In early July the Competition and Markets Authority (CMA) published the initial findings of Roger Witcomb’s investigation into the UK energy markets. With the average UK household currently spending around £1,200 on energy each year, energy prices have turned up the heat on politicians.
The Witcomb findings suggest that we need to make the energy market work better for consumers. But do we really believe that after a 75% rise in electricity and 125% on gas prices over the past decade we can simply tweak the medicine of market regulation in order to make those markets work better? I would beg to differ.
Attempts to regulate competition are clearly failing. If we look at energy switch schemes they fall down for a number of reasons. Whilst councils have worked hard to enable their residents to switch to cheaper tariffs, this process is often dogged by its inherent weaknesses; older or poorer people who may not have the confidence, or the means, to make that switch in the first place, and secondly there is a need to switch suppliers roughly every 12 months in order to make on-going savings.
So we are back to the issue of can we ever make competition in the UK energy markets work? The issue with UK energy markets is that they all sell the same homogenous products with little differentiation. Consumers faced with little choice are forced into a ‘sellers’ market rather than a ‘buyers’ market because of a lack of a realistic alternative. It is at this point we should recognise the role of local authorities. APSE has been working with over 50 councils over the past two years to develop APSE Energy; a progressive collaboration between councils who are keen to rebalance energy markets and in doing so make some much needed extra cash for councils.
The development of ethical alternatives to the big six energy companies is emerging through a number of council run energy schemes; from solar schemes through to tidal energy, from biomass boilers to ground-source heat pumps, councils are using innovative ways to produce their own energy and pass on savings to both local residents and to the public purse.
There is an alternative to the big six through municipal energy schemes and an opportunity for a triple gain; first of all by providing ethical competition against the big six in terms of energy supply; secondly by addressing fuel poverty through energy efficiency schemes making savings for residents and councils and; thirdly by providing an income stream to our local council coffers for the surplus energy produced. It’s a viable local alternative to the failed attempts at market regulation.