The winter of 2021/2 is not being kind to those on low incomes. As the East Anglican Daily Times reports, the ‘Cost of Living Catastrophe’, brought on by ever-increasing fuel prices, is dragging more people into debt and fuel poverty. The reasons are complex, with the majority of reports in national media all citing the cost of gas.
The UK is more reliant than other European nations on natural gas for the generation of electricity, with over 40 per cent of our electricity being created that way. This was a result of a decision towards the end of 2000 under the Blair administration. It was considered to be a better alternative than simply supporting the existing coal-fired power stations, and offered lower energy costs given the price of gas in the UK at the time. It promoted competition in the market and led to the expansion of gas power in the UK. Whilst it did cut greenhouse emissions in comparison to coal, it was not the move to renewables that environmental campaigners had hoped for; it was, however, something that Enron really did want.
Yes, that Enron.
Often when we know a company name, it is due to intelligent advertising, or due to our use of their products, but once in a while, we know the name of a corporation for a different reason. Such is the case with Enron. We may recall that it was an American power company that did something illegal with its accounts, and when it was found out, back in 2001, it went bust almost overnight, in one of the largest corporate bankruptcies in U.S. history. Many of us may know that this event cost a lot of investors an awful lot of money, and some people in Texas their jobs, but we may not realise it had an impact in the United Kingdom.
Yet it did.
Enron, along with other power companies, and supported by political pressure from the United States, where they financially contributed to a number of political campaigns, had lobbied hard in the mid to late 1990s for the UK to lift its moratorium on building new gas-fired power stations. This change in policy resulted in new power stations being built, but also meant our electricity prices were now susceptible to increases in the price of gas.
Twenty years later, this means we have more people at risk of being in fuel debt. It also meant that we had an issue of over-supply, which forced prices down and meant a great deal of corporate debt could not be paid. In fact, it would be this very situation that caused another Texan power company, TXU Europe, owner of the former Eastern Electricity and one time shirt sponsor of Ipswich Town Football Club, to close its own doors shortly after Enron.
To be clear, whilst in the wake of the scandal there were whispers of corruption within Whitehall, these were never substantiated. It transpired that all that had happened was that a lot of companies had simply been very good at lobbying Government.
While this may sound like an abstract political / economics lecture, a physical reminder of this situation can be found on the Lincolnshire and Norfolk boarder. There, on the banks of the River Nene, you will find Sutton Bridge Power Station, a gas fired power station which opened in 1999 and which was built by Enron. It once reportedly produced two percent of the nation’s power. However more recently, even during the recent energy crisis, with capacity stretched to meet demand, it sat dormant with its various owners constantly struggling to make it viable.
Spiking fuel prices
Elsewhere, 28 energy supply companies ceased trading between 1 January 2021 and 1 December 2021, with the loss of jobs and incomes. This was due to wholesale gas prices increasing 250 percent in 2021. But due to a government energy price cap, they were unable to pass the rise onto consumers.
Twenty years have passed since Enron collapsed, and, despite being in the space age, we now face the Dickensian problem of keeping the most vulnerable in our society warm and safe. A generation after the decisions above were made, we find ourselves in a situation that the move to gas was supposed to prevent. We face higher prices for electricity and fuel insecurity because we are so reliant on gas imports.
We also still need to remove the greenhouse gases from our energy generation. It feels like an exercise in futility. A stark example is the Sutton Bridge Power-plant. Today it sits, ironically surrounded by renewable energy generation. Like a forgotten parody or tribute to the whims of Don Quixote, our politicians sought to joust with giants, when perhaps they should have been waving at windmills.