David Cameron, Britain’s new prime minister, may have succeeded in bridging his country’s political power gap, but another looms that could very quickly short-circuit the Tory leader’s grip on national power, unless his coalition government gets real – and quickly – over energy and environment.
For one thing, the sale of two-thirds of the nation’s power utilities to European competitors has effectively led to Brits subsidizing their EU neighbors’ energy costs; for another, just as the next election season rolls around in five years time, he is likely to find his autocue a little difficult to read as the nation’s lights start going out.
Power Game
Big Oil is the usual whipping boy for the public when it comes to energy. But British energy consumers might feel the time is ripe to turn up the heat on Big Power.
While UK energy prices spiralled upwards by 16.7 percent in 2009, the average increase across the rest of the European Union was a mere 3.8 percent. All of this while global energy costs generally fell by around 40 percent. It is a price differential that could not fail to bite into British industrial competitiveness. And in May it did exactly that, putting an end to a 100-year association between the American owners of Celanese Acetate and its British subsidiary – a company that once employed 20,000 people – now due to close at the end of the year. The Celanese Corporation will concentrate production in Belgium, the United States and Mexico, where energy costs are much cheaper.
Bob Walters, general manager of the Derby-based British company, was compelled to admit that the British arm’s operating costs “remain the highest in Celanese Acetate.” A spokesman for the company told the local media that, “A lot of work was carried out to reduce costs but there was no way to make any inroads into reducing our fundamental energy costs, which are much higher in the UK than overseas.” He confirmed, “The biggest differential in costs between ourselves and other sites in the group is the price of energy.”
George Cowcher, Chief Executive of the Derbyshire and Nottinghamshire Chamber of Commerce, was equally unequivocal, “Our energy prices are substantially higher than in France, Germany and Belgium. Global companies operating here will put information about their sites into a spreadsheet and if the UK operation is the most expensive it will be the one that goes.” Cowcher adds, “The concern is that other multinationals will do the same.”
Conway Standing, managing director of the commercial energy broker, Utility Exchange Online, concurs. “Most of Britain’s energy companies are owned by German, Spanish and French companies which have kept any increases lower in their own countries but allowed the prices in the UK to remain high.” He adds, “Research shows that, since last summer, wholesale energy costs have fallen by 40 percent but most of the big energy suppliers have failed to pass that on.”
Early in 2009 suspicions that Britain’s mostly foreign-owned power utilities were allowing UK energy prices to rise, while keeping prices in their home countries low, appeared confirmed when the OECD Consumer Price Index report showed that the German, French and Spanish owners of four of the UK’s Big Six appeared to be doing exactly that. The Index revealed UK energy inflation running at a high of 12.1 percent in the previous year, though it actually fell by 0.6 percent in Germany, 6.5 percent in France and 7.2 percent in Spain. While the two British owned power utilities British Gas, owned by Centrica, and Scottish & Southern Energy (based in Perth, Scotland) eventually did announce a 10 percent cut in prices, none of the other four followed suit. E.ON and NPower are based in Dusseldorf, Germany, EDF is French and Paris-based, and Scottish Power is owned by Iberdola, the huge Spanish utility company. In the year 2008-9 Britain saw the highest price rises in Western Europe.
But Britain’s energy problems don’t end there.