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SUGGESTION TO THE RT. HON. CHRIS HUHNE MP 2011

SUGGESTION TO THE RT. HON. CHRIS HUHNE MP (LD)

To:               The Rt Hon Chris Huhne MP (LD)

From:            Athinarayanan Sanjeevraja

RE:               UK Energy Sector Reform (Industrial Policy)

Suggestions:

Good Morning Sir. When I turned into BBC world, it reported that UK energy sector reform. Sir, particular privatized, regulated, liberalized model for electricity and gas based on full retail competition is broken and is damaging to consumers and the economy. The European Commission’s energy arm recently conceded that 85% of EU electricity and gas supplies are provided by no more 12 companies. For instance just think of major national champions EDF & GDF/Suez from France, ENI & ENEL from Italy and RWE & EON from Germany. If I am not mistaken, UK has half of this big implicit cartel. Investors require rock-solid assurances of investment before they’ll even think about investing because most assets in the electricity and gas industries are long-lived and specific. I hope that you better understand this concept.  

Sir, firstly you have lost the most fundamental things that a market does which is to discover prices. Secondly, you have allowed a competitive market to become uncompetitive. I don’t approve of the coalition solution though if natural gas becomes very cheap in a few years time. British electricity consumers won’t get the benefit, they’ll still pay the subsidy. It might well end up being cheaper to make one’s own electricity from the gas supply using a Stirling engine (i.e the latest gas boilers) than to buy electricity from the grid and paying the associated subsidy. 

Sir, I would like to highlight there seems to be a tacit agreement between the government and energy companies that the energy companies will be allowed to maintain their oligopoly in return for a little extra investment. I personally think this is disgraceful. The government should firstly ensure that there is a properly functioning energy market by forcing the sale of some generation capacity. It should then take set up a carbon market where the government dictates the level of emission which in turn determines the price of carbon, not the other way around. The government would have to be the final backstop that guarantees supply by building power stations itself if necessary.

Thank you very much for your kind attention Minister

Sincerely,

Athinarayanan Sanjeevraja

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