Tuesday, 16 November 2010


Just as winter begins to bite, and the morning air has that pleasant dry,cold and crisp feel to in, there is that faint whiff of coincidence in the air. British Gas customers are to face a 7% rise in gas and electricity bills which comes into effect on 10th December. As a result of rising wholesale prices, said British Gas. Oddly enough British Gas has become the second major UK energy supplier to announce price increases for the winter months - when there is a grater demand, and coincidentally a greater profit to be made.

Scottish and Southern Energy intends to raise its domestic gas charges by 9.4% at the start of December, blaming wholesale prices for the increase in customer bills. It is worth noting that the price increase announcement, was made just before just before they reported a 6.1% fall in pre-tax profits to £386m in the first half of the company's financial year.

The market wholesale price for gas is around half of what it was at peak in 2008, yet over the same time period customers prices have only been reduced by less than 10%. No doubt British Gas and the other cartel members (sorry suppliers) will trot out the old excuses of having to respond to forward energy prices, etc. It's strange that the suppliers did not make cuts when market conditions allowed it, they are merely covering their profit margins as wholesale prices slowly rises. The timing is interesting especially at a time when there are reports of a gas glut, perhaps consumers take on all the risks.

Back in October 2009 the then Tory Energy Spokesman, Greg Clark (currently a Minister of State in the Department for Communities and Local Government) said that the "cartel" of the big 6 energy firms would be referred to the Competition Commission by an incoming Conservative Government. The then Tory Energy Spokesperson also condemned the unacceptable lag between the cost of wholesale gas prices and household energy bills - noting that customers were on average being charged some £74 pound too much for their energy per year.

An 'independent' investigation in the Energy companies refusal to pass on reductions in wholesale energy prices to customers would have been welcome along with the promised 'Energy Revolution' to overhaul the energy sector billing structure and charges. It all sounded great, save for the fact that it was a Conservative Government that was responsible for starting the whole sorry mess in the first place by privatising the energy market in the first place, throwing any rational energy pricing structure upon the whims of the 'market' by allowing the newly privatised energy companies to price gouge customers in the first place?

Oddly enough that pre-election pledge for an independent inquiry into the £25 billion-a-year energy industry which has been subject to lengthy and repeated criticisms surrounding accusations of profiteering on electricity and gas, was quietly dropped by the Com Dem Coalition Government. Heaven forbid that principle get in the way of profit.

Few people this winter will have as cozy a relationship with the gas companies as that exists between the political parties within the Westminster village (and without) and the energy supply companies. For sometime before the last Westminster general election, the Conservatives and the Liberal Democrats made repeated criticisms (and much political capital) from New Labour for its failure to tackle prices charged by the Big Six suppliers. Both the opposition parties publicly and repeatedly demanded an inquiry by the Competition Commission.

There was a faint hope that an inquiry into the nefarious activities of the energy supply cartel (sorry companies) might have had the power to reform the industry, encourage new entrants to break the hold of players such as British Gas and EDF on 99 per cent of the market and even possibly impose price caps. Yet, it appears that barely four months into the Coalition Government, there will be no inquiry has been called for and the Department of Energy and Climate Change confirmed on the 17th August 2010 that it has no plans to refer the industry to the Competition Commission.

Perhaps there ought to be an inquiry into the dubious (and financial rewarding (in cash and kind) relationship between our political parties and the representatives of the energy supply companies who are pretty keen to shower enough goodies around during Party conference season (and beyond) - I suspect not?

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