The big six energy providers don’t need a bailout – nor do they deserve one
As the energy crisis deepens, the UK government is frantically searching for ways to provide relief to households facing sharp increases in gas and electricity bills. In the latest development, Downing Street is said to be considering paying energy supply companies when wholesale energy prices are high in the hope that they do not pass on rising costs to consumers. When wholesale prices fall below a certain threshold, the energy companies would give money back to the government. In effect, this amounts to an emergency bailout that guarantees the income of private energy companies when wholesale prices rise.
The energy companies, perhaps unsurprisingly, support the plan and financial journalists have described it as a “radical intervention”. But subsidising energy companies is not radical in any meaningful sense of the term. In fact, the proposed initiative is firmly aligned with the status quo, in which private companies reap massive profits through the good times, and have their losses absorbed by the state through the bad.
Though the details of the latest government plan are scant, there are already plenty of reasons to be sceptical about its effectiveness in tackling the energy crisis. The first is that it comes far too late to save many of the smaller companies in the sector. Over the past year roughly half of the energy suppliers in the UK, nearly 30 in total, have already gone bust. The majority of these failed companies were swallowed up by one of the five firms that own the “big six” energy suppliers.
One of the main impacts of the crisis has therefore been to further consolidate the power of the big six in an already heavily concentrated energy sector. And at present there is little reason to believe that the
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