Energy firms should be nationalised, say AOL users

Updated: 

SurveyAOL

A survey of over 7,000 AOL users discovered that by far the majority wanted to see energy firms brought back under state control. Some 65% said that the move would make energy prices cheaper.

So how would things change under a nationalised industry?


The findings

The survey found that 65% of people wanted renationalisation, in the hope it would reduce prices, while 31% felt it would make no difference, and just 4% said that the free market was providing the best solution. There is clearly a great deal of unhappiness with the way the market works at the moment, so would we be better off with a really dramatic change?

It's worth starting with how we got here. Privatisation of the energy industry started in 1986 with the gas suppliers, when British Gas was floated on the stock exchange. Electricity followed soon after, in 1990, when the assets were broken up into Powergen, National Power and National Grid Company.


Since then, the operation of the industry has clearly been far from ideal. Research from the University of Warwick and Verona University in 2008 concluded that the effect of nationalisation had been to reduce the money companies made on generating power - and increase the margins they made on selling it.

Rising prices?

There's no doubt prices have soared. In the 1990s, the energy price stayed roughly stable and gas prices fell, because of price controls and the first stirrings of competition. However, after that, things started to change.

Gas prices rose first, and around 2005, both gas and electricity costs started to soar. Lucy Darch, Director of Energy at uSwitch.com, says: "The average household energy bill has rocketed by 140% since 2004 - today we can expect to be paying £1,258 a year on average for our energy, which is a huge sum for most of us to find. Affordability is a huge concern and led to over eight in ten households rationing their energy usage last winter because of cost."

Politics

In recent months, dissatisfaction with the way the industry is operating has spilled over into politics. The coalition has pledged fairer bills and more clarity from energy firms. Last autumn the Labour Party concluded that if they were in power they would break up the big energy companies, so it would be easier to see where they were generating their profits, and whether their activities were fair.

Elsewhere in the world, there have been waves of nationalisation of energy and power companies. Just a few months ago Argentina renationalised the former state oil companies.

The flaws

However, the problem with renationalisation is that you have to assume that the state is better-equipped to run these businesses. There's a heavy question mark over whether Britain's state-owned banks are doing a better job of freeing up lending and fairly rewarding the fat cats. The headlines would seem to indicate otherwise.

Long-term prices also question what the impact of nationalisation would be. British Gas figures, revealed by parliament, show that in real terms, the price of both gas and electricity peaked in around 1983 - with gas around £640 (in today's prices) and electricity around £510. Gas prices have now scaled these same sorts of heights, and in 2011 peaked above £700, while electricity remains below £500.

So while energy prices seem impossibly high now, they were just as painful in the years just prior to nationalisation.

Mark Todd, a director at energyhelpline.com says: "The fact we have been so many price rises makes it feel like prices are going up and up. However, if you compare us to the rest of Europe, we have comparatively low gas prices, and middling electricity prices. If you compare it to somewhere where the state is very involved in the industry, like France, you're not necessarily seeing a better picture."

Alternative

Nationalisation is a huge and dramatic step. As Darch says: "It's too soon to be thinking of renationalisation – the fact is that we don't yet know what a truly competitive market could look like and the impact it could have on prices, because not enough consumers are actually engaging."

Todd agrees: "Companies have to generate a profit. If you are active in the market you'll get a better deal, if you're inactive then you're likely to get a worse deal - because you'll get more profit made from you."

Darch adds: "The old adage of voting with your feet to put pressure on companies to perform still applies, but with less than two in ten households shopping around to take advantage of lower prices the big six energy suppliers are being given an easy ride. There is currently £300 a year difference between the cheapest and most expensive tariffs on the market – this is a substantial saving and I would urge consumers to take advantage and to make competition work for themselves."

But what do you think? Do we need drastic action? Let us know in the comments.

10 of the biggest consumer rip-offs

10 of the biggest consumer rip-offs


More stories