Ed Miliband, Labour leader, pledged to freeze energy bills should he come into power in the next elections. His comments came at the height of public disapproval on the rising energy bills, which politically seemed like a savvy move. However this weekend it has emerged that the comments have led a £3bn investment shortfall in the energy sector and it has contributed to a £500m windfall for profiteering hedge funds.
According to Angela Knight, chief executive of Energy UK, “The industry does not know what is going to happen and the promised price freeze certainly comes into that”. Energy UK, represents all energy providers and according to their stats, private sector investment was £13.1bn when £16bn is required to meet renewable energy targets. Due to the uncertainty in the sector, investors didn’t get the ‘stable, transparent and predictable policy framework’ it needed.
Moreover, the pledge to freeze energy prices led to a fall in the shareprice of the energy companies. Peter Atherton, investment banker at Liberum and ex-executive at National grid, stated “Following Ed Miliband’s pledge, £8bn was wiped off the value of Centrica and SSE, The price freeze was the dominant factor in that fall”. “As soon as Miliband sat down, the hedge funds started shorting these stocks. That pledge scared the hell out of investors”. To add, Atherton believes the private investment in the energy sector should be in the low £20bn, which is much higher than the figures stated by Energy UK.
Recently, the National Grid has requested energy suppliers to showcase how much unused capacity they have to cover the peak periods of Christmas. This is due to coal fired power stations getting shut down before low- carbon alternatives are being used. With a reduction in investment, this only exasperates the nation’s energy woes. According to Caroline Flint, Shadow Secretary for Energy and Climate Change, “what any investor needs isn’t short-term returns based on overcharging but long-term certainty on returns”.
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