC report: A fairer energy system for families and the climate: The full report is available here: https://www.tuc.org.uk/sites/default/files/2022-07/Public%20energy%20public%20paper%20-%20web.pdf
- Cost of bailing out failed energy companies: The £2.7 billion cost of energy firm bailouts comes from the National Audit Office’s report in June 2022.
- Energy Bills Rebate: The figure of £12 billion is the total cost of the Energy Bills Rebate component of the Energy Bill Support Scheme. In May 2022, the government announced that it would double the rebate from £200 to £400, at a cost of £6 billion. Therefore the overall cost is estimated at £12 billion.
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