EEF says energy costs put UK firms at a competitive disadvantage with the rest of the world

Energy market debate must consider manufacturers

The Government has been urged to heed the impact of energy prices on manufacturers as it announces energy market reform proposals.

Energy Secretary Ed Davey today announced a raft of measures, including the prospect of criminal sanctions against energy firms that manipulate the market, saying the industry needed to change to put consumers "in control".

The move comes amid continuing controversy over rising bills after four of the Big Six energy companies announced hikes averaging about 9 per cent in recent weeks, but Terry Scuoler, chief executive of EEF, the manufacturers’ organisation, is concerned that the debate has focused too heavily on the consumer market.

He said: “Whilst the price of energy for residential consumers has featured heavily in the news over recent weeks, it is important that government also remembers the costs faced by the manufacturing sector.

“We would urge the government to recognise the impact of rising energy prices and uncompetitive green levies on the UK manufacturing sector’s ability to grow and compete in a highly competitive global marketplace.

“EEF has long argued that the energy costs associated with manufacturing in the UK put us at a competitive disadvantage with the rest of the world, hampering the sector’s ability to thrive and continue playing a key role in rebalancing the economy.”

Davey revealed that his department will consult on increased penalties for market manipulation, including introducing criminal sanctions for anyone manipulating the energy markets; announced plans to make switching supplier simpler and quicker; a new probe into energy firms' accounts to make them more transparent on profits and prices; and annual competition reviews of the market.

“EEF supports the announcement to hold a competition review on the UK’s energy market,” said Scuoler.

“However given the numerous reviews into the energy market and competition that have taken place over the years, and their subsequent failure to deliver any real change, government must ensure that this time it will make a material difference by undertaking a rigorous evidence-based approach, with real teeth.”

The Liberal Democrat Cabinet minister told the Commons that the aim was to allow consumers to switch supplier in 24 hours, rather than the current five weeks.

Energy companies should be more open about how they treat credit balances in consumers' accounts, making every effort to return money to customers who close accounts, he said, but where that is not possible energy firms should ring-fence the money to help the most vulnerable customers.

Energy and Climate Change Minister Greg Barker will shortly meet energy suppliers to discuss issues around direct debits, including the level of credit balances that energy companies hold.

Ofgem will carry out an annual market assessment, working with the Office of Fair Trading and the new Competition and Market Authority to monitor the behaviour of market participants and ensure the market is working for residential and small business consumers and that all suppliers can compete fairly, with the first assessment completed by next Spring.

Ofgem will also carry out a detailed assessment of energy suppliers' financial reporting practices and set out any steps to improve transparency, so that consumers can see where their money is going. This assessment will also report in Spring 2014.

"The energy industry needs to change to put consumers in control. That means making it easy for people to change supplier to save money, it means regular market assessments to check their behaviour, and it means tougher penalties for market manipulation and putting an end to opaque finances,” said Davey.

"Energy companies need to know that any wrongdoing will be uncovered and dealt with.”

Ed Miliband, who has pledged a 20-month energy bill freeze if Labour wins the 2015 general election, has dismissed the review and Caroline Flint, shadow energy and climate change secretary, said the proposals effectively let companies "off the hook".

She: "It's another day, another policy that will do nothing to help people with their bills this winter. Hard-pressed energy customers struggling with the cost of living need action now, not endless reviews and consultations from an out-of-touch Government that refuses to stand up to the energy companies.

"What we need now is a price freeze because this is the only way we can deal with the energy companies overcharging. Labour's energy freeze will save money for 27 million households and 2.4 million businesses, and our plans to reset the market will deliver fairer prices in the future."

Today’s announcement was made as part of Mr Davey's annual Commons statement on energy, amid continued coalition tensions over so-called "green levies" , which under-fire energy firms blame in part for fast-rising bills for customers.

The Prime Minister has vowed to look at scaling back the environmental subsidies, but Deputy Prime Minister Nick Clegg said he would fight any "hasty, ill-thought-through change" in Chancellor George Osborne's Autumn Statement in December.

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