A letter to Caroline Flint

01 October 2013

Doug Stewart has written to Labour MP Caroline Flint about Ed Miliband's Energy Freeze

Dear Ms Flint,

Green Energy is an independent, customer-owned licenced electricity supplier to domestic and business customers throughout England, Scotland and Wales. We supply sustainable electricity and have been doing so since 2001. I am writing to express our concerns with Ed Miliband’s announcement at last week’s party conference, and clarify its potential impact on our business and thereby our customers. Our business exists and employs staff as a result of privatisation; our own business model is transparent. Unlike virtually all other energy suppliers, we operate a free share scheme where our customers become part of our business, where they have a say in how it is run and where they are invited to the AGM to have a voice. That alternative is available because of competition not in spite of it.

To my knowledge, Mr Miliband has written to just the Big 6 suppliers about his proposed changes to the industry and has not written to all licenced electricity suppliers. Green Energy has not received any communication so it would extremely important for our business to know whether or not Labour’s proposed price freeze will apply to us and indeed all other independent suppliers. A revision of the market might be to our advantage, but in my view a price freeze won’t facilitate that. There are of course two sides to every argument; clearly there are improvements that can be made to the energy industry and some of these are being addressed in the Energy Bill and Retail Market Reform.

Green Energy would like the energy market to be more transparent, and we, understandably, want to see the dominance of the big players reduced. An end to vertical integration, and returning to the separation of retailing and generation would be a good thing but we would be surprised if this ever happened. We share the widely-held view that Mr Miliband’s announcement will unfortunately add to the political risk and the levels of uncertainty for investors. Furthermore, the timing of the freeze could also be seismic to UK energy supply because it would come into effect at the very point the Large Combustion Plant Directive closes old plant (with the new replacement plant 3 years behind schedule) at which time OFGEM has predicted that the UK will only have a 2% capacity margin.

The price freeze starts from the premise that consumers are being ripped off by their energy company at a time when many are struggling to pay their energy bills. This may not be politically acceptable but successive investigations suggest that consumers are not necessarily being ripped off.

As you will know, energy prices rise for three reasons: ? A change in the commodity market ? Increases in infrastructure charges ? And government policy charges – ROCs Fits, Green Deal, ECO, smart meters

Recently, the rises have been attributed to infrastructure and policy – things no energy supplier has control over. Many of the policies that are now impacting on consumer bills were initiated by the previous Government.

The proposed prize freeze also regrettably has the potential to remove some small independents from the market and discourage new entrants (for example Open4Energy). The UK is our only market; independents are not global players, so we can’t take a view on a 20 month freeze and earn revenues elsewhere.

Green Energy supports a more open and transparent market because greater liquidity would help create the very thing Mr Miliband and indeed this Government wants: a better deal for consumers. However, a price freeze could unfortunately have the opposite effect. Surely the real beneficiaries should be those in fuel poverty.

These are important issues for the industry and for us as an independent supplier and as such I would welcome clarity on the announcement (does it apply to independent suppliers?) and the opportunity to expand on the various points that are raised in this letter directly with you or one of your front-bench colleagues. I have copied Tom Greatrex into this letter, and I will be sharing its content with our customer shareholders, OFGEM and selected journalists. I look forward to hearing from you.

Doug Stewart - CEO Green Energy