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Blackouts? The EU’s already freezing

Jonathan Lindsell, 30 September 2013

At the Labour party conference last week, Ed Milliband promised that, if elected in 2015, he would freeze energy prices for 20 months. This promise, worth around £120 per household, prompted cautious optimism from the left, who are focusing on the ‘price of living crisis’, and scorn from much of the centre and right. Critics across the Spectator and Telegraph argued that intervening in the energy market would result in market distortions and higher prices long-term, whilst Ed Davey, the Liberal Democrat Energy Secretary, went a step further and warned that Miliband risked ‘the lights going out’.

One serious cause for concern is EU competition law. Commentators noted that such heavy-handed regulation might be illegal within the single market, since it would limit free enterprise and insulate the consumer from the real cost of energy. There could also be downstream complications, since the ‘Big Six’ energy firms claim they re-invest a large proportion of their profits into environmental and efficiency technology. Rumour has it that shadow energy secretary Caroline Flint actually had to check with a QC before the plan’s announcement; such is the EU’s potential power to control our government.

However, in this case at least, European law should not be a problem. The Council for European Energy Regulators shows 18 EU member states currently regulate their energy markets, including France, Spain, Denmark, Ireland and Belgium.  Although the EU Energy Commissioner, Günther Oettinger, is critical of such practices, it’s difficult to see the German Commissioner blocking the UK from an action in which two-thirds of Europe participate. Some link prices to inflation, others to market indices. The UK’s electricity is currently the fourth highest priced in the EU, its gas, the seventh highest, although this is helped by a relatively low tax.  The OECD shows that the UK is facing the highest rate of energy inflation in the continent.

Although the energy firms protest, many of them are multi-nationals which already tolerate regulation abroad. EDF, properly Électricité de France, is owned by the French state and supplies French customers much cheaper electricity than Brits. Scottish Power is owned by the Spanish giant Iberdrola, which is limited by prices fixed by the Spanish government.

The European Commission has almost conceded the point, noting merely that it would rather support ‘targeted support for the elderly and vulnerable’. Here, then, is one area into which the EU has not yet extended its full power, although the proposed completion of the Services Single Market carries such a threat.

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