A potential new prime minister trying to defend profits of energy companies recently on TV just shows you the Modus operandi of the political class.
It might push people to riots in the streets.
>The investment bank predicted that the country’s retail energy price cap — which limits how much households pay for heating and electricity — would be raised to £4,567 in January and then £5,816 in April, compared with the current level of £1,971 a year.... Nabarro said Citi’s new forecasts had taken account of a 25 per cent increase in wholesale gas prices last week and a 7 per cent rise in wholesale electricity prices.
No price controls can account for the fact that energy prices are up a lot globally. Pretending they're not up and keeping the price cap in place is worse. First it doesn't discourage energy usage. That's a big purpose of prices in a market economy. Second, when something is priced below market price it inevitably leads to shortages. This will have to be addressed through some kind of political action that will be sub-optimal. Rather than a young person seeing higher energy prices and adjusting their AC, while an old person may choose to pay the higher price, you'll see ham-fisted conservation measures.
If you're against having the customer's price reflect more closely the market price, you have to propose an alternative. Do you want people to use less? If so, how do you do that? Or do you want people to continue using the same, pretend the high prices don't exist and just pay for it through taxes? Either way, the money will have to come from somewhere or rationing will have to take place. There's no free lunch
We already don’t have AC in summers which are growing more and more extreme (regularly over 90F, and sometimes over 100F) - there’s nothing there to turn off.
Edit: Big power retail companies in the UK are making record profits, and so is generation.
Tax that aggressively to start with.
Advocating for "market prices" doesn't necessarily mean letting everyone fend for themselves. You can provide grants/subsidies for the poor, while still keeping market prices so everyone is still incentivized to save as much energy as possible.
>Edit: Big power retail companies in the UK are making record profits, and so is generation.
Sounds like a great way to discourage investment and make future shortages even worse. The energy industry runs on a boom-bust cycle. Why bother investing for the boom years (ie. right now) when you know the government is going to seize all your profits?
[1] https://financialpost.com/investing/energy-firms-pay-record-...
2. the boom-bust cycle is exactly the reason not to reinvest all the surplus profits now. You might intuitively think that investing now will help lower oil prices, but it takes years for an oil project to be online so by the time the project is complete there will be an oil glut.
https://www.bp.com/content/dam/bp/business-sites/en/global/c...
The largest gas provider in UK (British Gas) profits in millions of pounds:
2009 147
2010 226
2011 258
2012 291
2013 153
2014 96
2015 73
2016 43
2017 11
2018 8
2019 -5
2020 27
I couldn't find more recent data but please provide it if you have it. These are in millions of pounds. Suppose their profit jumped to 100 million pounds (4x the 2020 profits). Do you think 100 MILLION pounds would solve the problem? To put this in context, public sector fuel and energy expenditure in 2021 was 456 BILLION. And this is only public sector. Profits aren't even a rounding error.
https://www.statista.com/statistics/521474/centrica-energy-e...
https://www.statista.com/statistics/298887/united-kingdom-uk...
As an example for more recent information.
> British Gas Services & Solutions adjusted operating profit fell by 88% to £7m.
> The reversal of a £50m Covid-19 and industrial action impact from H1 2021 was partially offset by an increase in customer compensation following disappointing service levels over the past winter, continued higher absence rates earlier in the year, and increased workload, which we believe is a function of customers choosing to have non-urgent jobs they had been delaying during the Interim Results | Group Overview (continued) Centrica plc Interim Results for the six months ended 30 June 2022 7 Covid-19 pandemic completed. These temporary factors negatively impacted adjusted operating profit by approximately £25m
It's difficult to tease out, but the profit numbers are so tiny compared to the aggregate increase in price experienced by consumers. I think focusing on profit makes for good headlines but underlying issues are a lot bigger. Taking away the tiny sliver of profit these companies have will reduce innovation and new entrants while doing absolutely nothing to alleviate higher consumer prices.
https://www.centrica.com/media/5723/centrica-2022-interim-re...
Sure, but how would these energy companies fancy being under the thumb of Putin.
If they want to benefit from the spoils of free markets with consumers who haven't died from covid then they must pay their fair share to maintain them. So whether it's a cap on the prices they can make, or a tax on their profits. Doesn't really matter. The burden cannot be met only by energy consumers.
https://www.bbc.co.uk/news/business-62382624
Not from any particular clerverness. Or increase in productivity. Purely because of abnormal market conditions due to a war waged by a dictator they have collaborated with for the last 20 odd years.
Also, that article doesn't make sense to me. What stopped the prices rising before?
Heat pumps would be better, but there is already an insane queue for those.
I could foresee riots again like the 2010 ones but I doubt it'd do to much change other than lead to some imprisoned people and property damage.
So, unlike, say, the poll tax riots i doubt itll lead to any meaningful British/English political changes.
It may add fuel to Northern Ireland joining Ireland/Scottish independence though.
On the contrary, we recognise that everyone has a duty to keep everyone else safe, which was especially true during the early pandemic times, when it seemed like it was quite dangerous and Americans ignored it and died in the tens of thousands.
It was when it was observed that we were not in it together that heads rolled.
And it looks like our observations panned out, as we do not have any lockdowns anymore and I don't know of anyone who is still getting sick in a bad way.
From Reuters: "France has committed to capping an increase on regulated electricity costs at 4%. To help do this the government has ordered utility EDF (EDF.PA), which is 80% state owned, to sell more cheap nuclear power to rivals"
(Source: https://www.reuters.com/business/energy/europes-efforts-shie...)
Then, the electricity wholesale price on the open market becomes irrelevant. As long as their set a price that covers their actual costs for their own consumers they are fine and it is sustainable, and certainly does not require any debts since it does not actually cost anything (beyond the cost of buying the remaining 20% of EDF).
Rinse and Repeat ad infinitum
This is the world on modern monetary theory. Not even once.
Hyperinflation and energy crisis are here.
[1]: https://en.wikipedia.org/wiki/English_Civil_War#Whig_and_Mar...
Edit: For context, the parent previously stated that this perhaps may become the first real revolution in Britain.