How to fix the energy crisis
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The government has finally announced its 鈥榮olution鈥� to the energy crisis 鈥� a repayable 拢200 loan to every customer and a 拢150 cut in council tax for homes in bands A-D.
This came on 3 February, the same day that Ofgem, the energy regulator, announced that their price cap will rise by 54%.
Unfortunately, the government鈥檚 plan is nowhere near a solution to the energy crisis 鈥� in fact, it鈥檚 barely a sticking plaster.
The 拢200 loan won鈥檛 come until October, after another price cap adjustment and it will need to be repaid. It鈥檚 also uncertain how the council tax cut will be delivered to some, for instance to renters whose landlords include council tax in the rent.
The energy crisis will be with us for a while yet - the recently predicted that global fossil price will probably remain high for two more years.
The question is: how can we really fix the problem, so everyone can afford to heat their homes and cook their food?
Short-term: Take off the tax
It鈥檚 within the government鈥檚 power to remove VAT and other taxes from energy bills, which would be worth around 拢300 per household 鈥� that鈥檚 half the impending rise in the price cap 鈥� without needing to pay it back.
They could fund this quite easily with a windfall tax on North Sea operators, to claw back some of the 拢20 billion extra profit they鈥檝e made this winter.
This is the ethical approach. Around 40% of Britain鈥檚 gas supply comes from the North Sea and the price of that has gone up tenfold during the energy crisis. It鈥檚 not costing any more to get out of the ground, it鈥檚 just pure profit at the expense of bill payers.
Given that the government aren鈥檛 willing to apply a windfall tax, our founder, Dale Vince, has a radical idea 鈥� a progressive tax on energy:
鈥淐reate bandings of annual consumption and apply the existing taxes in increasing amounts as consumption increases. So that the more energy you use the more expensive it gets. At the lower end we would have a tax-free element of energy consumption - as we do with income.鈥�
鈥淎nd it fits the bigger picture - where the 10% of wealthiest people are responsible for 50% of carbon emissions - they can and should pay much more for this than they do.鈥�
Long-term: A public enquiry
The energy sector isn鈥檛 going to magically fix itself. When this energy crisis ends, you can bet there鈥檒l be another one along 鈥� the only question is when.
That鈥檚 why we need a public enquiry, to identify the problems so that we can rebuild Britain鈥檚 broken energy system.
1. Fix the price cap
The Price Cap only controls retail prices, not wholesale. Dale Vince believes we need to examine 鈥渢he role of government鈥檚 refusal to adapt that - in the face of this crisis - which has bankrupted 26 energy firms since summer.鈥�
2. Who pays for the stranded customers?
Dale says: 鈥溁使谔逵齛pp need to look at the cost of that market failure - four million stranded customers promised credit balance protection and access to unrealistically low energy prices (lower than it can be bought for wholesale) has a current running total cost of 拢4 billion.
鈥溁使谔逵齛pp pick this up one way or another and currently government seem set on adding it back to energy bills.鈥�
3. Stop the stealth tax
An average customer has around 拢100 of VAT added per year to their energy bill. They also have around 拢200 of stealth taxes, to fund social and environmental programmes, making it an average of 拢300 added by government every year.
Dale says: 鈥溁使谔逵齛pp also need to look at the 拢9 billion of stealth tax government adds to energy bills to pay for social and environmental programs - it鈥檚 unique to load the cost of such things on any sector of our economy - for example the 拢2.5 billion per year that subsidises farmers is not added to food.鈥�
4. Exactly why did all those energy companies go bankrupt?
Some energy companies went under because they didn鈥檛 hedge, which means buying their power ahead of time to fix the price, helping to smooth out fluctuations in the market.
Oddly, though, some companies may have gone bankrupt because they hedged too well 鈥� and the cash in value of that energy was too much for their owners to resist. Here鈥檚 Dale to explain:
鈥淏ulb is a good example of a large company going bust due to not hedging properly. So big that government had to effectively nationalise it and take a 拢1.7 billion hit just to operate this winter.
鈥淧ure Planet is a good example of a company that was well hedged, and that appears to have been their downfall - as the value of the hedge was so high, it appears to have been cashed in by BP, dumping up to 拢500 million of cost on the taxpayer.
鈥淎 handful of smaller companies also went bust this way when the 鈥榞as shipper鈥� that did their gas hedging for them decided to exit the market and walk away with the hedges.鈥�
The even longer term solution
The real solution to all future energy crises is Energy Independence, where Britain is free from global market price setting.
This means getting all our electricity from the wind, the sun and the sea 鈥� and making our own sustainable gas from grass. 皇冠体育app have enough natural resources in Britain to power ourselves many times over 鈥� and we can get it done in 12 years or so if the political will is there.
As Dale Vince says: 鈥淲ith our own renewable energy and our own pricing we can have affordable energy bills that never need to go up - if we get it right.鈥�
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