Shadow energy secretary Caroline Flint speaks at the Labour conference. Photograph: Getty Images.
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Labour wins race to claim credit for energy market inquiry

While ministers were nowhere to be seen, Caroline Flint was on the Daybreak sofa.

After SSE's announcement yesterday that it will freeze energy prices until 2016 (which gifted Ed Miliband a winning line of attack for PMQs), this morning has brought another opportunity for Labour to argue that where it leads, others follow. Ofgem has revealed that it has ordered a full market inquiry into the big six providers to "consider once and for all whether there are further barriers to effective competition", a move that could ultimately lead to the break-up of suppliers. The investigation will be conducted by the Competition and Markets Authority (CMA) and is expected to last for 18 months. 

Here's the statement from Ofgem chief executive Dermot Nolan: "Ofgem believes a referral offers the opportunity to once and for all clear the air and decide if there are any further barriers which are preventing competition from bearing down as hard as possible on prices.

"I want to make sure that consumers are put at the heart of this market, so we will continue to take action to help consumers. This includes from today putting the industry on notice that any new serious breach of the rules which comes to light will be likely to attract a higher penalty from Ofgem."

Both Labour and the coalition will fight to take credit for this decision. It was Miliband who so prominently warned of a "broken market" in his conference speech last year, which prompted David Cameron to order a review of competition. In a letter leaked last month, Energy Secretary Ed Davey urged Ofgem to "think radically" as it considered whether to refer the sector for a full CMA probe. That is precisely what it has now done. But while both sides will now seek to claim victory, there was one clear winner this morning. 

While ministers were nowhere to be seen, Caroline Flint was on the Daybreak sofa hailing the decision as a vindication of Labour's radical stance. "It's a really frank admission that Ofgem hasn't been able to ensure that these companies work in a competitive way, it's an admission of failure, to be honest," she said. "I've been on this sofa the last couple of years saying that there's something seriously wrong here. It's why six months ago, pretty much six months to today, Ed Miliband announced that we would have a price freeze across the energy market and reform it fundamentally for the future." It was an hour and a half later that the coalition finally sprung to life with the Department of Energy and Climate Change issuing Davey's response

For Labour, the energy price freeze remains a valuable weapon. One shadow minister told me yesterday that private polling shows it remains the party's most popular policy, with high ratings from Conservative and UKIP voters even when Labour is explicitly referred to. While the government's decision to cut green levies and to ensure a full competition inquiry means it has a better defence against Miliband, he can still argue that more radical and faster action is needed. So long as bills continue to rise, the promise of a freeze will remain politically potent. But as I wrote yesterday, the refocus on this policy is a reminder that Miliband hasn't enjoyed a similar hit since. If he is to settle Labour nerves, he'll need to come up with a sequel soon. 

George Eaton is political editor of the New Statesman.

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Brexit will hike energy prices - progressive campaigners should seize the opportunity

Winter is Coming. 

Friday 24th June 2016 was a beautiful day. Blue sky and highs of 22 degrees greeted Londoners as they awoke to the news that Britain had voted to leave the EU.  

Yet the sunny weather was at odds with the mood of the capital, which was largely in favour of Remain. And even more so with the prospect of an expensive, uncertain and potentially dirty energy future. 

For not only are prominent members of the Leave leadership well known climate sceptics - with Boris Johnson playing down human impact upon the weather, Nigel Farage admitting he doesn’t “have a clue” about global warming, and Owen Paterson advocating scrapping the Climate Change Act altogether - but Brexit looks set to harm more than just our plans to reduce emissions.

Far from delivering the Leave campaign’s promise of a cheaper and more secure energy supply, it is likely that the referendum’s outcome will cause bills to rise and investment in new infrastructure to delay -  regardless of whether or not we opt to stay within Europe’s internal energy market.

Here’s why: 

1. Rising cost of imports

With the UK importing around 50% of our gas supply, any fall in the value of sterling are likely to push up the wholesale price of fuel and drive up charges - offsetting Boris Johnson’s promise to remove VAT on energy bills.

2. Less funding for energy development

Pulling out of the EU will also require us to give up valuable funding. According to a Chatham House report, not only was the UK set to receive €1.9bn for climate change adaptation and risk prevention, but €1.6bn had also been earmarked to support the transition to a low carbon economy.

3.  Investment uncertainty & capital flight

EU countries currently account for over half of all foreign direct investment in UK energy infrastructure. And while the chairman of EDF energy, the French state giant that is building the planned nuclear plant at Hinkley Point, has said Brexit would have “no impact” on the project’s future, Angus Brendan MacNeil, chair of the energy and climate select committee, believes last week’s vote undermines all such certainty; “anything could happen”, he says.

4. Compromised security

According to a report by the Institute for European Environmental Policy (the IEEP), an independent UK stands less chance of securing favourable bilateral deals with non-EU countries. A situation that carries particular weight with regard to Russia, from whom the UK receives 16% of its energy imports.

5. A divided energy supply

Brexiteers have argued that leaving the EU will strengthen our indigenous energy sources. And is a belief supported by some industry officials: “leaving the EU could ultimately signal a more prosperous future for the UK North Sea”, said Peter Searle of Airswift, the global energy workforce provider, last Friday.

However, not only is North Sea oil and gas already a mature energy arena, but the renewed prospect of Scottish independence could yet throw the above optimism into free fall, with Scotland expected to secure the lion’s share of UK offshore reserves. On top of this, the prospect for protecting the UK’s nascent renewable industry is also looking rocky. “Dreadful” was the word Natalie Bennett used to describe the Conservative’s current record on green policy, while a special government audit committee agreed that UK environment policy was likely to be better off within the EU than without.

The Brexiteer’s promise to deliver, in Andrea Leadsom’s words, the “freedom to keep bills down”, thus looks likely to inflict financial pain on those least able to pay. And consumers could start to feel the effects by the Autumn, when the cold weather closes in and the Conservatives, perhaps appropriately, plan to begin Brexit negotiations in earnest.

Those pressing for full withdrawal from EU ties and trade, may write off price hikes as short term pain for long term gain. While those wishing to protect our place within EU markets may seize on them, as they did during referendum campaign, as an argument to maintain the status quo. Conservative secretary of state for energy and climate change, Amber Rudd, has already warned that leaving the internal energy market could cause energy costs “to rocket by at least half a billion pounds a year”.

But progressive forces might be able to use arguments on energy to do even more than this - to set out the case for an approach to energy policy in which economics is not automatically set against ideals.

Technological innovation could help. HSBC has predicted that plans for additional interconnectors to the continent and Ireland could lower the wholesale market price for baseload electricity by as much as 7% - a physical example of just how linked our international interests are. 

Closer to home, projects that prioritise reducing emission through tackling energy poverty -  from energy efficiency schemes to campaigns for publicly owned energy companies - may provide a means of helping heal the some of the deeper divides that the referendum campaign has exposed.

If the failure of Remain shows anything, it’s that economic arguments alone will not always win the day and that a sense of justice – or injustice – is still equally powerful. Luckily, if played right, the debate over energy and the environment might yet be able to win on both.

 

India Bourke is the New Statesman's editorial assistant.