Ofgem says current market system for energy supply will lead us to disaster

[Strategist]

Is it me, or is it significant that the energy regulator Ofgem of all people appears to be saying that the current "free market" system for electricity and gas supply is leading us into an energy crisis, and that renationalisation may be necessary?

http://www.morningstaronline.co.uk/index.php/news/content/view/full/86404
http://www.guardian.co.uk/business/2010/feb/03/energy-bills-unaffordable-system-overhaul

I can't say with any great authority what the report says, but I'm getting the impression that there appears to be some recognition that under the current system the asset that they got off the nationalised CEGB at privatisation has been milked & sweated, the punters have been gouged, they've siphoned off all the profits to themselves and the city, pissed it up a wall, and now the system is knackered, there's no way they're going to invest in the new equipment that is required without a much stronger guarantee of risk-free profits than their own beloved "free market" can provide. 

I know there is more rejoicing in the kingdom of heaven when one sinner repents etc, but surely we must insist on some comeback when Ofgem and the industry turn on a sixpence in this way and suddenly acknowledge that they have been talking shit for years & years.  It has been plain as a pikestaff for years to anyone with a longer forward horizon than this year's executive bonus, that the current system has been generating too much in the way of profits for absentee landlords and not enough of the necessary investment in the system (and that which there has been, has been of the wrong type, burning up our scarce and precious natural gas to generate electricity, rather than investing in renewables).

I'm glad renationalisation is on now on the table at least (although I fear both New Labour & Tories will fall for the inevitable barrage of lobbying and bribery and grant the private sector guaranteed risk-free superprofits), but I do feel we are entitled to some retribution for all the years we have had to suffer this market ideology being shoved down our throats, despite the obvious evidence that it was leading us into a total mess.   

[Brigg57]

The most important thing about that report is the fact that a significant proportion of the British population won't be able to afford the high price of energy in coming years.

That means it may be too expensive for a lot of people to heat their homes, or light them, or enjoy the basic facilities of life.

The deep public spending cuts we're about to endure are probably going to be followed by very high inflation. A double whammy. A very important reason for the Left to wake up - just a little.

John Stuart Mill used to call the Tories 'the stupid party'. To me, this has been an apt descrition fo he Left for quite a while now. Please..wake up.

[Johnnywas]

Strategist

one of issues is that energy traders have a vested interest in underproviding  energy supply to drive up prices

theres a large  body of economic evidence which explains the behavior of monopolies and oligopolies

if this all seems rather academic witness the behavior of Enron traders caught on tape by CBS-
 
http://www.cbsnews.com/video/watch/?id=620639n&tag=related;photovideo

The tapes, from Enron's West Coast trading desk, also confirm what CBS reported years ago: that in secret deals with power producers, traders deliberately drove up prices by ordering power plants shut down.

"If you took down the steamer, how long would it take to get it back up?" an Enron worker is heard saying.

"Oh, it's not something you want to just be turning on and off every hour. Let's put it that way," another says.

"Well, why don't you just go ahead and shut her down."



j

[Jon Teunon]

The privatisation of our utilities were carried out for political reasons which relied on the Efficient Markets Hyopotheosis as justification. As Jwas highlights, the claim that prices would be kept low through competition of course didn't allow for oligopolistic currents to more than counter this, and a lot of people have made themselves very rich for very little contribution to society as a whole. Thatcher's government also effectively squandered these natural resources, by selling them off to the oligopolies, and used this money to keep taxes low - which disproportionately beenfited the more wealthy sections of the country who in return continued to vote for the Tories, and later for New Labour as well.

The consequences of this has been to exacerbate income differentials in the UK and as Brigg points out to increase the likelihood 'that a significant proportion of the British population won't be able to afford the high price of energy in coming years.'

Briggs wants us to concentrate on the latter point - which would suggest that their energy supply will have to be subsidised by the wealthier sections, in one form or another. Any renationalisation of utilities would have to hold this in mind - and reclaiming the ill gotten gains of the energy asset strippers should be a secondary concern. I.e. it should only be done if it can be shown that the poorest will directly benefit. But what a mess we're all in, because of the previous 30 years of politically inspired economic propgaganda! Where do we go from here?

