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Should the UK nationalise energy suppliers to lower bills?

Sun setting over a traditional British neighbourhood.

Energy prices look likely to rise significantly in 2022. In recent years, we have become used to lower prices on comparison sites. We can choose between many different energy suppliers, as we do for car insurance. However,  it seems there won’t be any cheap energy on offer at all this year.

The annual cost of energy for households could reach £2,000 in the coming months. In response, energy suppliers are urging the government to do something about it and crisis talks are ongoing.

The government has stepped in to save the energy sector already, but does this mean that a publicly owned energy supply is the answer?


Fuel poverty

Rising energy prices cause fuel poverty. This means that those on the lowest incomes have to make a choice between heating and eating. 

Benefits, pensions and the minimum wage take into account the basic cost of living. If energy suppliers raise prices still further, the lowest incomes will be out of step. More households will be in fuel poverty as prices rise.

Many more of us work from home now. Therefore, employees are paying extra for heating and electricity during the day – at a higher rate.

Failing energy suppliers

More than 20 energy companies have failed during 2021. Bulb is in special administration. This means that the government has already taken over the company, thereby avoiding letting customers down or transferring them. Fortunately, Bulb has even been able to pay out promised Warm Home Discounts.

Other energy companies, like Ecotricity, have called for government money to prop up energy suppliers. Taxpayers are set to provide energy companies with a £20 billion loan. In view of this, it seems likely that enthusiasm for publicly owned energy might increase.

Further price rises

The global cost of energy will affect Ofgem’s decision about the energy price cap in April. Currently, energy suppliers are unable to raise prices sufficiently because they can’t pass the whole cost on to the consumer at the moment. Therefore, it is highly likely that Ofgem will raise the energy price cap. This could mean consumers having to dip into their savings or use a credit card to pay bills. 

Energy bosses are calling for the government to protect consumers from future price rises. Perhaps this will involve the government bridging the gap indefinitely.


Energy efficiency and the environment

With many different energy suppliers, efforts to reduce the impact on the environment are not as simple as they might be. For example, the uptake of smart meters, solar panels, heat pumps and insulation may perhaps have moved faster with a nationalised energy industry. 

However, one criticism of publicly owned companies is that they become badly run and a burden on taxpayers, while private companies are more successful. 

Concerns about climate change and rising costs are putting huge pressure on energy companies. For example, the failure of Bulb proves that planet-friendly companies can let down customers and shareholders. 

In these times, private energy suppliers may not be able to manage such extreme challenges long term. 

Nationalisation of energy suppliers and shareholders

In 2019, Jeremy Corbyn promised to nationalise energy suppliers and other industries. At the most recent Labour conference, members voted to keep this policy

It is even more unlikely that a future Labour government would drop the idea after this crisis. In the event, shareholders would be due compensation at market value.

For shareholders, the timing of any future public ownership would be crucial.

Nationalising energy suppliers could lead to lower bills

A national energy supplier may not lead to lower prices immediately because global prices are so high. Nevertheless, it could ensure more stability. 

Eventually, a publicly owned energy supply could become as normal as publicly owned roads. Government-run energy may be partly funded through tax. This might mean lower energy bills overall. 

The post Should the UK nationalise energy suppliers to lower bills? appeared first on The Motley Fool UK.

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