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DERMOT MURNAGHAN: Now the first of the big energy companies responded to Ed Miliband’s price freeze threat this week with a price rise. SSE as you just heard announced they would raise gas and electricity prices by around 8.2% so are politicians powerless to stop it? And has Labour started, as one satirical website added this week, a race to the price cap amongst energy companies? Well let’s say a very good morning to the Shadow Energy Secretary, Caroline Flint. This issue of these price rises, or this price rise that we’ve seen and presumably there’ll be more to come from other energy companies this week, it raises the prospect which you must have considered with this pledge to cap prices, that perhaps the big companies will get a couple of big prices rises in before Labour come into power, if they do, and therefore you cap won’t really hurt them very much?

CAROLINE FLINT: Well I think the price rises that were announced by SSE were formulated before the announcement at the party conference but the truth is, every year we get used to these increases above inflation, way above inflation. As you just said the likelihood is that herd-like the others will follow suit. Now we believe very strongly that something has gone wrong in this energy market where prices have gone up in the way we’ve seen in the last few years, £300, £400, three times the rate it was going up under the Labour government and I don't think these companies can justify this. Now we say we’ll have a price freeze for 20 months because we think that’s right, while we reset the market, and it’s not just the price freeze, it’s a package of reforms to make this market more competitive but actually, David Cameron could do something now if he so chooses. He could have a price freeze, he could reset the market but he’s choosing not to.

DM: We understand that and we’ve heard quite a lot of that in advance and it is that fact of Labour showing their hand well in advance and I’m talking about the tactics here, that if the big energy companies get a couple, maybe two or three big price rises in before 2015 if the prospect of a Labour victory grows, that cap doesn’t really make any difference. Do you have a contingency plan to force them to lower prices and not just cap them?

CAROLINE FLINT: Well I would very much welcome for example if one of the Big Six broke away from the herd and said, do you know what, we are going to reduce our prices and maybe get more customers coming across but unfortunately they control 98% of the market, they have customers that they know don’t move often because it’s so complicated but in answer to your question, if we see price rises this year and next year that cannot be explained by what’s happening in wholesale costs, because wholesale costs for gas for example have stayed pretty static for the last four years, prices for electricity in wholesale dropped dramatically in 2009, that’s something we will look at and consider but I would urge David Cameron to look at this now and question whether or not these price rises are justified. He’s got another two years, Dermot, he could do something about that.

DM: You say look at and consider, we’ve seen one of them, this is one of the signals, 8.2%, well above the rate of inflation, well above the wholesale costs of energy. If we see more of them, would you consider for instance a windfall tax on the companies when you come into power and then a price cap?

CAROLINE FLINT: No, we’ve been very clear at the moment that we will have a freeze for 20 months and in order to reset the market, make a stronger regulator to make sure that that regulator has the power so that if wholesale prices fall, that is passed on to the customers, but other ways to break open the power of the Big Six and the way they dominate this market. But you know, we should be questioning these price rises, we should be holding them to account because the truth is the customers have seen their bills go up, they haven’t seen the investment be actually carried out in terms of the amount of profits these companies make – they’ve been making a billion pounds more profit on top of their existing profit over the last three years but instead …

DM: So what happens, my question is if they really stick the prices up over the next 18, 19 months, before Labour got into power as you want in May 2015, why not then hit them with a windfall tax as well and then cap prices because they are making the excess profits in your book right now?

CAROLINE FLINT: Well we’ve been very clear, Dermot and I think quite often in the past people have said what are Labour’s policies in different areas? Well on energy we have been quite clear, we are going to have a 20 month price freeze and reset this market by reforming it but I think there are things that the Prime Minister, who has got another nearly two years to go, should be doing and unfortunately they are not focusing on what needs to be focused on, is the way this market isn’t working and it’s broken and it’s not working for customers.

DM: Do you just brush aside the arguments that come in, we heard it last week from SSE didn’t we that it is wholesale energy costs but it’s a bigger package in terms of costs they’re facing, then there’s the cost of distribution and, as they point out, government imposed levies and those levies invented by Labour and one E. Miliband?

CAROLINE FLINT: Well a number of the asks of the companies involved for example is to make sure we ensure cleaner cheaper energy in the future that is more secure, that’s why we need to have renewables and it’s why we need to have nuclear but also it is about social obligations as well. I have to say Dermot, there have always been social obligations on the utilities in terms of the poorest customers, both under nationalisation and under privatisation under Margaret Thatcher and I do think it’s a bit cheeky, well more than cheeky, I think it’s really out of order for the energy companies to blame something which is about £112 of the total bill on these price rises of £300, £400 that we’ve seen. I think it is very important that when governments make asks of any organisation in terms of public policy, that we bear down to make sure we are getting absolute value for money and I have to say, on something like ECO which supports those families and pensioners on low incomes with insulation, I think there are ways that we can improve that and get better value for money. I am not going to let them off the hook by ignoring their profits and the wholesale prices that have gone down.

