Ofgem’s energy price cap is a sticking plaster on a broken industry

While £75 off bills is a welcome short-term fix, our energy industry desperately needs an overhaul. Democratic public ownership, where customers and workers have a say and a stake in where their energy comes from, is the only way to ensure a "fair" tariff.


Ofgem have put forward their proposals for an energy cap – while they have been brave in setting the cap lower than expected, the savings are still a sticking plaster on a deeper problem with the energy industry.

The energy sector is dominated by big business: six vertically integrated companies own the entire value chain from power station to customer, and even the wires and pipes that bring electricity and gas to our homes were sold off and are now high demand commodities to buy and sell on the global infrastructure investment markets.

The result is a system which is overpriced, over-complicated and unaccountable. A Competition and Markets Authority investigation into the industry in 2016 estimated that customers are overpaying for energy by £1.2bn every year. These customers pay the price when bills go up in response to rising wholesale costs, but are slow to come down when wholesale costs reduce.

And just as customers are held hostage by the needs of private shareholders, government is hamstrung by energy companies putting private profit over public policy. This makes it harder to create a fair system which protects the environment and the customer from harm.

The fact that Theresa May has pushed Labour’s price cap proposals show some recognition across the political spectrum that our energy market is failing to deliver the right outcomes. Too many households are stuck having to make a difficult choice each winter between heating and eating, while energy bosses take home huge salaries and pay out generous dividends to investors. Last year, for example, the British Gas chief took home a 40% pay rise – his £4.15 million package would have been enough to pay heating and lighting bills for almost 4,000 customers.

While the £75 that the average customer is set to save under the proposed price cap is welcome, it is akin to bread and circuses.  Unless customers get a voice and ownership stake in where their energy comes from, the system will remain skewed in favour of private, profit-making interests.

The Co-operative Party’s ‘Democratic Public Ownership for the 21st Century’ puts forward ideas on ways to democratise the energy industry. A new generation of community, co-operative and municipal renewables would give everyone a voice and a stake in the UK’s energy mix. Grids owned by customers and employees would replace private monopolies with democratic organisations where everyone can share in their success. And co-operative, community and municipal energy suppliers should provide a fair and transparent alternative to the market dominance of the six incumbent energy giants.

Ofgem should be lauded for taking the first step on the road to a fairer energy system – but they should be clear that this is only a first, remedial step. A full transition to a democratic, publicly owned energy system is the only way to ensure customers pay a “fair” tariff.