Reduce and remove government intervention, says House of Lords report

“Constant intervention by successive governments in the electricity sector has led to an opaque, complicated and uncompetitive market that fails to deliver low-cost and secure electricity.”

These are the findings of the UK House of Lords’ Economic Affairs Committee report entitled The Price of Power: Reforming the Electricity Market.

The report has identified two key failures in the current market and they are the narrow amount of spare capacity, particularly in the winter months, and the rising cost of electricity to consumers and business.

The report suggests that security of supply should always be the ‘first and most important consideration in energy policy’ and must take priority over affordability and decarbonisation.

According to Lord Hollick, chairman of the Economic Affairs Committee, “Poorly-designed government interventions, in pursuit of decarbonisation, have put unnecessary pressure on the electricity supply and left consumers and industry paying too high a price.” He said that Britain’s high industrial electricity prices have led some energy-intensive industries to relocate abroad and that low-carbon policies are a factor in high prices.

The report has recommended that Government intervention in the market should be reduced and ultimately removed and that an Energy Commission should be established ‘to provide greater scrutiny of energy policy decisions’.

Industrial electricity prices in Britain, claims the report, are among the highest in Europe and while the Government has compensated some energy-intensive industries, decarbonisation still accounts for an estimated 13% of electricity costs after compensation.

Gareth Stace, director, UK Steel commented, “As the report rightly highlights poorly-designed government interventions over a number of years have left industries like steel paying some of the highest electricity costs in Europe (£1 million per week more than competitors in Germany), fuelling the disparity steel producers face when competing in a global market place.

“Government now needs to fully and finally tackle head on the uncompetitive electricity and policy costs that have historically hindered the growth of steel producers to allow companies to invest and grow.”