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Labour's Energy Policy Will Cap Prices For Some, Raise Prices For Others

17/05/2017 16:06

A week after it was leaked, the Labour Party has officially released its manifesto for the upcoming General Election - and it's got a lot to say on energy.

According to Labour, "people don't have the time to shop around" for energy.

Apparently, Jeremy Corbyn thinks it's hard to fit in time to shop around for energy.

Perhaps it's hard when you've got pro-Palestine marches to attend - for most people though, it should be a pretty easy and straightforward process.

But the Labour Party, being what it is, thinks the better option is having the state step in and force prices down.

First, it wants to bring in an emergency price cap of £1,000 for dual fuel bills.

That will certainly cut prices for many customers.

However, for others - those who check for the best deals - it will mean a price increase.

Many energy companies offer fixed energy deals significantly cheaper than £1,000 a year, often through switching websites.

Those deals, if a £1,000 cap is introduced, will disappear or get more expensive, as suppliers will likely keep all deals and prices near the upper end of any regulatory limit.

If the price is capped on energy prices for standard variable tariffs (the type of deal most people paying over £1,000 are on), prices will be raised on those deals currently below £1,000 to compensate.

With prices bunched together at the upper rate of the cap, competition is stifled.

The move will further squeezes the industry's tight profit margins, already under pressure from higher wholesale costs and government-imposed green energy obligations, and therefore risks stymieing investment and forcing suppliers to cut jobs.

It's the same economic flaw that undermines the Conservative Party's half-baked price cap policy.

As well as capping prices, Labour wants to support the creation of publicly owned and "locally accountable" energy companies to compete with private suppliers.

How this will work is anyone's guess.

What exactly being "locally accountable is" means exactly, I'm not sure.

But generally, state-owned companies are not very responsive to consumer needs and generally have abysmal customer service.

On the other hand, it's possible the such state-owned energy providers will be cheaper (being subsidised by you, the taxpayer, of course).

Yet all the talk of saving consumers money seems to go out the window when it comes to energy sources.

The party has pledged to ensure that 60% of all the UK's energy comes from zero-carbon or renewable sources by 2030.

Renewables are still being developed and are making great strides, so there is potential for renewable energy to become massively cheaper in the next few years.

But as it currently stands, renewable sources end up costing consumers more.

Indeed, recent price rises have been widely blamed on green policies.

For instance, a paper by the Committee on Climate Change found that in 2016, on average, 9% of dual fuel household's bills were due to such green policies. That's around £105 extra per year.

Worst of all for consumer prices, though, is Labour's pledge to ban fracking.

The revolutionary technology has opened up massive new sources of fuel in the United States and led to plummeting energy prices across the pond.

We could have the same here. Fracking in the UK could massively increase the supply of gas. And, as supply increases, prices go down.

The Labour Party, however, seems to disagree.

Instead, they hope to ban the practice and potentially cut off consumers from potentially massive drops in fuel prices in the future.

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