Energy

Iain Conn, who will succeed Sam Laidlaw as chief executive of Centrica, would have been a dead cert for the top job at his current employer, BP, were it not for the Deepwater Horizon oil rig disaster in the Gulf of Mexico in April 2010. The subsequent PR fiasco terminated the BP career of the then chief executive Tony Hayward — who seemed crushed by the episode, but recovered to make a double fortune at Genel Energy and Glencore. Had Hayward served a full term, Conn (BP’s head of refining and marketing) would almost certainly have followed him. As it was, BP found it more politic to appoint an American, Bob Dudley, to repair relations in Washington while simultaneously arm-wrestling with the Kremlin-connected oligarchs who were BP’s co-investors in Russia.

The government's announcement today that fracking will not take place in National Parks and Areas of Outstanding Natural Beauty save ‘in exceptional circumstances and where it can be demonstrated they are in the public interest’ is a welcome and sensible move. It may indeed be in the national interest to exploit a new source of energy, but these landscapes are specially protected in the national interest, too. The government states that countryside ‘adjacent’ to these protected areas will also be covered by the policy. That will be a relief to the residents of Wisborough Green and Kirdford in my constituency, two villages in beautiful countryside close to the South Downs National Park which have faced the prospect of drilling.

‘Iraq turmoil sends crude oil prices to nine-month high’ is the sort of headline that used to send shivers down economists’ spines, especially if it appeared on the same page as ‘Europe faces gas shortage as Russia cuts Ukraine supply’. How worried should we be at the current turn of events in the energy world? Since Iraq’s new insurgency kicked off, the price of a barrel of Brent Crude has blipped from $105 to $115 — nothing to panic about — but the more pessimistic analysts are talking of a further $30 rise if Iraqi oil flows of 3.6 million barrels a day (representing about 4 per cent of global demand) are seriously disrupted.

In a healthy, competitive market, prices go down when costs go down. Not in the energy market. As Ofgem announced this week, the wholesale cost of gas and electricity has dropped by more than a third since this time last year, but our bills have increased. Wholesale power is the cheapest it's been since 2010, so why haven’t the savings been passed onto consumers? The energy industry usually blames price rises on increasing wholesale costs, so the announcement those costs are going down is tricky for them. This week Energy UK, the Big Six trade body, said: ‘Wholesale energy is just one of a number of costs outside of an energy company’s control, which make up a household bill’.

Here's something that you won't read often in The Spectator: Ed Miliband is right. Britain's energy market is broken, and a small number of big companies have the upper hand against consumers. But the solution, of course, isn't state intervention – it's more competition. That's why The Spectator is making its own foray into the market. Under new rules put in place by Ofgem, energy companies are being told to simplify their tariffs. But you can also get a special rate negotiated by a collective of consumers, and our plan is to get enough Spectator readers (and anyone else who wants a good deal) together and then negotiate – something that will be done by a start-up company called the Big Deal on Energy.

[audioplayer src="http://traffic.libsyn.com/spectator/TheViewFrom22_3_April_2014_v4.mp3" title="Matt Ridley and Fraser Nelson discuss the IPCC's latest report" startat=67] Listen [/audioplayer]Advocates against global warming often frame the issue in terms of helping the poor. ‘You’re right, people dying thanks to climate change is some way off...’ ran one fairly typical advert recently, ‘about 5,000 miles, give or take.’ Indeed, the United Nations agrees that, looking toward the future, climate change ‘harms the poor first and worst’. And the logic stacks up: the poorer you are, the less able you’ll be to afford the resources to adapt to a changing climate. However, climate policies also have a cost, and these predominantly hurt the poor.

I believe in free markets, but there are some markets that don't work properly.  Where competition has not prevailed in favour of the consumer. Where customers are too weak, companies too strong and choice too constrained. One such market is energy.  Just six companies control 98% of household gas and electricity supply.  British Gas accounts for over 70% of all gas customers. In energy the regional monopolies that existed before privatisation largely continue to this day.  If you’re reading this and live in London I’d be willing to bet that for three out of four of you EDF is your electricity provider.  If you’re in Cardiff I bet it’s SSE. And if I'm right i'd also be willing to bet you've never switched and you're paying too much.