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Home > News and Reports > OECD chief argues against energy price cap
Dec 16, 2018
OECD chief argues against energy price cap

Labour’s plan to cap energy prices has recently been deemed unwise by the secretary-general of the Organisation for Economic Co-operation and Development.

In an interview with BBC1 last week, Ángel Gurría, secretary-general of the OECD, said that putting a cap on energy prices for nearly two years as proposed would negatively affect firms and deter investors.

Gurría’s comments support claims made by the Tories that the promise of an energy cap, which was successfully revealed by Ed Miliband at the Labour conference, is not an economically sound decision.

According to Miliband, Labour would initiate a price freeze on energy bills after the general election for a period of 20 months, providing the party with enough time to draft and pass legislation that would restructure the energy market to create added competition and increase consumer protection.

Gurría, however, believes Labour’s policy could raise wholesale energy prices and cripple energy companies.

“If you freeze the price of energy and the international price of energy rises, it means there’s going to be a very big difference to pay,” Gurría said.

He continued, “Who’s going to pay the difference? Well, are you going to ask the investors to take the difference? Well, you know they’ll probably go bankrupt. How are you going to get people to come in and invest to get their money back in 30, 40 years’ time, when you are saying there’s going to be a freeze? I think this is simply not consistent, not economically objective.”

On the same programme, Paul Massara, chief executive of npower, rejected Labour’s claim that energy companies are profiteering from increased energy prices. “We’ve had lots of speculation and, quite frankly, wild talk without people looking at the facts – and the facts are that we lost money in the retail business in 2009, 2010 and 2011,” said Massara.

“In 2012 we made about a 3.5% margin. That is hardly excessive. Unfortunately, the political dialogue right now means that with rising bills they want someone to blame and the suppliers are the easiest thing to shoot at,” Massara exclaimed.

As figures highlight the near £11bn devaluation of energy stocks over the past two months, Centrica chairman Sir Roger Carr told reporters that an attempt to cap energy prices was not only illogical, but would threaten the “financial fabric” of the UK’s energy companies as well.

Vincent de Rivaz, EDF Energy’s chief executive, recently proclaimed on BBC’s Andrew Marr show that energy prices were “hurting” UK consumers. According to Rivaz, the energy companies should “join forces with Government to bear down on costs.”

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