OECD Brands Labour’s Energy Price Fixing Pledge as Economically Unsound

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By Lianna Brinded | December 10, 2013 12:46 AM EST

Secretary-General of the Organisation for Economic Co-operation and Development (OECD) Angel Gurria (Photo: Reuters)

The Organisation for Economic Co-operation and Development's leader has slammed the Labour Party's pledge, to freeze energy prices until 2017, if the UK's opposition group wins the general election in two years.

According to an BBC Panorama interview, which is will broadcast on 9 December evening, the OECD's secretary-general Ángel Gurría criticises the political party's voter-friendly policy by claiming that it will hurt Britain's companies and future economic development.

"If you freeze the price of energy and the international price of energy rises, it means there's going to be a very big difference to pay," said Gurría.

"Who's going to pay the difference? Well, are you going to ask the investors to take the difference? Well, you know they'll probably go bankrupt.

"How are you going to get people to come in and invest to get their money back in 30, 40 years' time, when you are saying there's going to be a freeze? I think this is simply not consistent, not economically objective."

During the same episode of Panorama, one of Britain's 'Big Six' energy companies is also set to reject price fixing pledges as unwise.

"We've had lots of speculation and, quite frankly, wild talk without people looking at the facts - and the facts are that we lost money in the retail business in 2009, 2010 and 2011," said npower's chief executive, Paul Massara.

"In [2012] we made about a 3.5% margin. That is hardly excessive. Unfortunately, the political dialogue right now means that with rising bills they want someone to blame and the suppliers are the easiest thing to shoot at.

"The amount of spare generation that is around at the peak day has gone down from about 15% to, this winter, we'll be about 5%, and I think next winter will be even smaller," he said. "So will we get through this winter? Yes. Will we get through next winter? I don't know."

Political Football

In September, opposition leader Ed Miliband pledged to freeze energy prices until 2017, if the Labour Party wins the general election in two years.

Three months later, the coalition government pledged to cut energy bills by £50 a year, via a series of measures.

Meanwhile, a number of the UK's 'Big Six' energy companies stated an intention to cut household bills or not raise prices until 2015.

Npower said it would not raise prices any more until spring 2015, unless wholesale costs go up, and EDF promised to adhere to the same pledge.

SSE and Centrica have said they will also pass on cost reductions.

British Gas said it was dropping household gas and electricity prices by an average of 3.2% and that these price reductions would take effect from 1 January.

SSE said it would cut household bills by 4% this winter.

E.on said today that UK customers could face another hike in household bills despite the group unveiling increased gas and electricity prices one day after the Autumn Statement.

Big Energy Boss Bonuses

At the beginning of November, Labour's energy minister Caroline Flint called for all energy bosses to follow Centrica's chief Sam Laidlaw's footsteps and forgo their bonuses amid the energy price hike row.

Laidlaw's total pay package for 2012 stood at £4.96m (€5.86m, $7.92m). This amount includes a £2.6m "long term incentives" bonus scheme.

Laidlaw said, in a debate on "Business Trust" at the CBI conference on 4 November, that he has "already decided to withdraw his consideration for a bonus by the remuneration committee", amid the row over how Britain's energy companies continually raise prices while ordinary Britons struggle to make ends meet.

Although, labelled Laidlaw's bonus slash as a "gimmick," he later announced one month later that his bonus will be slashed because of the company's poor customer service.  

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