ROB GIBSON: Answer to energy crisis is not more private profits for fossil fuel firms
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By Rob Gibson, former Caithness, Sutherland and Ross MSP
The cost-of-living crisis due to fossil fuel shortage is rapidly becoming an emergency. Additionally, the Russian invasion of Ukraine which pulverises the breadbasket of Europe has resulted in gas supplies from Russia to Europe being massively disrupted if not turned off.
Sanctions from around the world will paralyse the Kremlin’s power eventually and plunge Russian Federation citizens into deep economic losses of jobs and prospects for years to come. Consequences here are dire.
Before unpacking the effects we will feel in the Highlands and Islands, I will not let the fog of war shroud the utter incompetence of the UK energy regulator, Ofgem.
First a few words of explanation, the Gas and Electricity Markets Authority and is referred to as GEMA, the Authority, or the Ofgem Board. It comprises non-executive and executive members, and a non-executive chair. Members are appointed by the Secretary of State at the Department for Business, Energy and Industrial Strategy.
Last month in evidence to a House of Commons committee, Ofgem chief executive officer Jonathan Brearley admitted costly failures by his organisation. He blamed them on political choices made by the Tory government in London.
SNP MP Alan Brown focused on the excessive prices being paid for electricity by people in the Highlands and Islands, far above the average £2000. He said: "Brearley and Ofgem’s director of strategy and decarbonisation Neil Kenward both admitted they did not have a grasp of the detail and said they would look into the issue and get back."
Brown pressed on: "The Highlands and Islands is obviously an exporter in terms of generation of electricity. Is that not an anomaly that Ofgem as the regulator should be looking at or discussing with government, in terms of that penalty that is applied to customers?"
Astonishing as this is, it explains a lot. We in Scotland and particularly the north are abandoned to fuel poverty amidst fuel plenty. Mr Brown told the committee that he had raised this several times in parliament, as has his colleague Drew Hendry, MP for Inverness, who has campaigned hard on the matter.
Brearley then admitted that picking up the lost credit balances swallowed up by companies going bust this year will cost UK consumers at least £200 million – 10 per cent of the rise in the domestic energy cap.
Committee chair, Labour MP Darren Jones, asked: "Do you think that it is right that consumers should have to pay back through their energy bills, of their own money that has gone because of the bankruptcy of energy companies that were not regulated properly?"
Brearley agreed that, with hindsight, Ofgem should have ring-fenced customer credit balances more firmly.
This utter failure on the home front has another source of deep concern. Some benighted right-wing commentators want greater investment in North Sea gas fields. They say it will speed the just transition to renewables. Others of that ilk don’t care for the greenhouse gas emergency, they just want more profits from hydrocarbons.
Before the Russian invasion of Ukraine, wholesale oil and gas prices rocketed. The companies like Shell and BP were returning huge profits. Even so, the UK government instructed Ofgem to lift the price cap for gas and electricity to consumers.
My standing charge for electricity at home in Evanton is due to rise from 27.48p to 50.14p on April 1. Since most of the Highlands outside big towns are all-electric, it’s a deeply worrying emergency.
Meanwhile, that free market in fossil fuels is seeing gas exported from the North Sea and imported from many other countries. It’s a free market. Fortunately the UK gets a small percentage from Russia, where Putin’s economy relies on exports of fossil fuels and minerals. Sanctions are going to squeeze his dictatorship but we have to cope here to hope his advances in Ukraine are pushed back.
In 2020 the pipelines across Europe pumped 168 billion cubic metres of gas from Russia. That’s a third of the gas needed in Western and Central Europe. While Germany is most exposed, the clear message from the EU is get a move on to develop renewables and end dependency on Russia.
Putin still finds buyers. Shell was exposed as one such just before the Ukraine crisis. They bought at a deeply discounted oil prices some $28.5 below the $100-plus price of Brent crude. This must stop. But who can control this free market and stop EU and UK homes paying through the nose?
Back home in the free-for-all UK, there is no sign of relief for our consumers. I look out and take heart at the stack of jackets lined up at Nigg Energy Park for placement in the offshore wind farm sites. But I keep asking why, when France has cut fuel increases to four per cent, why does the UK allow 40 per cent.
It is simply explained. French electricity is nationally-owned. In the UK, private profit trumps public misery.
I’ve said it before and I’ll say it again, Scotland needs the powers to control our electricity prices. For the few short years we still need gas, the supply must be at basic prices free from shareholders profits. We must be demanding nationalisation, not just a windfall levy.
- Contact Rob Gibson at: robgibson273@btinternet.com
