Ed Miliband’s plan to freeze UK energy prices could lead to massive pre-emptive price hikes, blackouts, corporate insolvencies and cuts in jobs and investment, according to Scottish energy minister Fergus Ewing.
Ewing described the Labour leader’s party conference pledge as arbitrary and unworkable, citing a similar attempt in California which saw energy prices increased by 800%.
Mr Miliband pledged to freeze gas and electricity prices for homes and businesses for 20 months after the 2015 general election if his party wins power.
Announcing the policy at the UK Labour conference last week, he said the move would save the typical household £120 and an average business £1,800 between May 2015 and January 2017.
Speaking in Holyrood today, Labour finance spokesman Iain Gray said the freeze and a proposed new UK regulator with the power to control pricing could benefit consumers if they vote No to independence and if Labour wins the next UK election.
Mr Ewing proposed an alternative “super-regulator” for an independent Scotland, which would oversee water, rail, telecoms and the energy industries.
Mr Gray said: “By continuing as part of the UK, Scottish consumers stand to benefit from Labour’s commitment to freeze energy prices for two years, while a new regulator with the power to control energy prices is created. Will the minister simply match that commitment for his preferred separate Scotland and new regulator?”
Mr Ewing said: “The record of regulators in the UK when one considers regulation of banking, the railway or payday loans isn’t one to boast about. Consumer experts have said that before this freeze comes in the companies will whack the prices sky-high and companies may put off decisions by energy companies to invest in new cleaner generation capacity.
“The industry, SEE and Scottish Power have said smaller companies would face insolvency and bigger companies would have to consider energy use and jobs.
“An arbitrary price freeze has been tried before in California in 2000, which led to blackouts and an increase in the wholesale price of 800%.
“Never can I recall a measure introduced by a leader of a major political party in the UK which has received such widespread, utter and total condemnation as being completely unworkable.
“And worst of all for Scotland, such an arbitrary measure threatens to impair the essential investment in renewable energy schemes which are so important for this country.”
He added: “Individual regulators including Ofcom, Ofgem, the ORR and the Water Industry Commissioner for Scotland could be replaced with a single economic regulator to oversee the regulation of the water, rail, telecoms and energy industries.
“Further, we have established an independent energy commission with industry, academic and consumer experts to provide evidence on how we can improve Scotland’s stewardship of energy and gas regulation in an independent Scotland.”
Energy investors were instantly spooked by Mr Miliband’s pledge, with shares in Centrica and SSE dropping sharply shortly after his conference speech.
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