Saturday, September 13, 2008

"At worse we'll make more money"

British utility bills have gone up by 500% since 2003. You don't have to be 'left-wing' to understand that's plain wrong. If Spain can cap utility prices then why can't Britain?

The Unions are asking the government to tax the "windfall" profits of utility corporations. In plain English: if, for example, nPower had forecast an already massive profit of 20% in a year and, by cashing in on higher oil prices, they ended up raking in a 45% profit (by squeezing higher bills out of millions of citizens), the government should tax that extra mega-profit. The result would be used to offset the effects of dearer utility bills. But, predictably, after talking to the Big companies, Gordon Brown ruled out the windfall tax as a useless "short-term gimmick". If only he knew how many thousands of citizens could do with "short-term" relief.

And yet, why are we surprised? Oil corporations and utility companies alike are a little shy, for want of a better word, at the idea of lowering prices as soon as oil gets cheaper. To reassure the public that they're not hauling in dividends on our back, they always come up with a cop-out: currency devaluation, high tax, the stock market in Hong Kong, the Nimex, Russia, the Cold war, tension in the Middle East, etc. There's always some excuse. But if only the same papers whose headlines were screaming at skyrocketing oil prices used the same big fonts to report their current fall, perhaps people would learn that in two months oil went down by 24% whereas petrol and utilities didn't (instead they are expected to go up by 20 to 40 per cent this year). The pressure on those greedy "wealth creators" and the government would increase.

In Spain, the Government holds the legal prerogative to cap utility increases. The companies put forward their proposal (say, 20%) and the Government decides if that's appropriate. Granted they always make sure the bargaining process doesn't end up pissing off the corporations (this year's sanctioned rise stopped at 11%), but at least Spanish customers are spared the obscene rises seen in Britain, where utilites have gone up by 500 per cent since 2003. And before you spare a tear for those poor Iberic utility companies, they still manage to pocket millions' worth of dividends. The unregulated British system, instead, ensures the balance is completely and utterly at the expense of the customers.

How Labour doesn't even consider the possibility of reintroducing regulation on utilites tells you all about the state of the party. But you don't necessarily need to be left-wing or "liberal" to be of the opinion that there's something wrong with a 500% increase in your gas/electricity bill in five years. Most people who'd call themselves "conservative" would agree that an unregulated utility market is not working except for a handful of glib shareholders ("at worse we'll make more money", quipped Mark Owen-Lloyd, head of power trading at E.On. What a nice man). When utilites go up that much, that fast, and there's a trickle down effect on inflation, companies, retailers and consumers, the buck will ultimately stop at the government. Read: election defeat.

[Tony Woodley, the joint general secretary of Unite, made a speech at the TUC conference on the subject. Read it here]

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