The debate about energy prices continues to rumble on here in Britain. Yesterday the six biggest energy companies were summoned to parliament to account for themselves. The energy companies insist that their rising prices are down to green levies on bills. Since this argument is popular with the press, the government doesn’t seem to be contesting it, and Cameron’s promise to run the ‘greenest government ever’ becomes a blacker joke by the day.
There are a lot of things wrong with the debate on energy prices. One thing is the level of complaining about the ‘big six’ energy companies and the monopoly that they apparently hold. But people can choose their supplier. It’s an open market. If we only have six big players it’s because we continue to support them. There are plenty of smaller, cheaper suppliers, offering better customer service and doing more for the environment.
Last week the Prime Minister suggested that people should shop around for a cheaper supplier, and his opponents ridiculed the comment, saying that all the companies were putting up their prices together. This is not the case. Some of the smaller suppliers have implemented smaller price rises or frozen them. My own supplier, Ecotricity, wrote to me a couple of months ago to say they were lowering my bills. If you’re still with one of the big six energy companies, you have no right to complain about them and what they’re doing to your bills.
At the bottom of this, there’s a fairly simple reason why the big six have to keep raising their prices – profit. That’s not a dirty word, it’s a business reality. British Gas has to deliver the goods to shareholders. However much we may like them to swallow the rising price of gas rather than pass it on to consumers, that wouldn’t be a sustainable business model. The profits of the energy companies aren’t excessive, at around 4-5% of the household bill. It wouldn’t take a big move in the wholesale price to wipe out any profit at all if they couldn’t pass it on to customers.
But, and here’s the important bit – not all energy companies have shareholders. Co-operative Energy is owned by its customers, so they made the decision to absorb half the price rise. Their bills will go up 4.5% rather than the 8 or 9% rise being implemented elsewhere. “The profitability level we require is less than British Gas’s at 5%” said the Co-op’s general manager Ramsay Dunning. “We share profits with our customers through annual dividends and we reinvest in the business to sustain the business. And unlike the big energy firms, there’s no money going out to shareholders.”
The Co-op still runs at profit, it just shares it and customer members will get less by way of dividend this year. But you can go further. An energy company can run entirely on a not-for-profit basis, operating at cost in order to keep bills as low as possible for their customers. That’s what Ebico do.
There is a step further still, and that’s to take control of your own energy. That’s already happening up and down the country, through community owned wind farms, energy co-ops and solar buying clubs. This gives people a stake in their own energy supply, drawing a profit if one is made, or taking a saving in their bills when one is not. Unless you live on a small island, the chances are you’re still connected to the grid, so this is not a replacement for bigger energy suppliers. But it reduces household vulnerability to price increases, and engages people in the business of energy.
In the past, this sort of thing was very expensive and beyond the reach of most people. The falling price of solar, and new models of community buying have lowered those barriers to entry. You don’t have to have thousands of pounds to invest. Urban solar clubs are fitting solar panels to tower blocks, supported by residents and lowering bills for those who need it most. Schools are reducing their bills by investing in solar power or CHP boilers, engaging parents and the community in crowd-funding them.
This doesn’t need to be micro-generation either. It’s early days in Britain, but some towns in Germany and in the US and elsewhere have committed to sourcing their own power more locally. That involves community-owned or council-owned power stations, providing local power without the middle-man of a big energy company. That’s not quite so easy to do here, but it’s something that could develop with the right support.
Community energy is happening, and it’s growing. It is one of the more promising developments in an energy landscape that is changing all around us. The government should by all means call in the big six energy companies and give them a talking to. If they were to call in the pioneers of community energy and talk to them too, they might be a bit closer to a solution.
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