UK utility nationalisation plan unveiled by Labour

By BLOOMBERG

LONDON • Britain’s Opposition Labour Party outlined plans to nationalise large swathes of the UK energy industry if it wins the next general election, a move that would put government in control of the grid for the first time since 1990.

The measures would put the companies, that transmit power and own cables linking with markets in the European Union, under the authority of ministers in London. Labour leader Jeremy Corbyn would make the priority to reduce fossil fuel emissions and ensure heat and electricity flow to consumers at lower prices.

Companies from SSE plc to National Grid plc, who have generated £13 billion (RM69.47 billion) in dividends for shareholders over the last five years, would be compensated with bonds at a price determined by the Parliament. Prime Minister (PM) Theresa May’s government said the measures would cost £100 billion and result in higher taxes. Labour said the plan would be “cost neutral” to the public purse and help those who are stretched financially to pay for fuel.

“Our plans see climate justice and social justice as inseparable,” said Rebecca Long Bailey, a Labour MP who speaks on business, energy and industrial strategy. “It’s an insult and an injustice to our people and our planet for companies operating the grid to rip customers off, line the pockets of the rich and not invest properly in renewable energy (RE).”

While the next election isn’t scheduled until 2022, May’s grip of the Parliament is fragile enough that lawmakers may opt to call a vote before then. Industry analysts think it’s unlikely Corbyn could achieve his ambitions even if he takes office.

“The proposals that Labour are putting in are only going to cause just a huge amount of disruption, the proposal is quite complex which is going to cause a huge amount of delays which is the last thing you want when you’ve got the need for a huge amount of infrastructure investment,” John Pettigrew, CEO of National Grid said in an interview.

“You have to ask, what problem are they trying to solve? UK networks are some of the most cost effective and reliable in the world.”

The Opposition said profit from the investor-owned networks will be redirected to build out the grid to support areas where there’s potential for solar, wind and tidal energy.

Labour would create the National Energy Agency to own and maintain networks, while 14 regional agencies will take over from the current Distribution Network Operators. Additionally, municipal and local energy groups will be formed.

Labour wants to see the public ownership for the UK side of the five European interconnectors currently operation and the six that are either being built or planned.

Conservatives, who started selling state-run utilities when Margaret Thatcher was PM in the 1980s, bridled at the move, saying it would reduce investment needed to modernise the grid. The government has estimated it needs to draw in £100 billion to replace ageing coal and nuclear power stations and to modernise the grid for handling flows of RE, which fluctuate with the weather.

Bloomberg Intelligence estimates the cost to be £135 billion for buying the energy grids and water industry. — Bloomberg