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.