Supply security — a better candidate for UK state intervention?

The pledge to cap retail energy prices in UK prime minister Theresa May’s ill-starred 2017 election campaign was a distinct departure from Conservative Party economic orthodoxy. Intended to appeal to the working class heartlands of the opposition Labour Party, it was at the centre of a manifesto widely decried by the business community as the Tories’ most “anti-business” ever.

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UK energy policy for the past

The UK’s two largest political parties have proposed taking back control of energy prices at a time when they have the least power over them.

The opposition Labour party plans to create publicly-owned energy companies and an “emergency price cap” on household energy bills, according to a leaked draft version of its manifesto.

Labour declined to comment on the leaked document with a “clause 5” meeting to scrutinise the draft manifesto today.

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UK energy price cap vulnerable to spikes

A UK energy price cap based on wholesale markets could still result in substantial changes to tariffs, especially if the 2016-17 winter’s price spike is repeated.

The UK’s Conservative Party, which polls put on course to win the upcoming general election, has proposed an energy price cap to be set by the regulator. The cap is likely to be based on prices at the UK’s NBP gas hub, a trading point for wholesale gas.

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