Public Ownership of Energy Companies Is the Only Way to Solve the Energy Crisis
Energy bills are soaring, and the climate crisis is worsening. The one solution for the energy sector is to bring it under public ownership.
Energy bills in the UK will rise by £693 in April 2022. (K. Reichert)
There’s never been a worse time to run our energy system entirely around shareholders. And there’s never been a better time to run energy in public ownership — for people and planet, not profit.
As most of us in the UK are all too aware, our energy bills will rise by an astonishing £693 in April. Everyone will feel the impact, and for some, it’ll mean a choice between heating and eating. Six million households will be plunged into fuel poverty.
It’s good to see Labour and other voices calling for a one-off windfall tax on oil and gas companies of 10 percent to cut people’s bills. Of course, we need this — but the government needs to go much further. The cost of living crisis and the climate crisis won’t be solved without public ownership.
Other countries are already showing us how it can be done: a permanent windfall tax of 56 percent, driving forward state investment in renewables, running the energy grid in public hands, and cushioning households with a publicly owned supply company. We can copy sensible policies from countries like Norway, Denmark, Germany, and France instead of putting our heads in the sand.
So far, Chancellor of the Exchequer Rishi Sunak has ruled out even a one-off windfall tax — but he has plenty of time to change his mind as the full damage of the energy bills hike becomes ever clearer. By April 1, We Own It is calling on him and Business Secretary Kwasi Kwarteng to make a public commitment to the following four steps.
Introduce a New Permanent Windfall Tax on Oil and Gas Companies, at the Same Rate as Norway
Natural resources like oil and gas, wind, sun, and hydropower belong to all of us if they belong to anyone — but right now a handful of shareholders are profiting while ordinary households suffer.
Research by Common Wealth shows that oil and gas companies have handed out almost £200 billion to shareholders since 2010. £20 billion is needed to keep household energy bills at their current level while prices are high — and Shell and BP’s profits since 2010 would cover that amount more than seven times over. This year they are expected to make a further £40 billion in profits, and for the last three years they’ve paid no corporation taxes on their North Sea operations.
The UK has won nature’s lottery with oil and gas in the North Sea and huge potential for wind and hydropower. But we’re squandering it. Oil and gas companies operating in Norway pay a corporation tax of 22 percent and a special tax of 56 percent. In other words, there’s a permanent windfall tax. For every £100 Norway collects in taxes on barrels of oil in the North Sea, in the UK, we collect only £8.
Norway first invested in developing its hydropower, so today 98 percent of the country’s energy is renewable. It then used its oil wealth to set up Statoil (now Equinor, 67 percent owned by the Norwegian state), and to create a sovereign wealth fund for the future worth $1.4 trillion. This means that in today’s energy crisis, it will pay 80 percent of people’s bills above a capped price.
The whole world — including Norway — needs to stop drilling and switch to renewable energy to tackle climate crisis. But while we’re allowing private oil and gas companies to operate, we should be taxing them at the same level as Norway, and using this money to invest in the clean, green, affordable energy of the future.
Set Up a New State-Owned Renewable Energy Company: Energy for Britain
The UK should set up a publicly owned company to lead the way on renewables and tackle climate crisis. This would reduce our dependence on fossil fuels like gas and move us faster toward renewable power like wind and water.
A publicly owned renewable energy company would work locally, regionally, and nationally to deliver a just transition. It would skill up workers, provide decent UK jobs, and level up communities. Profits can be returned to the public purse here in the UK instead of flowing out of the country.
Other countries show us this is possible. The Norwegian state owns Statkraft, the largest renewables generator in Europe (which operates in the UK). Norway is also considering setting up a state-owned hydrogen company. Meanwhile, Denmark owns 50 percent of Ørsted (previously DONG Energy), which is the world’s largest developer of offshore wind power.
Around 50 percent of UK offshore wind is publicly owned right now, but only 0.07 percent of it is publicly owned by the UK. This is a huge missed opportunity, especially for a country with our geography.
Bring the Privatized Monopolies of Energy Transmission and Distribution into Public Ownership, Saving £3.7 Billion a Year
Once energy has been generated, it needs to be transmitted across the country. The UK is the only country in Europe that has fully privatized its transmission grid (apart from Portugal, which was forced to privatize its grid after the financial crisis).
National Grid is responsible for gas transmission across the UK mainland and electricity transmission in England. You don’t have any choice about this as a consumer — it’s a private monopoly. In 2021, National Grid shareholders received £1.4 billion in dividends — money that could have been reinvested back into the system.
A handful of privatized distribution companies also take the energy — gas and electricity — from the power stations to your home. Shareholders from around the world profit from these monopolies. For example, if you’re in the North East, your electricity is delivered to your home by Northern Powergrid. This company is owned by American conglomerate Berkshire Hathaway, which is owned by US billionaire Warren Buffett. If you’re in London, the South East, or the East of England, your electricity is delivered to you by UK Power Networks. Last summer it paid its billionaire Hong Kong owner, Li Ka-shing, a £237 million dividend for the second year in a row.
If we brought our energy networks — transmission and distribution — into public ownership, we’d save £3.7 billion a year. This money could be used to bring down energy bills and/or to invest in renewable energy. The government would have to buy out the companies, but this investment would pay for itself in around seven years. It makes no sense to keep these private monopolies working for shareholders instead of the people of the UK.
Give People the Option of a Publicly Owned Energy Supplier
Now is the perfect time to create a publicly owned supply company that people can rely on, working for the public, not for shareholders. This company can make sure people aren’t ripped off, plan for fluctuations in global energy prices, and invest in renewable energy.
This is already normal in other countries. In Germany, France, and Italy, most people already get their energy from a publicly owned company. Research shows that prices are 20-30 percent lower in systems with public ownership. In Germany, two-thirds of people have municipal-owned electricity. In France, two-thirds of people get their energy from EDF (Électricité de France, Electricity of France), which is 80 percent state-owned. The government has decided that EDF will take a hit to cushion households — so energy bills won’t rise by more than 4 percent.
In the UK, forty energy supply companies have gone bust recently, affecting nearly 6 million customers. The market is in chaos. Right now, the government is either just letting them collapse or stepping in to bail them out. For example, the government has loaned at least £1.7 billion of public money to keep failed company Bulb afloat (equivalent to more than £1,000 per customer).
It’s hugely wasteful to spend public money rescuing private companies and getting nothing back. Creating a publicly owned energy supply company is an easy way for the government to provide a public option for people without having to buy out existing companies. If and when private companies fail, their customers will be transferred to the publicly owned provider.
The energy crisis is complex, and price rises have been caused by a number of different factors. Public ownership isn’t a silver bullet — but it is a vital tool that government could use to reduce people’s energy bills now and plan for a greener future.
Urgent action is desperately needed both to make people’s lives livable, and to tackle the climate crisis. The government wants to ignore the role of ownership, but it can’t be ignored. It matters who our energy system is working for and who is picking up the cost. Now’s the time to fight for an energy future that works for all of us.