[wolfysmith]

Thatcherite privatization was driven by the need to release state assets into the market in order to extend and maintain profits and capital accumulation for international finance capital at the expense of investment in the social and ecological development   projects. As a consequence the revenue from North Sea Oil and Gas has gone to globalized finance capital rather than building for the future needs of Britain. As Strategist says its good to see Ofgem pointing out what socialists knew all along, but the sad thing is that all that money (capital) has been robbed from the British people thanks to Thatcher, Major and Blair and as Brigg points out energy in the next ten years will become so expensive that probably a third or even half the population will be unable to afford basic lighting and heating and as he also points out after two decades of low inflation we are also probably entering a period where we face either high inflation/stagflation or high interest rates which will probably mean extended economic recession. Johnnywas is right to make the link with Enron and monopolies and oligopolies this is the very thing that Marx and Lenin were predicting, particularly Lenin in ‘Imperialism the Highest and Final Stage of Capitalism’. We could and should have used the capital to invest in wave energy and wind turbines along with a program of solar panels for domestic use as part of a planned programme of state investment for the future. Well the future has arrived and as Strategist says ‘they've siphoned off all the profits to themselves and the city, and pissed it up a wall’. Where do we go from hear, For a start we have to show the people of Britain how the elite who they have entrusted to run Britain for the last thirty years Tory and New-Labour have squandered the natural resources of Britain or plain given them away to global capitalists, with the attitude Sod the people and the future needs of our country, lets make one hell of a profit whilst it lasts and don’t worry about the future that’s somebody else’s problem. Rosa Luxemburg understood this a hundred years ago so I would say John Stuart Mill was correct when he called the Tories 'the stupid party', unfortunately this includes all those committed to free market capitalism. The Left may struggle to get their message across because the media is controlled by the capitalist elite rather than the it being a case of Marxist and non-marxist not recognizing the problem of social and eco-logical development it’s a case of they are not allowed to put the case for socialism to the people other than in the left-wing press and academic books which will not be read by anyone outside the left where we need the alternative to be heard. But my guess is the fixes and fudges that have kept the ‘wolfie’ from the door of capitalism will no longer work and socialism is going to come back onto the horizon as people realise capitalism cannot solve the social and economic problems that it has produced. As Jon Teunon says ‘what a mess we're all in, because of the previous 30 years of politically inspired economic propaganda! Where do we go from here?’

Social ownership and state planning will be needed along with democratic control and accountability. Production for the purpose of profit for private capital is the problem not the solution, we know it the people need to know it and then to demand a government that will act in the interests of the British people not global finance capital.

[Strategist]

The most important thing about that report is the fact that a significant proportion of the British population won't be able to afford the high price of energy in coming years.

We have to absolutely resolute and say that fuel poverty will not be tolerated in this (still rich) country - but, neither will fuel profligacy.  At some stage may some kind of guaranteed fuel ration have to come into play? (eg something that gives you your first x therms cheap and a lot more expensive for every therm above that threshold).  It seems to me that renationalisation will be central to being able to implement the kind of policies that will be needed. 

Some schemes, such as the Green New Deal's proposed massive programme of insulating & making energy efficient all British housing, are win-win, addressing cold houses and also cutting fuel use.  We could get on with that tomorrow - see Create a Million Climate Jobs Now   
http://www.campaigncc.org/greenjobs
 

[wolfysmith]

