The Guardian asks: "Can collective consumerism help cut energy bills?" Apparently, "Henry de Zoete, a 32-year-old former adviser to Conservative education secretary Michael Gove and scion of the De Zoete banking dynasty" has launched "The Big Deal on Energy", which seeks to use the power of group buying to secure improved tariffs for gas and electricity customers. I was amused to see this story appear on the same day that Alexei Miller, the CEO of Gazprom, announced that wholesale gas prices for Ukraine will be increased due to the lapsing of discounts negotiated by the former regime of Victor Yanukovych.
These discounts were quid pro quos for Ukraine rejecting the association agreement with the EU, which led to the Maidan protests, and for the 2010 Kharkiv Accord, which extended Russia's lease on its Crimean naval base. The latter was recently rescinded by Vladimir Putin on the grounds that the annexation of Crimea made it irrelevant. The formality of the former lapsing indicates that we are probably now in the negotiated end-game of the Ukraine crisis. At one level, both of these initiatives are examples of exchange dynamics: the Russians are exploiting a monopoly position, while de Zoete & co are striving towards a monopsony (i.e. single buyer) ideal. In practice, we decry the former and applaud the latter. Ironically, Miller is arguably being more honest about the reality of the energy business.
The criticism of Miller's announcement is directed at Gazprom's ultimate sponsor, Putin. EU sanctions against Gazprom are as unlikely as Chelsea running foul of UEFA's Financial Fair Play rules. Energy is a matter of national security, so no one is blathering about the wonders of the "free market" on this occasion, or suggesting that Gazprom is anything other than an arm of the Russian government. This is in contrast to the coincidental blathering in the UK about gas and electricity prices and the rapacious practices of the "big six" suppliers. The usual suspects on the right are busy claiming that any government intervention (whether in the form of price-caps or "green crap") is counter-productive, despite the obvious lesson from Gazprom that what we pay for our energy is driven as much by political design as scarcity or market dynamics.
It is true that supply and demand determine prices over the long term, but it is also true that state intervention is the largest factor in sudden price fluctuations (and has been since the 1970s oil shocks), and that both wholesale and retail prices are heavily affected by domestic policy, even in the most pro-market economies. For example, the lower gas prices due to the "shale revolution" in the US are as much the product of government subsidies and a ban on exports as a breakthrough in technology or increased reserves. In the UK, the government has already (quietly) admitted that fracking will not lead to lower energy prices, any more than North Sea oil did, and that there are few parallels with the US experience.
The wide variation in gas and electricity prices across Europe should be evidence that there is not a free market either at national or international level, and for a good reason. In a genuinely free market, exposed to wholesale price shocks and cut-throat competition, we would have both price volatility and the periodic failure of suppliers. This would mean that disconnections and blackouts would be regular occurrences (this actually happened in California in the early 00s). Given the risk of public disorder, not to mention the psychic damage of "third world" problems, developed nations tightly regulate their domestic energy supply, which means de facto cartels and the setting of price bands. The latter must reflect local affordability, which is why they tend to move inversely to the cost of other household staples, such as housing and food.
The cost of energy is a public order issue, which is why Ed Miliband was taking few risks in promising to cap prices. The popularity of this rhetoric, and the irritation it caused in government and among the suppliers, shows that we all know the market doesn't exist and that the state can significantly influence prices without an investment strike. In this light, the proposal that our interests can be better served by "collective consumerism", i.e. switching en bloc, is crass. It sounds empowering, even a sentimental echo of the co-operative wholesale principle. In practice, it's the old idea of a buyers' club updated for the Internet age: essentially a mailing list where discounts are the quid pro quo for spam. "The Big Deal" may be focused on energy today, but a quick shufti at their terms (no mention of energy, just "campaigns and offers") indicates that this will become as promiscuous as Groupon.
It is also worth remembering that while collective buying can be beneficial in aggregate (if it efficiently clears surplus stock), in a market such as energy, where prices are multifarious and openly manipulated, any savings achieved by the buyers' club will be cross-subsidised by higher tariffs charged to non-members, which will disproportionately affect poorer households obliged to use pre-payment meters or unable to commit to annual contracts. The Big Deal on Energy preserves the fiction that there is a buyers' market for gas and electricity and that government is ultimately powerless. According to Henry de Zoete: "people power can fix the energy market quicker than politicians." Alexei Miller could soon put him right on that one.