The energy ceiling that the government will introduce from 1 January has a wonderful side effect. While almost everyone believes that it is wiser to conclude long-term energy contracts, so that consumers are less sensitive to price fluctuations, the price cap actually encourages short-term contracts. More and more energy companies are also offering it. For example, Greenchoice will adjust the gas price every month, Essent will do that every three months, instead of once every six months as it is now.
As soon as the gas price falls, consumers with a short-term contract benefit immediately. If the gas price skyrockets, the damage will be limited because the government will pay for everything above the price cap. The consumer pocket the profit, the taxpayer pays the loss. This makes taking risks very attractive. It is a classic example of privatizing the gains and socializing the loss, which we have seen many more examples of in recent decades, including the bank bailout in 2008.
The energy ceiling also makes it attractive for energy companies to charge higher prices than necessary. Consumers will hardly notice this, because the gas price has been capped for them. Politicians therefore want the Netherlands Authority for Consumers and Markets (ACM) to closely monitor whether government support benefits the profits of energy companies. The supervisor has thanked for this. With sixty energy companies and 27,000 tariff changes, proper control is simply impossible. Competition in the energy market has led to an uncontrollable monstrosity.
At the beginning of this century, confidence in the free market was so great that energy companies were not hindered. Anyone who wanted to sell energy could, so to speak, start the same day. Serious supervision was not considered necessary. ACM now believes that this must change. Rightly so.
ACM, which traditionally strives for as much competition as possible, based on the idea that consumers benefit from this in the form of a lower price, has now come to the conclusion that consumers first and foremost crave certainty. The regulator therefore advocates obliging energy companies to offer annual contracts.
A government that intervenes in the market without regulating the market at the same time cuts into its own flesh. Because the government suddenly acts as guarantor, market parties adjust their behaviour. Consumers will also take more risks, which is exactly what you don’t want as a government because the price for the guarantee will quickly rise. Minister of Energy, Rob Jetten, would therefore do well to adopt ACM’s advice as soon as possible.