The cost of everything seems to just go up and up. No more so recently apparently than in energy. The question the public are asking, and a lot of politicians and business leaders are trying to answer is why. And in answering this question, another one emerges. Should we be supporting a move towards nationalising the UK's energy production?
First, let's answer the 'why' question about the price rises. UK energy prices are influenced by six factors. They are, in decreasing order of size
- Wholesale energy costs (46% of your total bill)
- Network costs (23%)
- Supplier costs (13%)
- Environmental and social charges (8% - the so-called 'green levies')
- Supplier profit margin (5%)
- VAT (5%)
Wholesale prices have been increasing in the UK since the financial year 2004/2005. This was when for the first time the UK was importing more of its natural gas (the primary fuel used for British electricity generation) than it was mining from the North Sea and other locations. Because of this, Britain has to set its gas prices to at least as high as those in continental Europe, so that suppliers will be attracted to send their gas here, rather than Norway or Belgium (the two countries where the largest pipelines to Britain run through).
And since European gas prices are more regularly linked to the global oil price (thanks to a historical accident in the 1960s when gas was first uncovered in Europe) this means that wholesale gas prices are much more volatile and affected by market problems all over the world. Given that many believe we hit peak oil production some time in the 1990s, but demand for oil in countries like India and China is still growing, prices are not expected to drop substantially for some time.
Network costs are another matter. While it is true that since the 1990s the energy market has been largely privatised, there is still an effective monopoly in place in the form of the National Grid. The NG is not a power company, they don't generate electricity. Instead, they distribute it across the UK, keeping track of the need to generation ratio on a minute by minute basis. Although the power companies own the power stations and they cover operational costs, it is the NG who is responsible for controlling these plants. During the World Cup, what with so much of the nation glued to their TV screens at the same time, employees at the NG often wish for a swift England departure.
The most controversial parts of your household bill is the 13% that includes supplier's profits and the government's environmental charges. Seventy-five per cent of the public see green levies as unjustified, with 48% of the public doubting that climate change is manmade and 31% not seeing it as a threat. Since the financial crisis of 2008, there is very little sympathy with executives receiving millions of pounds in bonuses. In 2012, the total from five of the "big six" CEO's bonuses totalled at £16.4 million. This was revealed in the middle of the coldest spring for three decades, and makes it difficult to sympathise with the argument that the energy companies need profit to re-invest into upgrading the network, no matter how true that might be.
However, even if you doubt climate change, the green levies shouldn't be dismissed. One of the biggest problems with energy production is that transmission isn't just expensive to manage, it's incredibly wasteful. Moving electricity from a power station hundreds of miles away results in a loss of power of sometimes up to 30%. That's not the fault of the NG or the power companies. It's just simple physics. But green levies are there in part to encourage people to move towards systems like the one the government offers in the so called "Feed in Tariff" where people fit solar panels to their homes for free by selling the energy generated back to the energy companies at an inflated price. Thus, the panels pay for themselves, and one company, 'A Shade Greener' has been able to install free solar panels all across the UK saving people between 37-52% on their energy bills. By putting the solar panels directly onto a person's house, only a negligible amount is lost in the transition. It's a matter of inches rather than miles.
Perhaps then the area that should be questioned is the 5% VAT charge on all electricity bills. This is the one area that is very definitely within the government's control, and given how VAT is applied, it would make sense to drop it further in the current climate. Basic items like most food and clothes for children, infants, and new-borns don't have any VAT because they're classified as absolute essentials. Given the health conditions and sometimes deaths that can result in living in a cold house, asking people to pay any VAT does seem somewhat unreasonable, even if heating isn't all they are using their energy for.
Many Christians are asking the question of whether private companies with inbuilt profit motive are in fact the best guardians of our energy supply. Should we instead be returning to the days of nationalised monopolies whose sole interest was making sure we get as much electricity as we need, rather than pleasing shareholders to get as big a dividend as possible.
Unfortunately, the Bible isn't an economics manual. Many have interpreted it as such, but at no point does God issue a commandment that could be unambiguously interpreted as being in favour or against private industry or capitalistic economic systems. Some have argued that since capitalism, by its very nature, is based on the accumulation of wealth, it is a greed-centric system, and therefore should be done away with. But Jesus was living in the midst of the capitalistically minded Roman Empire during his ministry, and though he railed against wealth, it was less to do with systematic problems and far more to do with individual's internal desires.
The question then that many are asking is whether capitalism is in fact a manifestation of selfish desire. It's certainly arguable, but regardless, it isn't impossible to operate within a capitalist system without being a slave to greed. Co-operatives, where the customers are also the shareholders, are a model that resists the traditional profit driven cooperate paradigm. These systems are incentivised to give as good a deal as possible since all their money goes back to the consumers. Examples of this are in the Building Society "Nationwide" and of course "The Co-Operative" which deals with everything from food to funeral care.
In the end, the question Christians should ask themselves in terms of supporting a particular direction is not what economic model is being used, but rather the results of its operation. If we see greed and price gauging, and treatment of the customers as "Cash Cows", as Ed Davey accused the "big six" of doing recently, we should ask if an alternative should be considered. But if, as we saw on occasion during Britain's time of nationalised industries, we see wage demand inflation and price rises resulting from a greedy workforce, that too could be a direction to change. It is ultimately less about process for the Christian, and more about the heart of those operating it, and the fruits of those hearts as a result
