Is there life in this zombie parliament?

What will this year’s election mean for the Coalition? The Lib Dems have not proved to be very trustworthy. From student loans to nuclear power they seem to be very relaxed about keeping to their election promises. There are even questions being raised in recent papers about whether Nick Clegg will keep his seat with voters favouring the anti-EU and immigration stance of UKIP. Could UKIP take the place of the Libdems as the party of protest?

So what does this mean for Labour? It has got to sharpen up its lobbying skills if it does not want to form a coalition with the Lib Dems or UKIP and win the election outright. Labour leader Ed Miliband sees energy policy as a potential vote winner. He is seeking action on the difference between retail and wholesale prices. The party has recently figured out that its energy bill price freeze promise is not enough to woo voters and has said that now Ofgem should be given new powers to force firms to cut gas and electricity bills – to reflect falls in wholesale energy prices

Wholesale energy costs have been dropping in recent months, with the price of a barrel of Brent Crude oil falling to below $50 and gas prices falling 20% over the last year yet there has still been no reduction in energy bills. Chancellor George Osborne has reportedly launched a Treasury investigation into whether energy companies are passing on the savings from falls in the wholesale price of oil.

As readers of this blog will know this state of affairs is not new. There is a virtual oligopoly in gas and electricity markets. The Big Six energy companies are smart enough to know that regulators can be manipulated easily and think that, in their book, customer switching is a sign that the market is working. Sure, switching levels should be a good metric in some cases (say where there is not vertical integration or an oligopoly in place) but this is not the case in the UK at the moment. Many years on from the introduction of competition a significant chunk of customers have never switched. They have relied on the regulator to do its job.

So do we have problems with regulation? Yes! A strong regulator sends the signal companies cannot do what they want.

Dominic Maclaine is an EPG Associate and used to be the editor of New Power before he sold the business. He conducted PhD research into electricity supply competition in the UK and Norway at SPRU. He was previously the editor of the monthly newsletter Power UK published by Platts (and previously the Financial Times). He is currently writing a book about recent developments in the UK electricity market, to be published by Routledge.

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