Potential benefit
Direct benefit to approximately 7 to 8 million households currently experiencing fuel poverty or energy insecurity – the latter defined as spending more than 10% of income on energy, after housing costs (around 30% of UK households).
Eliminate 30-40% profit margins through nationalisation of distribution, saving households £142 per year.
Potential cost
If funded through progressive charging within the energy bill system, the policy could be mostly cost-neutral for the government.
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Consumers in Britain are suffering under a long-building affordability crisis stemming from the structure and ownership of the UK energy sector, an overreliance on gas and the poor efficiency of the housing stock. The effects of the war in Ukraine and the COVID-19 exacerbated an existing crisis and rendered energy bills unaffordable for far too many. While bills have come down from their peak, over 10% of the population live in fuel poverty. This is a long term phenomenon that requires a structural solution.
The UK is the only country in Europe, apart from Portugal, with a privatised electricity grid (ie. the physical distribution and transmission network). It is structured into regional monopolies; a high wealth extraction by grid operators significantly contributes to consumer costs. Taking this element of the energy system into public ownership will eliminate parts of the high profit margins and amount to savings of £142 p/year for households and loosen the extractive grip of the private sector on our energy system. The National Energy Systems Operator (NESO) has already been nationalised, setting the precedent to bring more of the distribution network back into public ownership.
This should be supplemented by making energy bosses more accountable to government, including stronger powers to curb price gouging and direct reporting to ministers on the issue, ensuring that the system shifts away from profiteering and towards the public benefit. This includes using public money to support public and community ownership as part of a long-term strategy for lower bills, community wealth-building and a more efficient system.
In addition to these structural changes, we need to address prices directly. Caps on energy prices for households and firms are not uncommon and have proven effective in addressing the inflation that has defined the most recent cost of living crisis. We must replace our weak existing price cap with something fairer and more effective. All energy suppliers must be required to offer a standardised tier or sliding pricing structure. A baseline consumption level would be established, potentially adjusted for household size, property type, and—depending on data access—household income, with the first tier priced significantly below current market rates.
