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Turning up the heat on British politics

Wednesday, December 04, 2013 - 02:11

Dec 04 - The rising cost of energy is the new political battleground in Britain. But as Ivor Bennett reports the companies involved may not be the villains they are being made out to be.

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The heat is on in Britain, in more ways than one. Rising gas and electricity bills have made energy the new political battleground ahead of the next general election. Both government and opposition are fighting for the role of people's champion. With providers playing the villain. Secretary of State for energy Ed Davey. SOUNDBITE (English) ED DAVEY, SECRETARY OF STATE FOR ENERGY AND CLIMATE CHANGE, SAYING: "What we want to do is, through competition policies, is put pressure on the big six, to make them compete, that is another way of bearing down on energy bills." The so-called big six supply 98 percent of British homes. Politicians say the lack of competition is leading to inflated prices - accusing the companies of operating like a cartel. But energy consultant David Cox says competition's not the problem. SOUNDBITE (English) DAVID COX, DIRECTOR, LONDON ENERGY CONSULTING, SAYING: "The problem is that they have a very similar cost base. So they're buying wholesale energy at similar prices, they're paying the same transportation, transmission and distribution charges as everyone else, and they've got similar cost base within the company and similar profit margins, so their tariffs are going to be much the same." The average annual bill for gas and electricity in Britain is well over 1200 pounds. What was a simmering issue boiled over when companies announced price hikes of 9 percent next year. That's since been reduced through government taxes, but bills are still increasing a lot faster than the rate of inflation. Are such hikes really necessary? SOUNDBITE (English) DAVID COX, DIRECTOR, LONDON ENERGY CONSULTING, SAYING: "Yes they are. Companies need to recover their costs. They're also investing a lot in this new low-carbon future. So I think yes they are necessary. When you look at their P&Ls, you know you see that they're generally making 4-5% profit margin. Not a huge amount compared with many other big companies." There are worries the energy debate could damage investment signals after opposition suggestions of a price freeze. While it did ignite the debate, the plan has its problems. In Spain for example, utility bills have been capped for several years, building up a huge tariff deficit. So far it's 26 billion euros. which will have to be repaid eventually, whether consumers like it or not.

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Turning up the heat on British politics

Wednesday, December 04, 2013 - 02:11