To fix our broken energy market, we need Help to Supply

The government should do more to help communities, local authorities and businesses not only produce but supply their own power.

The Help to Buy scheme has so far attracted 6,000 applicants in just two months, and has already enabled nearly 750 people to climb onto the property ladder: another step towards encouraging a "property-owning democracy" and securing assets for individuals and families. Great. But there is a much more radical shift waiting to happen in the energy retail market, and a far greater opportunity to facilitate widespread ownership, not only among individuals, but communities and businesses too. We have heard so much about the need to encourage diversity and competition beyond the "big six", yet seen little by way of policies to put this into action.

In fact, we’ve seen the reverse taking place. The reduction in the Energy Company Obligation (ECO) levy will aid to bring down costs, but only for the larger energy companies, giving them an even greater advantage in winning over customers. And according to a recent report, the 20 month price freeze advocated by Ed Miliband will see smaller utilities lose out. We desperately need policies that will not seek to disadvantage start-ups and smaller players within this sector. The party manifestos - if they are serious about tackling high energy bills – must include measures that encourage innovation, competition and widespread ownership, not stifle it.

Markets overseas show that an entirely different picture can be painted. Germany has 1,100 electricity suppliers, and the average household has a choice of around 72 of these. The four major energy companies operating in Germany (E.ON, RWE, EnBW and Vattenfall) take up 43.8 per cent of the retail market. Most other suppliers are owned by the municipality or the community, and the rate of "bottom-up" ownership of such services and assets is growing. At the end of 2012, 190 communities had been successful in bidding to run – yes, own and run – their local distribution grid (at least nine of these are co-operatives) and 70 municipal utilities had been founded.

This is not renationalisation or even remunicipalisation, but a move toward a much more constructive, locally-governed infrastructure in which communities ensure transparency, efficiency and good competition. Many of these emerging community-owned suppliers, such as Feldheim Energie and EWS Schönau, are not only offering cheaper tariffs than their competitors, but are seeking and fuelling the prosperity of their locality. In contrast, the UK has 30 licensed suppliers and the largest six take up 98 per cent of this market. No community has yet set themselves up as a competitor.

True, we cannot lift the infamous successes of Germany’s market and immediately apply them to the UK, and neither for this reason can we directly duplicate policies from overseas. But what we can do is not do nothing: we need a strong policy infrastructure, backed by government, that will catalyse new start-ups and new competition.

The Community Energy Strategy, published today, recognises that many of the UK’s communities, local authorities and businesses have an ambition to not only produce, but supply their own power. Ofgem’s "Licence Lite", which was introduced five years ago to make this possible, has so far seen only one application progress. The GLA, the largest governing authority in the UK, has the facility, scope and financial backing to take advantage of this scheme, but many institutions and civic groups don’t. The London Authority’s application is still pending final approval, so we are unsure as to whether even this will be successful.

What we need is a "Help to Supply" scheme. Government, working with the Department for Energy and Climate Change and Ofgem, should set up a series of pilots to work with a range of partners – communities, generators, local authorities, supermarkets, business hubs, Local Enterprise Partnerships – to help them establish a licensed supply company. Along the way, risks, costs and barriers should be noted and policies – perhaps even an alternative to Licence Lite – should be implemented as a result of this learning. This way, we may move from the paltry 30 suppliers we currently have to doubling or trebling this number in the next couple of years, and perhaps even more as the momentum builds.

Our ambitions are right, but our policies are wrong. If we are to take rising bills, competition and transparency seriously, we simply cannot let this opportunity pass us by.

Caroline Julian (@carolinejulian) is Head of Research at ResPublica and undertook a Winston Churchill Memorial Trust travel fellowship to Germany last year to explore the ownership structures of local distribution grids and utilities. The report based on this trip will be published through ResPublica this year.

Lightbulbs on display in an electrical retailer in Soho in London. Photograph: Getty Images.

Caroline Julian is Deputy Director, Head of Policy and Strategy at the thinktank ResPublica.

Paul McMillan
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"We're an easy target": how a Tory manifesto pledge will tear families apart

Under current rules, bringing your foreign spouse to the UK is a luxury reserved for those earning £18,600 a year or more. The Tories want to make it even more exclusive. 

Carolyn Matthew met her partner, George, in South Africa sixteen years ago. She settled down with him, had kids, and lived like a normal family until last year, when they made the fateful decision to move to her hometown in Scotland. Matthew, 55, had elderly parents, and after 30 years away from home she wanted to be close to them. 

But Carolyn nor George - despite consulting a South African immigration lawyer – did not anticipate one huge stumbling block. That is the rule, introduced in 2012, that a British citizen must earn £18,600 a year before a foreign spouse may join them in the UK. 

“It is very dispiriting,” Carolyn said to me on the telephone from Bo’ness, a small town on the Firth of Forth, near Falkirk. “In two weeks, George has got to go back to South Africa.” Carolyn, who worked in corporate complaints, has struggled to find the same kind of work in her hometown. Jobs at the biggest local employer tend to be minimum wage. George, on the other hand, is an engineer – yet cannot work because of his holiday visa. 

To its critics, the minimum income threshold seems nonsensical. It splits up families – including children from parents – and discriminates against those likely to earn lower wages, such as women, ethnic minorities and anyone living outside London and the South East. The Migration Observatory has calculated that roughly half Britain’s working population would not meet the requirement. 

Yet the Conservative party not only wishes to maintain the policy, but hike the threshold. The manifesto stated:  “We will increase the earnings thresholds for people wishing to sponsor migrants for family visas.” 

Initially, the threshold was justified as a means of preventing foreign spouses from relying on the state. But tellingly, the Tory manifesto pledge comes under the heading of “Controlling Immigration”. 

Carolyn points out that because George cannot work while he is visiting her, she must support the two of them for months at a time without turning to state aid. “I don’t claim benefits,” she told me. “That is the last thing I want to do.” If both of them could work “life would be easy”. She believes that if the minimum income threshold is raised any further "it is going to make it a nightmare for everyone".

Stuart McDonald, the SNP MP for Cumbernauld, Kilsyth and Kirkintilloch East, co-sponsored a Westminster Hall debate on the subject earlier this year. While the Tory manifesto pledge is vague, McDonald warns that one option is the highest income threshold suggested in 2012 - £25,700, or more than the median yearly wage in the East Midlands. 

He described the current scheme as “just about the most draconian family visa rules in the world”, and believes a hike could affect more than half of British citizens. 

"Theresa May is forcing people to choose between their families and their homes in the UK - a choice which most people will think utterly unfair and unacceptable,” he said.  

For those a pay rise away from the current threshold, a hike will be demoralising. For Paul McMillan, 25, it is a sign that it’s time to emigrate.

McMillan, a graduate, met his American girlfriend Megan while travelling in 2012 (the couple are pictured above). He could find a job that will allow him to meet the minimum income threshold – if he were not now studying for a medical degree.  Like Matthew, McMillan’s partner has no intention of claiming benefits – in fact, he expects her visa would specifically ban her from doing so. 

Fed up with the hostile attitude to immigrants, and confident of his options elsewhere, McMillan is already planning a career abroad. “I am going to take off in four years,” he told me. 

As for why the Tories want to raise the minimum income threshold, he thinks it’s obvious – to force down immigration numbers. “None of this is about the amount of money we need to earn,” he said. “We’re an easy target for the government.”

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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