My guess is that a Green New Deal is essential and as it says creating a million jobs to satisfy a social and economic need as a part of a strategy for long term sustainable development. As it says on the website factories production was transformed in months for the war effort. Both the first and second world wars show what is possible when a government has the will and support of the people. But it also demonstrates the need for state planning, and we know even then the profiteers abused the system so ultimately social ownership of production is the best option in a world of limited resources. This is the reality we are now approaching and a capitalist system which relies on the market mechanism won’t cut it. What is needed is the mobilization of the British people for an equitable and sustainable solution before it’s got to the stage when we are all fighting over the scraps that are left from one hundred and fifty years of unsustainable development based of capitalist accumulation for profits by a greedy elite. It cannot be overstated because it’s not a cliché but the choice is between barbarism and socialism, the question is how do we make sure its socialism? First we have to convince the people that capitalism is leading us towards total social and economic collapse, then the labour movement and a coalition of the broad left need to lead the people against the forces of the capitalist elite who will not want to give up the privileges and wealth that they have expropriated from the people and natural environment. Once this has been achieved then a left government will be able to implement the strategy for an eco-socialist social and economic policy. Until then we are pissing in the wind and you know what happens then, it all blows back at you and its not very nice.     

[wolfysmith]

The Tories are becoming sceptical about global warming and more people identify with the Conservative Party than the Labour Party ideologically for the first time in 20 years probably because new-labour is basically conservative so they probably think why not vote for the actual conservative party, and people have lost the sense of belonging to the community they live in. This was always the Thatcherite project ‘no such thing as society only the individual’. The social revolution achieved after 1945 by the Labour government was built on the sense of solidarity produced by two world wars, the NHS, state pensions, universal education, national insurance system.

The last 30 years have been about the individual rather than the collective; we now face a social, economic and ecological crisis which can only be solved by social ownership and planning. Such collective values are an anathema to the conservative view of the world. 
The Tories and capitalist elite rob workers' pensions and erode the value of the state pension hand the NHS over to private finance capital along with gas, electricity and water.

 
The Tory answer will be the same as before, ignore the future and retreat into individualism and will use the latest controversy over statistical errors to promote rejection of the general scientific consensus that global warming and resource depletion are a fact and due to human activity. Recalculated figures didn’t change the general trend just the speed at which it is happening, the sceptic’s claims fall apart when examined scientifically. The New Economics Foundation report Growth Isn't Possible: Why Rich Nations Need A New Economic Direction concludes that current patterns of economic growth are no longer possible.

More than five million homes in Britain are living in fuel poverty the market will not solve this in fact it will make it worse in the same way we have seen inequality grow in Britain since 1979. That’s the reality that socialist need to put to the people of Britain, chose the neo-liberal/neo-conservative route and you chose to throw away any hope of a decent future for your children and grandchildren. Are people really that self centred that they would rather carry on as we have for the last thirty years heading towards a social, economic and ecological crisis unprecedented in human history or given the facts and the alternative will they chose human survival and sustainable development. Is humanity the first animal capable of altering its fate or are we no better than the dinosaurs, on the road to extinction but of our own making. How thick is that?

I am with Rosa Luxemburg lets chose socialism rather than Barbarism

[wolfysmith]

Reform or Revolution?

‘The struggle for reforms is its means; the social revolution, its aim…….The struggle for reforms is its means; the social revolution, its aim’

‘Only when the great mass of workers take the keen and dependable weapons of scientific socialism in their own hands, will all the petty-bourgeois inclinations, all the opportunistic currents, come to naught. The movement will then find itself on sure and firm ground’ (Rosa Luxemburg)

[Brigg57]

Strategist, Wolfy,

Strategist - you're absolutely right about the use of energy. There is a basic use (which looks like being denied to the less well off) and there is excessive use (in which the better off tend to indulge).

Nationalisation I'm not happy with. It places too much trust in the British State. I prefer the term socialisation, in which energy is planned for the international community. I don't see you disagreeing at all with socialisation, but planning within one nation - the traditional socialist/social democratic approach to state ownership - strikes me as inappropriate at such a transitional time as out own. The State can only act according to its nature - as a property-owner's democracy (NOT the same as that hackneyed phrase a bourgeois democracy, please).

