Written evidence submitted by Trades Union Congress (EPM0017)

Trades Union Congress response to Consultation on Energy pricing and the future of the Energy Market

Background

The Trades Union Congress (TUC) exists to make the working (EPM0017) world a better place for everyone. We bring together more than 5.5 million working people who make up our 48 member unions. We support unions to grow and thrive, and we stand up for everyone who works for a living.

We welcome the opportunity to comment on the energy price crisis, and the need to transform our energy retail system to better serve energy users (both domestic households and otherwise) and to drive the climate transition.

      The performance of previous policies introduced to stimulate effective competition within the retail energy market, and an assessment of the impact on competition of proposed future regulatory frameworks.

The focus on achieving “competition” within the retail energy market has distracted from achieving positive outcomes: affordable energy, secure energy, good customer service, a rapid climate transition.

Greater competition in the supply market clearly failed to do this. But merely returning to a situation where 5 or 6 companies dominate the supply market will do little to resolve the underlying issue either.

We are in a systemic crisis, and the solutions must be systemic. The focus should be on the desired outcomes, not competition for its own sake. It is questionable whether an artificial market of middlemen companies buying electricity & gas on the wholesale market and billing customers is the best way to achieve affordable energy (for households and industry), secure energy, good customer service, a rapid climate transition. Instead, we are socialising risk at significant cost to the public.

      The future of Bulb and the recovery of public funds and the cost to consumers of other energy supplier failures.

The recent failure of Bulb and other energy supply companies was driven by soaring wholesale gas prices. The public is carrying much of the burden of these higher prices and of energy supply companies going bust – through higher household bills and government stepping in. In parallel a number of UK companies are profiteering from these high gas prices.

Effectively, we are a seeing a transfer of funds from consumers (both household and business) and from the public sector, to companies and states that are extracting gas. UK households that are struggling with soaring bills are making substantial payments towards the soaring profits of North Sea oil & gas companies, as well as Qatar etc.

There is limited ability for the recovery of public funds from overseas entities extracting gas like Qatar.

However, North Sea oil & gas corporations are within reach, and are seeing extreme profits that are not related to investments or risks taken. In fact, government statistics show that the UK’s gas exports have also shot up in the last quarter of 2021, as North Sea companies have maximised their profits by sending gas to Belgium and Netherlands.

The UK government needs to introduce a windfall tax on North Sea companies that made excessive profits from the soaring gas price, to recover public funds and costs to consumers.

      The role of retail market reform in the context of the UKs net zero transition and domestic energy security requirements.

There needs to be a reset to retail energy provision in the UK. In addition, the UK’s energy infrastructure has been hollowed out through years of under-investment (including gas and energy storage, energy networks, nuclear energy, and domestic manufacturing for renewable energy), making domestic energy bills highly susceptible to the volatility of the unregulated global gas market.

Reforms to both energy retail and energy infrastructure investment should focus on ensuring that

      Access to energy is recognised as an essential public good, and is treated as such.

      Everyone has access to affordable and secure energy

      Citizens having a say over their local energy system

      UK energy infrastructure receives the investment it needs to deliver an accelerated zero carbon transition

      The energy retail interaction with households is put to best use in accelerating the climate transition – whether through retrofitting buildings, integrating smart networks with localised storage, influencing behaviour.

      Industry is supported to decarbonise and can access energy at competitive prices

      Energy sector jobs are high quality, secure and not offshored, and a Just Transition is delivered for high carbon workforces

These should be seen as key tests for the future transformation of the UK’s retail energy system.

There is limited evidence that an artificial market is the best way to meet these tests. The TUC’s position is that public ownership will be better able to meet these criteria, as it does in a number of other European countries, and deliver greater transparency, accountability and value for money.

January 2022