Seems like an age ago doesn’t it? But it was, actually, only two weeks ago that I sat in the Commons Chamber to hear David Cameron tell us in response to a fairly random PM’s Question that ‘we will be legislating so that Energy Companies have to give the lowest tariff to their customers’. By any measure, this was quite a startling announcement: on the face of it, it looked as if he was announcing the end of the Electricity Retail Market.
After all, if energy companies really DO have to give the lowest tariff (presumably the lowest tariff they offer) to their customers – I only report what was said here – then it doesn’t take a mathematical genius to work out that companies will then offer only one tariff. This tariff will of course be an amalgam of existing tariffs, and will, to avoid a haemorrhaging of switching almost certainly be identical to all other companies’ ‘lowest tariffs’ in even smarter lockstep than we have seen with the recent announcements of near-identical price rises by the big energy companies.
And that, overall, would be the tariff on which those big companies could make a living. So perhaps the lowest, but also at the same time the highest. Not to mention the awkwardness that might ensue if you wanted – say – a ‘green’ tariff, but the ‘lowest’ one was shoved onto your plate notwithstanding. In reality, we would move into the sort of world that international airlines inhabited in the days of international fare fixing – competition, such as it was, took place in the realm of free cuddly toys and presentation crystal ‘souvenir flight glasses, rather than price.
The fact that this all ‘unravelled’ over the next couple of days is, therefore hardly surprising: it wasn’t ‘ravelled’ in the first place. It simply could not have been done, and in quick succession ministers told us so in so many words: Energy Minister John Hayes had the look of a slumbering dog who had been woken up suddenly by a gun going off in answering an urgent question the next day, clearly having been in ignorance of the ‘initiative’ the day before. His take:
‘Following the Prime Minister’s announcement yesterday, I am pleased to confirm that we will be bringing forward legislation to help energy consumers to get the best deal … we have plans to improve competition and simplify tariffs in the retail market process’.
DECC Secretary of State Ed Davey, stuck even further to a different line in stating almost immediately that Energy Companies should ‘offer’ the lowest tariff, a promise he had already pre-sold months earlier at the infamous ‘Energy Summit’ of February.
And then the Prime Minister countermanded both of them by insisting, from Brussels that ‘we are going to use forthcoming legislation, the Energy Bill coming up this year so we make sure….customers get the lowest tariff’.
And this is, sort of, where it stands. Officials are scurrying around DECC, trying to work out how this plan can be incorporated into legislation that had not a word about tariffs in any of its previous iterations, to the extent that even the ‘long title’ of the Draft Bill nowhere mentions tariffs, unless you count ‘ and connected purposes’ as meaning ‘tariffs (cheapest).’ Meanwhile, within a few days the OFGEM proposals to narrow tariff bands down to four (well, more like about twelve if you count all the variables) came out, an occurrence that must have been known to No. 10 before it happened.
So what sense can we make of all this? It is an energy omnishambles, of that there is no doubt, but that thought is now…well, so last week. What does it all actually mean as far as energy policy is concerned? I had first thought that the announcement was simply a slip of the tongue – that the perhaps the PM really meant to say ‘offer’ when he actually said ‘give’, but that would not have been news at all and had already, in effect been done. And the PM stuck almost to his formulation a few days later.
So he meant it. And I understand that, in the weeks preceding the announcement , DECC had been in ‘dialogue’ with No 10 about options on tariff structure, consulting with Ofgem as their enquiry report crystallised, and then in turn offering possible packages to No 10 . As in all of these things, such policy offers come in plated form: the barmy option is at the side of the plate with the main sensible dishes in the middle. Something like ‘giving’ the lowest tariff was, I understand, one of the outriding ‘barmy’ options offered, together with a substantial downside warning. DECC’s main surprise, therefore was that No 10 had apparently taken up and run with the ‘barmy’ option, when they thought everyone understood what the rules were as far as options were concerned.
And it certainly was the case that No 10 wanted to run an intervention in energy. They wanted, I think, to signal that there really were three players in the debate, not just the territory staked out between relatively sensible, renewable and low carbon policy advocacy from DECC, and full-blooded gung-ho go for gas and sod the climate consequences line of Treasury. What better than for No 10 to position itself as the intermediary, on the side of prices, consumers and ‘energy realism’?
It is just unfortunate that currently, none of the No 10 advisers and machine actually seems to know anything about energy or low carbon policy. It always was the case in the last Labour government that both at No 10 and No 11 there was a special adviser who knew what they were doing: Geoffrey Norris, for example at No 10, and certainly Michael Jacobs at No 11. What is, I think alarming is that no-one spotted this as self-evidently lame before allowing the PM to launch it. One of the consequences will be, I think, that the No 10 ‘third position’ has more or less blown up on the launching pad, and the scrap between an underpowered DECC and an overweening Treasury for the soul of energy policy will continue anew. At the same time, the ability of No 10 now to pull everyone together will have diminished amid the raised eyebrows and private sniggering that has accompanied such a ham-fisted and hapless initiative.