The shamelessness of the energy companies shows why we need a price freeze

British Gas's suggestion that households should simply use less energy is blackly humorous. But customers won't see the funny side.

Following last week’s announcement that SSE, the biggest supplier of energy to Welsh households, is to increase prices by 8.2%, yesterday came the announcement that Britain’s second biggest supplier, Centrica (AKA British Gas) is to follow suit with a 9.2% hike. Though customers will not see the funny side, the press release from British Gas, defending its decision, is a blackly humorous read. It begins with an acknowledgement that Ed Miliband is right: "the cost of living is rising faster than incomes". Then there’s a passage of hand-wringing regret that despite these tough times for customers, our bills have to go up by almost 10% to maintain their profitability. Before, finally, in a statement almost beyond parody, the company’s managing director, Ian Peters, reassures us: "A price rise doesn’t necessarily mean energy bills have to go up too. The amount you pay depends not just on the price, but on how much gas and electricity you use."
 
And he’s right, of course. You could just not turn on the boiler or the cooker and save a fortune. Why didn’t we think of that earlier? It would certainly make life easier for David Cameron, who, having so spectacularly failed to stand up to the energy companies in the interests of ordinary families, looks like a man who would give anything to make the problem go away.
 
Since I was having such fun reading the press release, I thought I’d take a look the Annual Accounts and Report for British Gas’s parent company, Centrica, to see if they were as much of a laugh. I was not disappointed.
 
Sam Laidlaw, the group’s chief executive, concludes his introductory remarks with the cool observation that "Centrica has a robust balance sheet and generates strong cashflows". He’s not kidding. British Gas – the bit putting up their prices today – made a post-tax profit of £1.09bn last year, up from the £1.01bn it made in 2011, though not as much as the £1.22bn it made in 2010. Within that consistent £1bn-plus profit, the sales to residential customers have been looking good too: up to £606m from the £544m posted in 2011.
 
The bit of the company generating the energy to sell to British Gas (i.e. itself) is called Centrica Energy, and its numbers are even better. In 2012, the energy generation arm made a post-tax profit of £1.2bn, £200m better than the year before and £500m better than 2009, the last year a Labour government was in charge. Little wonder the smiles are so broad on the faces of the board members’ pen-pictures, when share prices have risen by a third since May 2010 and top managers’ salaries with them: Mr Laidlaw’s total remuneration was almost £5m in 2012, his understrapper at British Gas making do with £3m.
 
What the accounts don’t tell us, of course, is the real amount it costs Centrica to generate the energy which it then sells on to British Gas at the going market rate – a market rate that itself reflects the wholesale prices set by the big six companies. It’s a circular process - in which the only real loser appears to be the paying customer at the end of the pipeline or the power cable, watching nervously as the wheel spins ever faster in the black-box under the stairs. Labour can’t stop the wheel turning, but we can freeze the price of each revolution and therefore your overall bill. And we will.
The entrance to Leicester's British Gas Centre. Photograph: Getty Images.

Owen Smith is a Labour leadership candidate and MP for Pontypridd. 

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Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

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Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.