Thursday 5 October 2017

Energy Price Cap. *Sighs*

We begin in History Corner.

I started my career in energy when of all the great sources of energy, only oil was broadly a free-market commodity - in between price-interventions by OPEC.  Gas and electricity were produced & sold under various monopsony/monopoly arrangements around the world (with the honourable, and at the time rather quirky exception of Norway, where plentiful hydro-power made wholesale trading easy).  Nobody gave this much thought: and, interestingly, there were academic accounts of why gas and electricity couldn't - as a purely technical matter - be traded in open, competitive markets.

Well, as with much a priori reasoning, this sounded logical but was utterly wrong.  Propelled mostly by the vision (+ willpower + implementational skills) of the mighty Enron, *ahem*, it was triumphantly proved that you can trade natural gas (it's much more difficult than for 'conventional' commodities, but still possible) and electricity (staggeringly difficult, but still possible).  

Resistance to this movement was universal across the globe - there were a lot of very powerful vested interests defending the extremely comfortable status quo, and the sums of money involved are stupendous.  All the way through the nay-sayers declared that not only was competition in gas and electricity a Bad Thing, it was (contrary to the ever-growing body of evidence) technically impossible.  The Germans and the French were prominent in this resistance; but the European Commission, completely captive in this instance to British policy (sic), ground them into submission as only the EC can and, twenty years on and many tantrums later, there we have it.  Even the collapse of Enron along the way didn't halt the remorseless spread of energy market opening - gas, power, coal, carbon, wood pellets, ... (Incidentally, the Chinese have seen all this and want the efficiency gains it brings: they now plan to break the entrenched regional electricity monopolies in their country, too - but let's not hold our breath on this one.)   

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Having been active in both gas and electricity for the whole of the epic transition to competitive markets (which, incidentally, has very successfully shaken vast amounts of wasted capital out of the system), I confidently assumed we were on a one-way trip to global market opening, and that it would see out my career.  Little Ed Miliband's silly idea of throwing a price-cap into the works was, surely, a passing stupidity.  And although the old, unreconstructed CEGB types (and their friends in the unions) were still there in the shadows dreaming of nationalisation and monopolistic glories, well they could safely be ignored.  Hey, it'd be against the Lisbon Treaty!

Well.  What did I know?  Roll on 2017 and a 'Conservative' PM is limbering up for a price cap, and our Marxists-in-waiting plan to exploit Brexit by nationalising everything in sight, most specifically including gas and electricity - moves, we are told, which would be popular! 

We haven't got time for the Marxists here.  Let's just say on the price cap:  hey, remember the university fees cap?  How £9,000 p.a. was to be top whack which only a handful of the very most exalted establishments would be able to charge?  And how there'd be a great and imaginative diversity of different, cheaper uni-packages on offer below that level?  

And what happened?  Yup: the maximum becomes the universal.  There is no competition on price whatsoever.

The rot is truly setting in.  We'll no doubt be returning to the rest of the coughing and spluttering from the Manchester podium over the coming days: but this particular piece of nonsense will serve as a neat exemplar of the tremendous shifting in the terms of political discourse that has only just started.  It comes to something when I start pining for the Lisbon Treaty ...



CityUnslicker said...

Excellent, the few benefits of a really hard WTO Brexit will be though that we have a myriad of serious short-term shit to sort out and this kind of thing will have to wait.

Hopefully, by that time, the Marxist spasm has passed and the Tories have found a better class of politician.

If not, then we are screwed, but we face that anyway!

Graeme said...

That speech was almost enough to make me a Remainer

Steven_L said...

But at what point does Centrica's share price hit the 'point of maximum fear'?

Are we there yet or does Corbyn need to rise much higher in the polls?

Nick Drew said...

Centrica et al could very well figure ways to make a lot of money out of Corbyn (seeing as, in practical terms, I doubt he'd be able to nationalise on Day 1), and would be a sucker for schemes that could be packaged as socialist-interventionist: like I said, many of those old CEGB & British Gas bastards are still out there and they know how these tricks are played

(e.g., look how BG got the Thatcher government to OK the building of the vast and essentially never-required Rough storage facility in 1983 - an engineers' toy - and to dump the cost of approx £1 billion onto gas consumers)

But you are right, there could be a point of maximum (shareholder) fear

Electro-Kevin said...

2010 was the election to have lost. She'd have been gone with the rest of the liberal Tories.

When I hear "I'm standing up for minorities" I hear "I believe in positive discrimination against the children of those who voted for me."

When I hear "I want to give voice to the voiceless" I want to scream "You were elected to represent the people who voted for you, not the fucking voiceless."

Stephen Glover writes the speech that should have been given by May and that it wasn't (it is so obvious what would deliver a Tory landslide) is evidence to me that Tory Remainers (including her) would sooner let Corbyn in than give us proper Conservatism.

She is far closer to him than she is Margaret Thatcher.

As Peter Hitchen says, we probably won't see a lot of difference.

Don't overestimate the unions. In the private sectors you speak of trained people are doing very well and will not rock the boat. The so-called 'bully boys' have never thrown a punch in their whole lives. They haven't hardened their hands carving out coal or lugging steel.

Nationalisation for in my trade meant low pay. Privatisation was the best thing that happened to me.

Anonymous said...

Voices for the voiceless. Legs for the legless ....

Or whatever crap comes out of the Crosby stables now.

Anonymous said...

I thought she left Crosby out of the loop in favour of Nick Timothy and a nasty woman?

EK is right though - that was a Labour Party speech, but if she thinks a single Guardianista will love her for it, she has another think coming.

Stephen Glover's speech was definitely better than whichever PPE postgrad wrote the one May delivered.

Electro-Kevin said...

Ha ha.