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Monday, January 07, 2008

Government play blame game on power price rises

Obviously stung by the media backlash against disproportionate price increases for gas and electricity, the Chancellor of the Exchequer is now seeking an urgent meeting with Sir John Mogg, chair of the Gas and Electricity Markets Authority, and Alistair Buchanan, chief executive of Ofgem, the regulator for the industry, to ask whether the rises are justified by the recent increase in oil and gas prices. This is despite the fact that energy minister, Malcolm Wicks, indicated just 24 hours earlier that ministers were unlikely to intervene.

Mr. Darling appears to have been spurred into action by a decision by npower, the fourth largest supplier, to raise some tariffs by as much as 27%. The Guardian reports that Ministers know there is a time lag before electricity and gas companies have to pay higher prices for oil and gas because of long-term contracts setting a particular price, and are suspicious about the need for rises exceeding 20%.

Although it is always nice to see Ministers seeking to intervene in these sort of matters on behalf of some of the most vulnerable people in our society, there is a nagging suspicion that they are just going through the motions in an effort to shift blame. However, it is going to be very difficult to do this when they themselves, appear equally culpable for rising fuel prices.

That is because, as the Guardian also reports, consumers may face higher electricity bills to cover the future decommissioning costs of a new generation of nuclear power stations to be announced this week by the same Government. The paper tells us that Ministers have met several electricity firms known to be interested in building up to 10 new stations and they are understood to have demanded long term commitments to guarantee their investments - expected to be about £10bn a station.

It is understood that plans have been agreed for the government to collect a fee from the companies for each unit of electricity used in British homes to build up a fund to meet decommissioning costs. It is expected this extra fee will be passed on to consumers in the form of higher bills.

In addition it is believed that if the proposed fund does not meet the full decommissioning costs then the taxpayer will have to cough up, effectively meaning that we will all be paying twice for the Government's folly, once through our electricity bill, the second to the taxman. Taxpayers will also foot the bill of nearly £1bn to compensate the community eventually chosen to host the permanent nuclear waste repository, as well as the cost of security at potential sites, the transport of waste and the extra cost of any required increase in the size of transmission lines for the national grid.

Those who complain that alternative energy sources such as wind farms receive unfair public subsidy should take note. What they get will pale into insignificance by comparison to the package on offer to the nuclear industry.
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