I am stupid, I don't understand Labour's energy price policy

michaels

http://www.bbc.com/news/uk-politics-30766452

Basically prices are to be fixed resulting in bankruptcy for suppliers if prices rise but also linked to whole sale spot so that energy companies go bankrupt if they buy forward to try to handle the risk of the first policy.

Whilst I am sure that political focus groups must confirm this is a winner I was wondering if anyone could explain how it was considered to work economically. Is it just an attempt to bankrupt the suppliers and renationalise the industry for free? Mr R Mugabe would be proud of this one.

Thrugelmir

Labour threatens to freeze prices. So suppliers offer fixed rates and therefore contract forward to purchase at a fixed price on the wholesale markets. While at the same time fixing prices for supply during the winter months.

Wholesale prices fall. So Labour now wants suppliers to reduce their instantly prices.

You couldn't make it up. Complete disarray in policy. Bordering on farcical.

What's required is consistency and long term policy. Not knee jerk reaction. Just to have something to say that makes media headlines.

Generali

Thrugelmir wrote: »

Labour threatens to freeze prices. So suppliers offer fixed rates and therefore contract forward to purchase at a fixed price on the wholesale markets. While at the same time fixing prices for supply during the winter months.

Wholesale prices fall. So Labour now wants suppliers to reduce their instantly prices.

You couldn't make it up. Complete disarray in policy. Bordering on farcical.

What's required is consistency and long term policy. Not knee jerk reaction. Just to have something to say that makes media headlines.

michaels wrote: »

http://www.bbc.com/news/uk-politics-30766452

Basically prices are to be fixed resulting in bankruptcy for suppliers if prices rise but also linked to whole sale spot so that energy companies go bankrupt if they buy forward to try to handle the risk of the first policy.

Whilst I am sure that political focus groups must confirm this is a winner I was wondering if anyone could explain how it was considered to work economically. Is it just an attempt to bankrupt the suppliers and renationalise the industry for free? Mr R Mugabe would be proud of this one.

Perhaps the whole point is to bankrupt the energy companies to enable a stealth privatisation like Labour did with Railtrack. Simply put in a set of policies that ensure insolvency and then step in to 'save' the industry.

Voyager2002

This needs to be seen in context: the energy companies have been operating on excessive profit margins, and constitute a cartel that acts against the public interest. Forcing them to pass on savings that result from falls in wholesale prices is a reasonable response, although companies that buy 'forward' may face difficulty in complying. All told, they have made enough in excess charges over the year to tide them over any such difficulties...

chewmylegoff

I bet what Ed really wants to do is decide himself each Monday morning how much energy companies will be allowed to charge...

Graham_Devon

michaels wrote: »

http://www.bbc.com/news/uk-politics-30766452

Basically prices are to be fixed resulting in bankruptcy for suppliers if prices rise but also linked to whole sale spot so that energy companies go bankrupt if they buy forward to try to handle the risk of the first policy.

I'm no labour supporter, however, Labour suggested a price freeze until 2017.

This would give suppliers enough time to buy fuels at todays prices. Apparently, a couple of them buy fuel 3 years in advance anyway....this is the reason they can't pass on the falls in costs.

So any increase wouldn't see them bankrupt with a 2 year price freeze. If the price freeze imposed had been 5 years or so, then the problems could well have occured.

Labour couldn't insist on price falls if they put their freeze in place. However, that freeze isn't in place, and therefore, they can call for cost reductions to be passed on (if there is anything to pass on).

Thrugelmir

Voyager2002 wrote: »

This needs to be seen in context:the energy companies have been operating on excessive profit margins, and constitute a cartel that acts against the public interest. Forcing them to pass on savings that result from falls in wholesale prices is a reasonable response, although companies that buy 'forward' may face difficulty in complying. All told, they have made enough in excess charges over the year to tide them over any such difficulties...

The announcements from Ed contain no context though. It's pure unadulterated spin. Oil prices falls being reflected in lower petrol and heating oil prices on the open market. Wholesale gas has not declined in the same manner.

michaels

Voyager2002 wrote: »

This needs to be seen in context: the energy companies have been operating on excessive profit margins, and constitute a cartel that acts against the public interest. Forcing them to pass on savings that result from falls in wholesale prices is a reasonable response, although companies that buy 'forward' may face difficulty in complying. All told, they have made enough in excess charges over the year to tide them over any such difficulties...

But capitalist companies don't hang on to their profits they hand them out as dividends. The banks made a fortune in the years before the financial crisis but didn't have this money available to cover the losses.

princeofpounds

When I am in power, everyone will get to have their cake and eat it.

Generali

princeofpounds wrote: »

When I am in power, everyone will get to have their cake and eat it.

Will you introduce ISAs for dogs?

robmatic

Voyager2002 wrote: »

This needs to be seen in context: the energy companies have been operating on excessive profit margins, and constitute a cartel that acts against the public interest. Forcing them to pass on savings that result from falls in wholesale prices is a reasonable response, although companies that buy 'forward' may face difficulty in complying. All told, they have made enough in excess charges over the year to tide them over any such difficulties...

What kind of excessive profit margins have the energy companies been making? A percentage figure would be nice to know.