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Labour’s Promise to Freeze Energy Prices could Harm Energy Investment

Last week, at the Labour Party’s annual conference, leader Ed Miliband announced that if victorious in the 2015 general elections, he will freeze energy bills.

This claim has faced much criticism but he is standing by his decision, claiming that “we are absolutely confident because we've done all the figures, we've looked at all of the issues.”

Some people have warned that forcing energy companies to freeze their prices, regardless of the change in the cost to produce energy, could put future energy supplies at risk, and scare investment away from the energy infrastructure sector.

Related article: Despite Shale, OPEC Still Matters

Miliband has accused energy companies of overcharging businesses and consumers for too long, and blamed them for adding to the poor economic situation that the UK is currently suffering.

“There’s a cost-of-living crisis in this country. Energy bills are a big part of it.

For too long the companies have been able to over-charge people. Somebody's got to stand up and be counted.

That's why we'll freeze energy bills until the beginning of 2017 if we win the election. That will benefit 1.5 million businesses across our country, make a big difference to them.

We're absolutely confident the companies can stomach this, can make this happen, and we're going to make this happen.”

He has dismissed critics who have suggested the energy companies might work together to increase prices just before the freeze in order to secure the highest possible price for the length of the freeze. “If they try and do that, that is illegal. They can't do that.”

Labour believes that by freezing energy prices they could help to save UK businesses £1.5 billion.

Related article: Canada Continues Wooing Asian Energy Markets

But John Fingleton, the former head of the UK’s competition watchdog, suggests that Labour’s proposed price freeze will not work. Claiming that “in the long term it will harm consumers, and taking political responsibility for prices you cannot ultimately control is quite risky.”

Energy UK, a trade body that represents the six largest energy firms in the UK, has warned that if prices to generate electricity increase, without the ability to push these costs onto consumers, the jobs of the 600,000 people employed by the industry could be put at risk.

By. Joao Peixe of Oilprice.com



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