‘Socialism Lite’: Britain’s Energy Policy Is A Costly Political Disaster

Britain’s ruling Conservatives have imposed some awful energy policies in recent years, but their cap on household energy bills deserves a special mention.

The scheme has been an economic loser, and now it’s becoming a political loser in ways that illustrate the dangers when parties of the right play socialism lite. [bold, links added]

That cap is supposed to limit household costs for electricity and natural gas, which most British homes use for hot water and central heating.

It’s set twice a year by the industry regulator based on prevailing global energy prices. At the last adjustment, which took effect in April, households saw their energy bills shoot up some 54%, and the October rise is likely to be about as big.

The cap traces back to 2015, when Ed Miliband, the Labour candidate for Prime Minister, proposed a limit on energy bills.

He lost that election, but his energy idea resurfaced in 2017 when Tory Prime Minister Theresa May embarked on a campaign to position the Conservatives as a kinder, gentler party.

The effort didn’t work politically. In that year’s snap election she lost the majority her predecessor David Cameron had won when he defeated Mr. Miliband in 2015.

But the price-cap notion lived on and she implemented it in 2019.

Big mistake. The cap has exacerbated economic havoc in Britain’s energy market.

As global gas and other commodity prices started to rise in 2021, energy retailers found it impossible to pass to consumers the prices retailers were paying for the energy they were supplying.

This has contributed to a wave of bankruptcies, some of which have stuck taxpayers with the cost of supplying households whose energy companies went bust.

Meanwhile, since it only raises prices at a lag rather than limiting them, the cap leaves households frighteningly exposed to recent movements in global gas prices and the high-price consequences of Britain’s domestic energy policies—and leaves the Tories exposed to voters’ wrath.

And now here comes the Labour Party to argue for making the cap a real cap by freezing it at its current level instead of allowing the next rise due in October.

This is a terrible policy that would shift the burden of rising energy costs to taxpayers, who would have to make up the gap between energy companies’ revenues under the cap and their costs on the global market.

But who are the Tories to disagree? They’re the wizards who created the cap, and they now will have to either risk bankrupting Britain’s utilities or explain to voters why the “cap” isn’t really a cap.

None of this has anything to do with increasing the supply of energy, which should have been the Conservative policy.

Instead, the party has resisted shale-gas fracking and pursued the costly fantasy of net-zero carbon emissions.

Voters don’t seem to care about Tory’s green ambitions, but they definitely blame Tories for soaring energy costs.

The moral: Even half-hearted energy price controls are political losers for conservative parties. More energy supply or bust.

Read more at WSJ