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What are they smoking?

The UK is about to experience a significant energy crisis.

The effects of the war in Ukraine, combined with other inflationary forces, have produced conditions that threatened to see energy prices soaring this winter. Those high prices could have sent many households to the wall and would have undoubtedly cost lives as the icy winter weather began to set in.

The clever UK government have come up with a plan though.

What better way to deal with an energy crisis generated by a shortage of supply and skyrocketing prices thank to introduce a consumer-price-cap?

What are they thinking?

If you're trying to reduce energy consumption, so as to ensure availability, surely the last thing you want to do is introduce what effectively amounts to a flat-rate tariff scheme.

The plan, unveiled by new UK PM Liz Truss today, will cap household energy costs at around 2,500 quid per year.

Coinciding with this plan, the government will be rolling out all sorts of "save energy" programmes and encouraging people to turn down thermostats, hot water temperatures and such.

Is that really going to work -- when there's no financial penalty for not doing so?

Who doesn't at least get a little tempted to gorge themselves when attending a smorgasbord?

How on earth are they going to convince UK energy consumers to turn off their lights, turn down their heaters and take shorter showers when those energy users know that once they've reached 2,500 quid's worth, the rest is effectively free?

Just as bad is the fact that the producers of the energy still have to be paid whatever price they're asking -- which means there's a huge shortfall between costs and revenues. How does the UK government intend to fill that gap?

Well the taxpayer will be footing the bill.

Yep, energy suppliers will be paid for out of the public coffers which are funded by taxation (and a good deal of borrowing I suspect).

Does anyone else see a problem here?

The estimated cost of this subsidy is around 150 billion quid, more than twice the amount that was spent on all the UK's CV19 subsidies combined.

The unfortunate thing is that there isn't really much of an alternative, is there?

No government can endure a situation where people are dying from cold in winter or being driven to bankruptcy by energy bills that have doubled or even quadrupled in under a year. That would be political suicide.

The up-side is that those with EVs will be driving for free, once they've hit their 2,500 quid energy cap for the year. Assuming of course that the rampant demand for energy that this capped tariff scheme creates, doesn't bring the grid down completely or at least force protracted blackouts to manage that demand.

Ultimately this all boils down to a solid lack of planning doesn't it?

Energy is the one thing we simply can not do without in today's modern world. Ensuring an adequate supply of energy must surely be a top-tier priority for any government.

Sadly, in NZ as in the UK, energy barely gets an after-thought from "the government of the day". This is perhaps mainly because energy infrastructure takes a long time to build and is very expensive. That means it's the government of the day that takes the hit for the spend whilst it's more than likely an opposition government that reaps the reward for the benefits that are delivered many years down the road.

No government wants to take such a hit whist delivering their competition such a rich reward.

Gang politics has a lot to answer for!

Carpe Diem folks!

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