Energy prices are back on the agenda – how will the major party leaders respond?

For the first time since Ed Miliband’s 2013 intervention, the question of energy bills is back, and must be addressed by the Tories and Labour.

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When Ed Miliband stood up at the Labour Party Conference in Brighton in 2013 and said that, if elected, his Labour government would “freeze gas and electricity prices until the start of 2017”, the announcement put energy bills at the centre of the political agenda.

It had a dramatic effect not only because it spoke to a big issue for many households (a survey from the same month showed that more than a third of people were concerned about how they were going to pay their bills that winter), but also because it pledged a degree of government intervention that was, at the time, politically daring.

The pledge illustrated better than any other policy his Rooseveltian view that the state had to be more active in markets if consumers were to get a fair deal.

The issue remained at the top of the agenda for six months. That proved to be the high watermark of public debate on the issue. This was partly due to mild winters and falling wholesale costs – which meant less focus on the high cost of energy bills – but also because the government and the regulators kicked the issue into touch by asking the Competition and Markets Authority (CMA) to conduct a two-year investigation.

That hiatus ended today, as Ofgem announced it would accept the changes that the CMA suggested a few weeks ago. The fierce response shows that energy prices are now firmly back on the agenda.

They will stay at the top of the agenda unless and until Ofgem’s reforms fix the problem of high energy prices – which, sadly, seems unlikely. The CMA and Ofgem favour measures they think will get more people to switch suppliers and thus reduce their bills.

Previous attempts along these lines have succeeded at encouraging switching among richer customers, but have struggled to change the behaviour of the poorest. Unless this new attempt is more successful, energy prices will remain a hot political issue – potentially exacerbated by a return to colder winters.

We cannot yet know what the Conservative government will do if that happens – but Theresa May’s recent rhetoric gives some reason for hope. The only speech of her leadership campaign indicated that she might be prepared to make tough state interventions in private markets:

“If there is evidence that the big utility firms and the retail banks are abusing their roles in highly-consolidated markets, we shouldn't just complain about it, we shouldn’t say it’s too difficult, we should do something about it.”

On the Labour side, we are likely to see a renewed focus on energy prices. In recent months, Labour has instead been talking more about democratising energy and spreading power and responsibility.

This is understandable, given that much of the more interesting work in this area is being done at a local authority level, such as municipal energy companies being set up in Bristol and Nottingham (as recommended by IPPR). But, if and when Ofgem’s reforms don’t work, Labour will have to return to the question of how to sort prices.

We should not be surprised to see another conference speech from a major party leader promising to reduce energy bills.

Byron Orme is a research fellow at the Institute for Public Policy Research (IPPR), specialising in energy issues.

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