When our energy system was privatised beginning in the late 1980s, British Gas was sold off as a single private monopoly of the entire system. The electricity system was broken up, the twelve regional distribution companies were sold off in 1990, the transmission company National Grid was privatised a few years later, and the power stations generating electricity were also privatised over the next few years.
The supply of gas and electricity to customers was then separated off and became dominated by the so-called ‘Big Six’.
So although supply companies are the public face of energy in Britain, the story of energy privatisation is bigger than just supply. We have private companies generating electricity, the privatised National Grid responsible for the transmission of both gas and electricity, private regional distribution companies, and then a chaotic energy supply market at the consumer end, with companies currently going bust left, right, and centre.
Recent events have laid bare how vulnerable privatisation has made our energy system. And it was all very avoidable. Let’s recap what’s been happening lately:
- Over 30,000 households had their electricity cut off for days, some for almost two weeks, as a result of Storm Arwen. Local leaders have accused the regional distribution company, Northern Powergrid, of failing people by not investing in their energy distribution infrastructure, forcing the government to launch an inquiry.
- Three weeks ago, the seventh-largest energy supplier in the United Kingdom, Bulb, collapsed. Bulb was responsible for the electricity of 1.7 million households and as a result had to be bailed out by the taxpayer, to the tune of nearly £1.7 billion.
- Other than Bulb, twenty-six energy suppliers have gone bust since August, leaving tens of thousands of families to be dumped at the mercy of alternative suppliers.
- In October, energy regulator Ofgem lifted the energy price cap, allowing energy supply companies to charge households £139 more next year. The move was predicted to send over 400,000 more families into fuel poverty. Over three million people are currently estimated to be in fuel poverty in the UK.
- The charity Citizens Advice has found that despite repeated warnings to act, Ofgem failed to properly ‘regulate the market and tackle rule-breaking by suppliers’. This could mean energy prices rising by an extra £120 for families.
What makes this situation all the sadder is not that there is turbulence in the energy market. Turbulence in the energy market is par for the course due to factors like changes in wholesale energy prices for gas and oil and a global pandemic, which are out of anyone’s control.
The situation is sad because it is easily avoidable. Public ownership of our energy system, at national, regional, and local levels, would have helped us withstand much of the latest turbulence. More importantly, it could still help save families money and keep the lights on this winter.
Right now, when energy-producing countries squeeze, we squeal. If they shut off their taps or limit supply in any way, prices immediately go up for British families. And since the energy supply market is dominated by a few large companies, who have historically been accused of anti-competitive and oligopolistic behaviour, families have no choice but to pay out of their noses or go without energy.
Our energy system is vulnerable to extreme weather events because the money that could be going to bolstering our infrastructure is going to dividends. Northern Powergrid, the company whose energy distribution infrastructure was affected by Storm Arwen, is owned by American investor Warren Buffet’s Berkshire Hathaway Energy.
National Grid, the main energy transmission company, made £1.4 billion in profit in 2020-2021. The Big Six energy companies made £1.2 billion from energy generation in 2020. According to a recent analysis, public ownership would save us £3.7 billion each year.
Public ownership is not a panacea, but the evidence we would be much better off under public ownership is plain to see.
For example, public ownership may not help us control the global price of energy, but we would be able to control how we reinvest profits. Rather than raising prices for customers or bailing out failing private energy companies, we could be reducing the burden for the public by subsidising their energy bills.
Privatisation was supposed to cut energy prices for the public, yet energy bills went up by 50 percent in real terms between 1996 and 2018, all while the private energy companies have paid out billions in dividends to their shareholders.
Public ownership may not help us control extreme weather events, but rather than seeing profit syphoned off into private bank accounts, we would be able to invest money into bolstering our infrastructure to prevent cuts when storms hit. We could also invest in renewable energy sources as part of our fight against climate change.
Ideologues for privatisation often say that people don’t care who’s running their services, as long as the services are run properly and don’t cost them an arm and a leg. Ignore for a moment that poll after poll shows that public ownership of energy is overwhelmingly popular, and even by their own measure, privatisation of energy has failed.
And public ownership is already delivering for people across Europe. Public sector, municipal suppliers provide two-thirds of all electricity in Germany, and they are more trusted than private suppliers. In France, a similar proportion of the population purchases their electricity from a majority state-owned company. And in Italy, two-thirds of homes have their electricity supplied to them by an energy company owned by the country’s equivalent of Ofgem.
Public ownership of energy can work here too. That’s why We Own It is backing the Local Electricity Bill campaign, which, if passed, could enable local authorities who choose to become small-scale energy generators to sell that energy directly to their local communities without the financial and regulatory hurdles currently making that impossible. With the support of more than 270 MPs from all parties, the bill has a chance to pass.
But we must not stop there. Public ownership works. It’s time to run our energy in the only way that makes sense.