LETTER FROM SCOTLAND 28th March 2014

Another battle has broken out in the energy war. Scottish and Southern Energy (SSE) has thrown down the gauntlet to its competitors, and the government, with a promise to freeze its electricity prices until 2016.

SSE LogoSo the old Scottish dam-builders, and their electricity board comrades in the south of England and Wales, have challenged the other five companies in Britain’s energy business to match their offer. And they’ve challenged the Coalition government by showing that Labour’s price freeze idea can work.

Meanwhile the market regulator OFGEM has cast a smokescreen across the whole battle field by recommending an 18-month long investigation into the whole business of energy supplies by the Competition and Markets Authority.

Jackie Baillie MSP Called for an energy price freeze
Jackie Baillie MSP
Called for an energy price freeze
The issue was top of the agenda at the Scottish Parliament when Labour’s Jackie Baillie challenged the first minister Alex Salmond to admit that a price freeze was the best way to protect households from ever-rising fuel bills. “Will he change his mind or will he continue to stand shoulder to shoulder with the Tories in opposing a price freeze ?” she asked, three times.

Mr Salmond said the SNP government in Scotland was already cutting fuel bills by £70 a year by agreeing to switch the renewables subsidies from energy bills to general taxation. He went on to welcome the competition inquiry but pointedly added that it should include an examination of the “massive subsidy” being given to the nuclear industry.

To me, it all seems like another case of political cowardice by all the parties concerned. The cruel fact is that energy costs are going to rise as the world becomes more industrialised and more populated. Of course the public complain about it – and a quarter of Scottish households are being pushed into “fuel poverty” – but the cruel fact remains. It would be better if the politicians accepted the fact of rising prices and encouraged people to use less energy.

The Big Six  Competition investigation
The Big Six
Competition investigation
Instead, all political parties are behaving like medieval witch-hunters and are hell bent on roasting the “big six” energy companies at the stake. The very fact that there are six of them, many of them global companies, indicates that there is no monopoly. The competition inquiry will be hard pushed to find any other large-scale industry which is more competitive. Britain actually has some of the lowest energy prices in Europe. They went up just 4 per cent last year, not a great deal more than inflation. The average household bill is £1,260 a year. The profits of the energy companies are running at around 5 per cent, not a lot considering the amount of capital invested.

SSE, for instance, has invested more in energy projects and its distribution network than it made in profit in each of the last five years. But now it has given in to political and consumer pressure and been forced into a price freeze which means it can no longer continue its wave and tide development programme. It’s all so short-term and so short-sighted.

If you think the energy companies are behaving badly, consider the banks. We had another example of their cavalier approach to their customers this week in the case of North Sea oil worker Richard Durkin. He bought a computer from PC World in Aberdeen with the help of a credit agreement for £1500 with HFC Bank, part HSBC. The following day he took it back, realising it did not contain an internal modem. But the bank continued to collect his monthly payments and when he fell behind, they put him on a credit blacklist which he could not challenge.

Price of a returned laptop £250,000
Price of a returned laptop
£250,000
Not only is this a scandal, but the legal system has taken 16 years to clear the matter up – finally awarding him £8,000 in damages at the Supreme Court in London. Mind you, Mr Durkin could have settled for £116,000 damages in Aberdeen Sheriff Court back in 2008 but he chose to challenge that ruling, saying the amount was too little. He reckons the litigation has cost him £250,000, leaving him a little rueful. “I’ve got mixed feelings,” he said. “But I’m glad I’ve helped the greater good with a consumer victory.”

This week the golfing authorities, almost as fast moving as the legal system, have entered the 21st century. The governing committee at the Royal and Ancient Golf Club in St Andrews has written to its 2,500 gentlemen members urging them to vote in favour of admitting women to the club for the first time in its 260 year history. The vote – in person only – takes place on 18th September this year. And if that date seems familiar, it’s the day Scotland decides whether it wants to remain part of Club GB or perfect its golf swing on its own.

Celtic Football Club, meanwhile, is wondering if it is to continue playing on its own or whether it can compete in a new mini-European league which has just been given the go-ahead by UEFA. It won the Premiership title with seven games to spare when it beat Partick Thistle 5-1on Tuesday night. Its arch rival Rangers still have a year’s probation to serve in the Championship league after their financial collapse and this week we learnt they are still making a loss of £3.5m a year. All this, I’m sure is worth discussing more, but I’ve run out of this week’s supply of energy.