Miliband Warns Energy Firms After Backlash

Ed Miliband has rejected warnings his plans for an energy price freeze if Labour regains power will spark blackouts.

The Labour leader told Sky News he was serious about ending the "blatant overcharging of millions" as he brushed off criticism about the pledge.

In a surprise move, Mr Miliband vowed on Tuesday to freeze gas and electricity prices for 20 months if he becomes prime minister in 2015.

He has also now written to the "Big Six" energy companies warning that they will be "part of the problem" unless they support the move.

Ed Miliband insists it is time to "reset the market"

Firms claim it could lead to energy shortages and power cuts as the industry is starved of the investment it needs and business chiefs have also been critical.

Shares in Centrica - British Gas's holding company - were down almost 4% in early trading, and shares in Southern Electric and Swalec owner SSE fell 3.6%.

Centrica chairman Sir Roger Carr said: "We are all concerned about rising prices and the impact on consumers, but we also have a very real responsibility that we find supplies to make sure the lights stay on."

Energy Secretary Ed Davey added: "When they tried to fix prices in California it resulted in an electricity crisis and widespread blackouts. We can't risk the lights going out here too.

"Fixing prices in this way risks blackouts, jeopardises jobs and puts investment in clean, green technology in doubt."

But Mr Miliband hit back, saying: "There are bound to be people coming up with scare stories ... California was a totally different approach."

Energy firms argue they need money to overhaul UK power stations

His plans would see a price freeze from 2015 until 2017 while the sector is reformed, with watchdog Ofgem axed, firms split into generation and retail arms and competition increased.

The Labour leader insists it is time to "reset the market" and told the industry he would not help guarantee funding for its development if it does not fall in line.

In his letter, he wrote: "I appreciate that you will not welcome all aspects of this package but it is my firm view that without resetting the market we are not going to see the public consent that is required to underpin the scale of taxpayer backed guarantees for which you have argued.

"I am prepared to make the case for sharing the risks of such investment, but that must be against the backdrop of a market that customers believe works for them.

"You and I know that the public have lost faith in this market. There is a crisis of confidence. We face a stark choice.

"We can work together on the basis of this price freeze to make the market work in the future. Or you can reinforce in the public mind that you are part of the problem not the solution."

Mr Miliband announced the 20-month price freeze in his conference speech as he sought to show only his party could tackle a "cost-of-living crisis".

Pitching the next election as a battle between Tories representing the "privileged few" as ordinary families and small businesses suffer, he repeatedly declared: "Britain can do better than this."

"I will lead a government that fights for you," he vowed as he insisted he would relish a contest with David Cameron based on leadership and character.

Labour claims the freeze, to last from May 2015 until January 2017, would save the typical household £120 and an average business £1,800.

Consumer group Which? has said it will "give hope to the millions worrying about how they can afford to heat their homes" but the CBI warns it will damage Labour's "pro-enterprise credentials".

The energy sector's umbrella group, Energy UK, accused Mr Miliband of "posturing to no purpose" and warned the freeze could have drastic consequences.

Chief executive Angela Knight said: "Freezing the bill, may be superficially attractive, but it will also freeze the money to build and renew power stations, freeze the jobs and livelihoods of the 600,000 plus people dependent on the energy industry and make the prospect of energy shortages a reality, pushing up the prices for everyone."

SSE claimed price freezes would lead to "unsustainable loss-making retail businesses" and suggested the Government's energy policy costs be put into general taxation instead of on bills.

"This would wipe £110 off the average person's bill and shift the cost away from those who can't afford to pay and on to those who can," a spokesman said.

Simon Walker, director general of the Institute of Directors, said: "We should think very, very carefully before piling more distortion on an already grossly distorted energy market. Price controls only add greater uncertainty to companies who we need to take the financial risks of energy investment.

Matthew Sinclair, chief executive of the TaxPayers' Alliance, said: "When the government fixes prices, it always ends in a disaster for consumers.

"Ed Miliband is sticking by the green taxes and expensive subsidies that drive up the price of energy, so at best this new policy would just store up massive price hikes for another day. At worst it could create a crisis and force the government to bail out the sector."

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