Should the UK nationalise energy suppliers to lower bills?

Energy prices are expected to increase significantly in 2022. In recent years, we have become accustomed to lowering prices on comparison sites. We can choose from many different energy providers, just like we do with auto insurance. However, it looks like there won’t be any cheap energy at all this year.

The annual energy cost for households could reach £ 2,000 in the coming months. In response, energy suppliers are urging the government to do something and crisis talks are underway.

The government has already stepped in to save the energy sector, but does that mean that public energy supply is the solution?

Fuel poverty

Rising energy prices lead to fuel poverty. This means that people with the lowest incomes have to choose between heating themselves and eating.

Benefits, pensions and the minimum wage take into account the basic cost of living. If energy providers increase their prices further, lower incomes will lag. More and more households will experience fuel poverty as prices rise.

Many more of us are working from home now. Therefore, employees pay extra for heat and electricity during the day – at a higher rate.

Failed energy providers

More than 20 energy companies went bankrupt in 2021. Bulb is under special administration. This means that the government has already taken over the business, thus avoiding dropping customers or transferring them. Fortunately, Bulb was even able to pay the promised Warm Home discounts.

Other energy companies, like Ecotricity, have asked for public funds to support energy providers. Taxpayers are expected to provide energy companies with a £ 20 billion loan. Given this, it seems likely that enthusiasm for public energy could increase.

Further price increases

The global cost of energy will affect Ofgem’s decision to cap energy prices in April. Currently, energy suppliers are not able to raise prices enough because they cannot at the moment pass on the full costs to the consumer. Therefore, Ofgem is very likely to raise the energy price cap. This could mean that consumers have to dip into their savings or use a credit card to pay their bills.

Energy bosses are calling on the government to protect consumers from future price hikes. Perhaps that will force the government to bridge the gap indefinitely.

Energy efficiency and environment

With many different energy providers, efforts to reduce environmental impact are not as straightforward as they could be. For example, the adoption of smart meters, solar panels, heat pumps, and insulation may have progressed faster with a nationalized energy industry.

However, one criticism of state-owned enterprises is that they become poorly managed and constitute a burden on taxpayers, while private enterprises are more successful.

Concerns about climate change and rising costs are putting enormous pressure on energy companies. For example, Bulb’s failure proves that planet-friendly companies can fail customers and shareholders.

In these times, private energy providers may not be able to handle such extreme long-term challenges.

Nationalization of energy suppliers and shareholders

In 2019, Jeremy Corbyn pledged to nationalize energy providers and other industries. At the last union conference, members voted to maintain this policy.

It is even more unlikely that a future Labor government will abandon the idea after this crisis. In this case, shareholders would be compensated at market value.

For shareholders, the timing of any future public ownership would be crucial.

Nationalization of energy suppliers could lead to lower bills

A domestic energy supplier may not drive prices down immediately because world prices are so high. However, it could provide more stability.

Ultimately, a public energy supply could become as normal as public roads. The energy managed by the government can be financed in part by taxes. That could mean lower energy bills overall.

About the Author

Some offers on The Motley Fool UK site are from our partners – this is how we make money and make this site work. But does this have an impact on our grades? No. Our commitment is for you. If a product isn’t good, our rating will reflect that, or we won’t list it at all. Additionally, while we aim to showcase the best products available, we do not review every product on the market. Find out more here. The above statements are owned by The Motley Fool only and have not been provided or endorsed by any bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of the board of directors of The Motley Fool. The Motley Fool UK recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard and Tesco.