Wolfy, this is a comradely request from one socialist to another. If you're going to repeat barbarism or socialism to everything, it's going to sound like the night where all cats are black. The alternative isn't as  clear as you seem to think, and the mere repetition of a phrase turns it into a cliche. Specific evidence is required. My own feeling sometimes is - to paraphrase that inn-frequenting bar-brawler Kit Marlowe - "this is barbarism nor are we out of it"

[wolfysmith]

Brigg,

Ok it seems a cliché but at the end of the day we are faced with a system which is run by the capitalist elite, more and more through privatisation its undemocratic (governance by the managerial class as opposed to democratic government by elected representatives) as the reestablishment of class power. The primary function being economic efficiency in order to maximize profits at the expense of workers and the environment, classic contradictions and examples of alienation and estrangement under the dictatorship of capital. Rosa Luxemburg highlighted the contradiction between the social-democrat reformist road of Bernstein’s theory as opposed to the revolutionary road which see social reforms as a means of the class struggle with socialism as the goal rather than bourgeois radicalism and bourgeois democracy. Capitalism is in a state of crisis socially, economically, ecologically and politically, a crisis which it’s incapable of solving. The market and the bureaucrats, accountants, managers and technocrats of capitalism cannot solve the basic contradiction between production based on profit maximization and production based on social need and environmental sustainability. So I would argue it’s not a cliché to say socialism is our only hope of survival as a species even if people chose to ignore any moral argument for socialism, self preservation should carry the argument that its better Red than Dead so I am still of a mind to agree with Lenin and Luxemburg in saying it’s a choice between barbarism and socialism. We no longer have a choice which allows exponential growth based on the market as arbitrator under the dictate of the capitalist elite. We replace the capitalist system or we allow the capitalist class to destroy the ecosystem that supports human existence. With no place to go, Mars may have water but it’s a bit cold and Venus to hot with an atmosphere that is already mostly carbon dioxide. So I go for the option of getting rid of the capitalist class they can go to Mars and Venus if they choose.

[Brigg57]

Wolfy,
your argument is on a very general level. That's fine. We all start from having a general analysis, though to tell you the truth mine is a bit up in the air, and your arguments are (as you acknowledge) very old now. I use these forums as a useful workshop, in which I can bounce off (most) others.

The point I make is to do with the specific situation of energy and the role of the State. That's why I warn of repeating a phrase until you'r only saying it's the night where all cats are black. It wa smeant as comrafedly - of a sort. I won't make it again.

Nationalisation, the nature of the State (I tentatively call it a proeprty-owner's democracy, which is NOT the same as a bourgeois democracy), the transitional phase in which Britain is being (very oddly) integrated into the EU, all require a very new analysis - at least in my opinion.

[wolfysmith]

We have to start by taking energy back under public control, i.e. re-nationalize gas, electricity and coal. But this time it should be more accountable to the people than it was in its previous incarnation and probably should be under one energy body which can then be split into its constituent parts so that it’s more manageable and the overall policy for Britain’s needs should be coordinated with the needs of the other EU states. This is where the British left will need to work with the left in Europe over strategies for greener energy across Europe. As you say my arguments come from a general analysis as for them being ‘very old’ the eco-logical issue is more dominant now than it was when Lenin and Luxemburg wrote, although I think she was ahead of her time on the eco-logical front. But I would still argue the general premise that the market will not and cannot solve the contradictions that have lead to the crisis in energy consumption and when the capitalist seek a solution from nuclear energy rather than green energy its because they seek the super profits that come from the high-tech nuclear industry backed up by state guaranties, nothing to do with solving the energy problems but everything to do with capitalism. Whereas wind and wave power although relatively new-technologies in the sence that they use aerospace knowledge of blade design are basically low-tech industries and labour intensive, perfect for achieving sustainable development and creating employment but poor from the point of view of making super profit.   

[rob9443]

Jeremy Legett warning about Peak Oil

http://www.guardian.co.uk/environment/cif-green/2010/feb/10/oil-crunch-peril#start-of-comments

Imagine what oil at $200 a barrel will do to the economy...

[Strategist]

Brigg: 

Nationalisation I'm not happy with. It places too much trust in the British State. I prefer the term socialisation, in which energy is planned for the international community.

Interesting! Yes, more than happy to find out more about that idea.