Saturday, November 27

If UK energy providers were publicly owned, would we have this crisis? | David hall

Government ministers say they will not bail out poorly managed power supply companies with poor business models. Bankruptcy is a natural part of business and businesses should be allowed to go bankrupt.

But the energy we need for our lives is not an ordinary consumer product; it is a basic need. As a result, although the sector is in the hands of private companies, we hope that our government and local authorities will deal with the problem, because they have an inescapable responsibility to ensure a reliable supply.

The real problem here is the business model of the energy sector as a whole, not that of individual companies. It was split into separate transmission, distribution, generation and supply companies in the 1980s to allow for privatization, and the EU later applied the same formula across Europe.

But it doesn’t work in many different ways. The monopolistic companies on the grid have not invested much in upgrading the renewable energy system, but they have extracted huge amounts in dividends and interest. National Grid shareholders took £ 1.4 billion outside the company in both 2020 and 2021, although it is still below its record of £ 3.2 billion in 2017. Private generators did not invest in renewables until we began to inject public money. Supply companies did not compete and simply enjoyed extracting dividends, until even Theresa May admitted that there had to be a price cap, a humiliating acknowledgment of the market failure.

Would there be a difference in the problem of rising world gas prices if we had public sector energy providers? Wholesale cost pressures would be the same, after all, and public subsidies would still be needed to keep price increases low. But there are some key differences. The job of the public sector is to serve the public interest, so that private shareholders do not take money. Public companies can plan to use surpluses to help cushion events like this. And public sector companies can be much more open with the public, providing more information and responding better to public concerns.

This is not just theoretical. In other major western countries, most households do not have to play the market as in the UK. In Germany, public sector energy providers are more reliable and two thirds of all electricity is purchased from municipally owned energy companies (“Public Utilities”). They also avoid other problems of the UK system. Public Utilities They own and manage the vast majority of distribution companies and have also played a leading role in the development of renewable electricity generation. the Public Utilities of the Munich city hall has been supplying enough renewable energy for the needs of every household in the city since 2016, and by 2025 it will also supply enough for all local industries – your BMW will be built on public renewable energy. In France too two thirds buy Its electricity comes from EdF, majority owned by the French state, which also manages the grids and generates most of the electricity. In Italy, a similar proportion buy from AU, a public company owned by the regulator.

In the US, where states were allowed, but not forced, to liberalize the sale of electricity, the state of California chose the exciting option of a free market in energy supply. This exploded in his face in 2000, when the state’s economy came to a standstill when it was alleged that Enron and other generators had unfairly raised wholesale energy prices. The only place that escaped repeated blackouts it was the city of Los Angeles, where the entire energy system is run by a 100% municipal company, the Los Angeles Department of Water and Power (LADWP). The lights stayed in Hollywood thanks to the public sector. No US state has introduced retail competition since, many retain utilities, and most homes and small businesses use the “default providers” set by the states, rather than playing the market.

So why is the UK population doomed to keep fighting, pretending, at great cost to us, that this is a suitable setting for private business? Even under EU rules, other countries find ways to trust the strength of the public sector. And after Brexit, we can do it much easier, because we are no longer subject to the EU legislation that underpins this discredited and unpopular system. The UK government appears to go to great lengths to support the EU system, rather than recognizing that the public sector is critical to addressing the multiple challenges of the energy system.

Leave a Reply

Your email address will not be published. Required fields are marked *