I have spoken to Ofgem’s chief executive, Dermot Nolan. He is worried because the Labour party wants to get rid of Ofgem, even though it is doing this fine job and talking to energy companies. Ofgem is worried that Labour wants to undermine the regulatory system. Interestingly, who set up Ofgem? The Labour party. Who reformed Ofgem just a few years ago to make it more effective? The Leader of the Opposition. There is no consistency or coherence about anything on energy policy from Labour.
Let us consider some more basic questions—Labour Members will have to answer them at some stage if they are to be vaguely credible. If the regulation forces
energy bills to drop immediately when day-ahead wholesale prices drop, what will that mean when wholesale prices rise? Will the regulation be exactly same both ways? If regulation forces retail prices to track wholesale prices, how often will a consumer’s energy bill have to be recalculated and what will be the cost of that? Who will be the genius who second-guesses companies’ forward buying strategies, and decides whether they are good or bad? Will all suppliers have to purchase at the same time for the same contract period in Labour’s brave new world?
The logic of the massive state price control that Labour is proposing is clear: Labour wants to destroy the forward energy markets. It wants to end competition between companies, which is based on who has the brightest and best purchasing strategy to deal with things such as events in the UK or in Iraq, and manage those sorts of problems. If we end that competition, who will lose when the risks are greater? It will be consumers who pay in higher prices.