Labour wins price battle as E.On cuts tariffs; the war continues

The price of privatisation: This graph charts the rise and rise of utility prices since privatisation. When the Conservative governments of the 1980s and 1990s sold them off, the promise was that prices would fall.

The price of privatisation: This graph charts the rise and rise of utility prices since privatisation. When the Conservative governments of the 1980s and 1990s sold them off, the promise was that prices would fall.

Here’s something many people may have missed: German energy company E.On has cut its standard gas tariff in response to “mounting political pressure”, according to the Telegraph.

Don’t get too excited – the 3.5 per cent reduction is less than one-eighth of the 27 per cent drop in wholesale gas prices over the last 12 months, but it does mean that around two million customers will save £24 on their gas bills if the reduction stays in place for a year. That’s equivalent to two weeks’ worth of usage.

E.On will lose £48 million of what it would have had if it had kept the tariff at its previous level – but if prices stay the same, it will gain £322,285,710 in comparison with its profits before the wholesale price dropped.

In any case, E.On has a lower tariff with an annual bill of £923, more than £200 less than the £1,145 post-cut cost of its standard rate.

So it seems Labour was right to call the cut “pretty measly”.

Some commentators have tried to claim that E.On’s move will signal a price-cutting war between the so-called ‘Big Six’ suppliers, but nearly a week has gone by with no further announcements.

The day after E.On cut prices, a Labour motion for regulator Ofgem to force energy companies to pass on the benefits of wholesale price cuts to their customers was defeated when the Tories and Liberal Democrats voted to support the energy companies rather than their constituents.

Despite voting against a move that would make it compulsory, Tories have hypocritically called on energy firms to pass on such savings willingly, and George Osborne has asked fuel companies to do the same with the prices of petrol and diesel.

There’s one more thing to say about this. Take note of the fact that E.On is a German company. This is what happens when you allow rampant privatisation of national utilities like gas and electricity – foreign companies get a chance to take those utilities away and run them for their profit, rather than for the good of the country.

E.On will make more than £300 million in profit from UK citizens, even after cutting its prices – and that’s on top of the profit it was already making before wholesale prices dropped.

Foreign firms own our energy companies and water suppliers. Foreign healthcare firms now have their claws firmly embedded in the English National Health Service. Hedge funds now own a large part of the Royal Mail as a result of Vince Cable’s botched sham of a sale last year. Who knows what will happen to the UK’s share of Eurostar, if the Coalition succeeds in selling that off before the election?

These travesties were all made possible because the public allowed the Conservative Party into government, giving its members an opportunity to strip the country of any assets that had value.

We must not make that mistake again.

Follow me on Twitter: @MidWalesMike

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5 thoughts on “Labour wins price battle as E.On cuts tariffs; the war continues

  1. Jeffery Davies

    Untill that day a government sais no more and once more takes control of the gas and electric but will they

  2. CDean

    “The price of privatisation: This graph charts the rise and rise of utility prices since privatisation. When the Conservative governments of the 1980s and 1990s sold them off, the promise was that prices would fall.”

    For gas and electricity, consumer prices DID fall, even though wholesale prices increased very slightly (as the graph shows). Prices only started to rise after 2005, when wholesale prices jumped dramatically. Privatisation cannot be blamed for commodity price increases. Government green taxes have also pushed prices up somewhat.

    The energy companies, from the start to the mid 2000s, were another example of a succesful privatisation (alongside British Telecomms and so on – there’s a reason why nobody is calling for renationalisation of the telecommunciations industry). But the way the pro-nationalisation side think, is that rising energy bills are automatically a sign that privatisation has failed. Do falling energy bills in the first 15 years prove the opposite ie that privatisation worked?

    1. Mike Sivier Post author

      Nobody’s calling for renationalisation of the telecoms industry because it should never have been nationalised in the first place; telecoms companies are the only instance in which people can be said to have a genuine choice and that helps to keep prices competitive. That doesn’t happen in the utilities like gas, electricity and water.
      Falling energy bills now show just as strongly that privatisation has failed, as it is only happening because of political pressure created by the electorate.

    1. Mike Sivier Post author

      The short-term price freeze is intended to provide time to consider such moves as you suggest, of course.

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