DM: Well let’s talk about profits and wholesale prices because we mentioned in our news bulletin, Ed Miliband writing in the Mirror today saying the only movement under this price cap in prices will allow, is when they go down. So there is really no leeway whatsoever, say there’s an oil price shock or something like that, the price of a barrel of oil doubles, it is not beyond the bounds of possibility the Russians turn the gas pipeline off – still that’s it, your cap, whatever it costs you, you’re saying to the energy companies?

CAROLINE FLINT: The freeze will go ahead …

DM: Even if they’re making a loss?

CAROLINE FLINT: The freeze will go ahead, but let me be clear about something here. The energy companies buy their energy two, three, four, sometimes more years in advance to deal with the sort of situation that might happen, this is something that they do all the time. They pre-buy what they need to offset any problems that might occur so they’ll be buying now for the period of the price freeze, so I think that’s something that can be dealt with. But we will keep to the price freeze and we will be reforming this market.

DM: On this issue, let’s broaden it out, on this issue of excess profits, their long term trend in terms of the margin they make, they point out is around about 5% profit which is pretty much in line with things like supermarkets. Do you think supermarkets make excess profits?

CAROLINE FLINT: But that’s not the whole picture, is it Dermot? We have what we call in the trade these vertically integrated companies which basically both generate power and retail it. Now when you look at the profits – and these aren’t my figures, this is Ofgem the regulator and organisations like Which, when you look at their profits on the generation side, we’re talking about 20% plus, 24% profits. That doesn’t even deal with the other trading that they do or where some of the companies are paid for storage so 5% is only the retail side but actually it’s the whole picture of the other 20 plus percent on their generation side that has to be added on top of that to get a better picture of the profits and that’s why we’ve been arguing for more transparency about the profits that are made because the truth is, the Big Six generate energy, sell it themselves on to us and that is why Labour is demanding – and we’ve demanded it in the Energy Bill going through parliament but the government have chosen not to accept our argument, to have a pool in which all those who generate energy, not just the Big Six but others as well, put their energy in and others can come in and …

DM: But are you talking about …

CAROLINE FLINT: But it’s really important that because so many commentators in the last fortnight have talked about this 5%, it’s not the big picture.

DM: I want to ask within the Shadow Cabinet, you talk about your policy offering developing there, looking at what’s come out over energy, you are talking about markets that you analyse as having failed and intervention being correct and proper in those cases. There are other markets which Labour have identified as failing – financial services, banks, things like that – is this the thin end of the wedge and you would intervene in other markets, that would be considered?

CAROLINE FLINT: Look, I think governments, not just the UK government but all governments, have a role to ensure that there is fairness out there in the way in which companies operate and that stretches from Health and Safety legislation through to financial accountability. I don't think there’s anything wrong with that. Interestingly, I’m talking about reforms and Ed Miliband is talking about reforms about making this market more competitive than it is and fairer and more transparent and I do believe very strongly that when it comes to energy, it powers our homes, keeps the lights on, keeps us warm, I think people do expect a level of regulation that is in line with how essential that is to our everyday lives.

DM: But there is a lack of competition, we’ve heard it from Ed Miliband and others, a lack of competition not just in this market but amongst banks. What are you going to do there then?

CAROLINE FLINT: Well part of actually what my colleague Chuka Umunna is doing is looking at banking, looking at regional banks, looking at how we can get back to that better sense of what the average bank on the high street can provide for consumers because often those of us who just have bank account and not shares everywhere else, they have lost that customer service. So we are reforming in that area. It’s why we’ve talked about, for example, bankers’ bonuses and the levy which is important to ensure that there is fair play and this is all about fair play. It’s not about stifling competition, it’s not about stifling business. Our freeze will help something like 2.4 million businesses as well as millions of consumers in their homes.

DM: And looking to the future on energy supply, a lot being made, a lot of hope from shale gas and whatever through fracking, does Labour support a big increase in exploration for that kind of energy in the UK?

CAROLINE FLINT: We’ve supported exploration in terms of shale gas alongside though some principles around the environment and some concerns, right concerns I have to say, about how you can actually get this gas out of the ground because let’s be honest about it, we’re not like where it takes place in America in these vast areas where nobody lives. We’re talking about the north-west of England, Sussex, other places where it’s a different type of environment. What has worried me about the debate around shale gas, which I think the government haven’t helped with, is the hyping up of expectations of what it could deliver. We know there’s shale there but we don’t know how much it’s going to cost to get it out the ground and potentially at what environmental cost. So we’re not setting our face against it, if the conditions are right and the environment is right but what we do disagree with is polarising shale against renewables that we need as well. To be honest I’ve spoken to some of the people in the shale gas sector and they are, I have to say, pretty hacked off with the way in which that has been polarised by George Osborne and this government.

DM: Caroline Flint, thank you very much indeed, the Shadow Energy Secretary there.