Ed Miliband and Rachel Reeves’ vaunted decision to “delink” gas and electricity prices is likely to raise prices. All for one marketing stunt…
Policy changes announced today ostensibly aim to reduce the frequency at which electricity is sold at gas-linked wholesale prices. The government is doing two things to achieve this:
There are some other piecemeal measures. As the CPS’ Robert Colvile points out, making the CfD switch voluntary will likely raise prices. Voluntary contracts will only get accepted when the fixed price beats the generator’s expected wholesale earnings so the government is likely overpaying relative to where the market would have landed anyway. Generators bullish on high gas prices stay on wholesale and those expecting prices to fall lock in a guaranteed income above future market rates at consumer expense…
That means “breaking the link” is achieved by raising the cost of non-gas electricity to consumers. A DESNZ source tells Guido bills won’t go down: “The only caveat is that raising the levy on generators might give them no choice – but you won’t see bills go down.” The source added: “It’s just a marketing exercise to justify clean power.” More hot air…
Douglas Alexander – a friend of Starmer’s – was asked on Sky News if the PM will be in post at the next election. He wasn’t so sure himself:
“I think he will. There are no certainties but of course I think he will lead and I think he should because, frankly, on the biggest call in this parliament he’s exercised the right judgment, which is to keep us out of someone else’s war.”