Miliband Warns Energy Firms After Backlash

Ed Miliband has warned energy firms they will be "part of the problem" unless they support his move to freeze gas and electricity prices.

The Labour leader has now written to the "Big Six" energy companies after pledging on Tuesday to hold prices for two years if he wins power at the next election.

Firms have warned the move could lead to energy shortages and power cuts as the industry is starved of the investment it needs and business chiefs have also been critical.

But Mr Miliband insists it is time to "reset the market" and warned the industry he would not help guarantee funding for its development if it does not fall in line.

Ed Miliband insists it is time to "reset the market"

His plans would see a price freeze from 2015 until 2017 while the sector is reformed, with watchdog Ofgem axed, firms split into generation and retail arms and competition increased.

In his letter, the Labour leader wrote: "I appreciate that you will not welcome all aspects of this package but it is my firm view that without resetting the market we are not going to see the public consent that is required to underpin the scale of taxpayer backed guarantees for which you have argued.

"I am prepared to make the case for sharing the risks of such investment, but that must be against the backdrop of a market that customers believe works for them.

"You and I know that the public have lost faith in this market. There is a crisis of confidence. We face a stark choice.

"We can work together on the basis of this price freeze to make the market work in the future. Or you can reinforce in the public mind that you are part of the problem not the solution."

Mr Miliband announced the 20-month price freeze in his conference speech as he sought to show only his party could tackle a "cost-of-living crisis".

Energy firms argue they need money to overhaul UK power stations

Pitching the next election as a battle between Tories representing the "privileged few" as ordinary families and small businesses suffer, he repeatedly declared: "Britain can do better than this."

"I will lead a government that fights for you," he vowed as he insisted he would relish a contest with David Cameron based on leadership and character.

Labour claims the freeze, to last from May 2015 until January 2017, would save the typical household £120 and an average business £1,800.

The party leader will be quizzed about the policy today as he tours television studios and later answers activists' questions before the conference closes.

Consumer group Which? has said it will "give hope to the millions worrying about how they can afford to heat their homes" but the CBI warns it will damage Labour's "pro-enterprise credentials".

The energy sector's umbrella group, Energy UK, accused Mr Miliband of "posturing to no purpose" and warned the freeze could have drastic consequences.

Chief executive Angela Knight said: "Freezing the bill, may be superficially attractive, but it will also freeze the money to build and renew power stations, freeze the jobs and livelihoods of the 600,000 plus people dependent on the energy industry and make the prospect of energy shortages a reality, pushing up the prices for everyone."

Energy giant Centrica blamed price rises on higher commodity costs, increases in regulated transport and distribution charges and environmental cost and taxes.

A spokesman said: "If prices were to be controlled against a background of rising costs it would simply not be economically viable for Centrica, or indeed any other energy supplier, to continue to operate and far less to meet the sizeable investment challenge that the industry is facing.

"The impact of such a policy would be damaging for the country's long term prosperity and for our customers."

SSE claimed price freezes would lead to "unsustainable loss-making retail businesses" and suggested the Government's energy policy costs be put into general taxation instead of on bills.

"This would wipe £110 off the average person's bill and shift the cost away from those who can't afford to pay and on to those who can," a spokesman said.

Simon Walker, director general of the Institute of Directors, said: "We should think very, very carefully before piling more distortion on an already grossly distorted energy market. Price controls only add greater uncertainty to companies who we need to take the financial risks of energy investment.

Matthew Sinclair, chief executive of the TaxPayers' Alliance, said: "When the government fixes prices, it always ends in a disaster for consumers.

"Ed Miliband is sticking by the green taxes and expensive subsidies that drive up the price of energy, so at best this new policy would just store up massive price hikes for another day. At worst it could create a crisis and force the government to bail out the sector."

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