Cooking the Books 1 – A fair price for power?
This month the limit on what utility companies could charge for gas and electricity was due to go up by 80 percent. In fixing the limit, Ofgem takes into account the price that utility companies have to pay when buying gas on the international market. This has shot up, the main reason being the bans and restrictions on buying gas from Russia which the US and its military allies imposed in retaliation for Russia’s invasion of Ukraine and Russia’s counter-retaliation.
For many decades importing gas from Russia has been an obvious choice for European industry and energy suppliers, obvious because it has been the cheapest. Reducing the supply from there has meant that other sources have had to be found which are more expensive and whose price has gone up still more due to the sudden unexpected increase in demand. When the international price of the gas goes up, Ofgem’s remit is to calculate how much utility companies can pass on to households up to a limit that preserves the level of profits that they had been making.
Having to pay more for energy represents a reduction in workers’ standard of living as it means we have less to spend on the other things we must consume to reproduce the labour power we sell to some employer. If nothing is done, the inevitable consequence is labour market pressure to increase wages. In view of the size of the increase, there was also the prospect of widespread social unrest.
The government therefore decided to temporarily subsidise energy bills through limiting the price that utility companies can charge to a lower level than calculated by Ofgem, itself paying the difference between this and the international price. This is going to cost them a massive amount, which they propose to raise by borrowing. Even so, gas and electricity prices are still going up, by ‘only’ 27 percent and will be twice as much as last winter.
One of the protest groups that sprang up was Don’t Pay which called on consumers to ‘strike’ from 1 October by cancelling the direct debits to their utility company. They also asked, ‘How do we achieve a permanent solution to the energy crisis?’ and replied ‘A Fair Price for Power.’ This assumes that power should have a price. That makes them less radical than one Tory ex-minister who had floated the idea of allowing households a quota of free energy (‘Give households a free fuel quota, ex-minister urges’, Times, 1 September).
What is fair and what is not on any issue is a matter of opinion but, if we look at the logic of capitalist commodity exchange, a ‘fair’ price for a commodity would be its average cost of production plus the going rate of profit. It is possible that Don’t Pay have something else in mind, such as the government taking over the utilities and charging cost price or something less. Such a ‘permanent’ solution assumes that the capitalist wages-prices-profits system too is permanent. It is still thinking inside the capitalist box.
But what is fair about having to pay to heat our homes? We have to pay for this only because we are excluded from ownership of productive resources and have to work for wages out of which to buy what we need to keep ourselves in working order, including keeping warm. There is nothing fair about that. From a worker’s point of view, there is no such thing as a ‘fair price for power’ any more than there is a ‘fair day’s wage’.
But there is a permanent solution. It’s a society based on common ownership, democratic control and production solely for use not profit, where gas, electricity, water, telephone, broadband and all other utilities would be provided free of charge.