At the Labour party conference last year Ed Miliband promised to freeze energy prices for 20 months from May 2015 until the end of 2017. This may have looked like a good wheeze at the time but the consequences of this foolish pledge are now becoming clear.
Yesterday Ofgem called out the energy companies on the apparent anomaly of falling wholesale energy prices not flowing through to lower consumer prices. It is not at all surprising. If you were running an energy company with variable costs and the prospect of a 20 month price freeze you might be forgiven for not giving up your margin now.
You only have to look at what is happening in Iraq overnight to see that the energy companies might be unwise to let their consumer prices drop whilst Miliband’s price freeze policy is in place.
The most significant phrase in Ofgem’s press release yesterday was “In a competitive market …”. The trouble is that since Ed Miliband’s intervention on energy prices the market has got less competitive. This market is already heavily regulated and susceptible to government policy decisions. Miliband’s promise to freeze prices next year overhangs the market and the political risk is not going away for the energy companies until the election is out of the way. So Miliband has got his energy price freeze a year early and it is hurting consumers.