Ed Miliband's pledge to freeze gas and electricity until 2017 has sparked warnings from energy companies that they could go bust by having to survive on "unsustainable loss-making" profits and the country could suffer from energy shortages.
The Labour leader used his address at his party's annual conference to announce that a Labour government would immediately freeze prices if it wins power in the 2015 general election, with households potentially saving £120 a year and an average business saving £1,800.
“Your bills will be frozen, benefiting millions of families and millions of businesses. That's what I mean by a Government that fights for you; that's what I mean when I say: Britain can do better than this," he said.
“The companies won't like it because it will cost them money. But they have been overcharging people for too long because the market doesn't work And we need to press the reset button.”
Miliband's pledge comes amid mounting anger about energy bills continuing to soar. Paul Massara, chief executive of npower, suggested in July that government green energy policies were forcing suppliers to put up prices.
A Miliband aide told the Huffington Post UK: "The Tories don't like price control but it'll be difficult for them not to like this price control."
Another said that rising energy bills were the "biggest issue" that came up in party focus groups after immigration.
Former Labour leader Lord Kinnock, who told the Huffington Post UK that ex-spin doctor Damian McBride was "repellant", cited Miliband's "commitment to fair pricing" in praising the Labour leader's "brilliant" speech.
However, energy firms have warned that Miliband's proposal could force them to shoulder an "unsustainable" financial burden.
Energy UK, which represents British energy firms, warned that the pledge could lead to job losses and increased the chance of energy shortages.
“Freezing the bill, may be superficially attractive, but it will also freeze the money to build and renew power stations, freeze the jobs and livelihoods of the 600,000 plus people dependent on the energy industry and make the prospect of energy shortages a reality, pushing up the prices for everyone," the body said.
“No other industry is facing the investment challenge of the energy sector. Last year alone the energy industry invested £11.6bn – the equivalent of building the Olympic stadium twenty times over. We need to invest £110bn over the next ten years to build and renew the power stations, the wires and the pipes everyone in the country needs to keep the lights on, our homes warm and to supply the power for British business to compete, to recover and to grow.
In response to the statement, Scottish and Southern Energy (SSE) said the price freezes would lead to "unsustainable loss-making retail businesses".
"The Labour Party should put policy costs into general taxation, taking them off energy bills," the firm added.
RWE npower CEO Paul Massara said the pledge would only be achievable if energy firms stopped investing in building new power stations.
"If the Labour Party can commit to reducing policy costs on household energy bills, stopping the smart meter roll-out, preventing commodity cost increases and accept that there won't be any investment in new powerstations and infrastructure, then we could freeze our prices. But will this make things better for Britain?," he said.
The pledge was prepared as one of Miliband's major announcements, with banners greeting delegates on exiting the hall showing off the commitment to freeze bills until 2017 along with online publicity as shown in this audioboo recording.
However, further business groups expressed concern about the burden such a promise would place on the energy industry.
The British Chambers of Commerce said they were "concerned about impact Miliband's proposal would have on investment in our ramshackle energy infrastructure."
John Cridland, director-general of the CBI, said: "The proposed energy price freeze will deter much-needed investment and is at odds with Labour's pledge to decarbonise the economy and create a million green jobs."
Meanwhile, Graeme Leach, chief economist at the Institute of Directors, said: “We should think very, very carefully before piling more distortion on an already grossly distorted energy market."
"Price controls only add greater uncertainty to companies who we need to take the financial risks of energy investment.”
Tory chairman Grant Shapps said that despite Miliband's pledge, Labour's energy policies would still increase household bills due to their commitment to a 2030 decarbonisation target.
"While we’re forcing energy companies to put their customers on their cheapest tariffs, Ed Miliband would introduce an energy policy that would add £125 to the typical household’s bill," he said.
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