A TANGLED WEB...

News that Ofgem (the energy regulator) has told energy firms they must offer simpler tariffs to help consumers compare prices is to be welcomed. Ofgem has also said that the "big six" suppliers should also face more competition, saying that it would force these firms to auction off up to a fifth of the electricity they generate, making room for new companies. Not to mention that Energy firms could be referred to the Competition Commission if they do not comply with the new system.

Now, of course, Ofgem launched a review of the energy market after claims were made that suppliers were making excessive profits. Certainly British Gas (earlier in the year) said operating profits had risen by 24% in 2010 to £742m. Back in November, Ofgem said that energy supplier's net profit margin per typical customer rose from £65 in September to £90 in November, which was a 38% rise. Interestingly enough, Ofgem also said that it had found evidence that the "big six" energy firms "have adjusted prices in response to rising costs more quickly than they reduced them when costs fell".

Factor in the possibility that Scottish Power, may face an investigation into its pricing regime and that this investigation is in addition to the ongoing Ofgem investigation into how British Gas, EDF Energy and Npower handle consumers' complaints. Not to mention that Ofgem is also still continuing to investigate allegations of misselling by EDF Energy, Npower, Scottish Power, and Scottish and Southern Energy and you may well draw the conclusion that the so called 'free market' in energy supply is joke that deliverers little save for fat profits for members of a self serving cosy energy cartel.

The problem is that any Ofgem investigation into questionable practices undertaken by the energy companies will not come close to the Conservative pre-election promise of a proper enquiry into the energy industry. Now oddly enough that pre-election pledge for an independent inquiry into the £25 billion-a-year energy industry (which has been repeatedly criticised with accusations of profiteering on electricity and gas) was quietly dropped by the Com Dem Coalition Government in August 2010, when no doubt when they hoped no one would notice.

Back in October 2009, the then Tory Energy Spokesman, Greg Clark has said that the "cartel" of the big 6 energy firms will be referred to the Competition Commission by an incoming Conservative Government. He also said that there was an 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 was also mooted along with an overhaul the energy sector billing structure and charges.

Now don't get me wrong, this all sounded great, but, wasn't it 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 alleged 'free market' by allowing the newly privatised energy companies to price gouge customers in the first place? So you may ask, why did it never happen? Well that was one reason may well be that the current shambles helps to feed the fat wallets of Tory chums in the City and the exchequer.

Its also worth noting the energy companies are busy gouge mining profits from their domestic customers. Back in February is was British Gas who's operating profits rose 24% in 2010 to £742m.This news, welcome to shareholders if no one else, two months after the UK utility announced a 7% rise in domestic energy bills, which it blamed on rising wholesale prices.

British Gas also said it had increased its number of customers by 267,000 during the year to 16 million. This helped parent company Centrica to achieve pre-tax profits of £2.8bn, with operating profits up 29% to £2.4 billion. Factor in continuing unrest in the Middle and near East which is leading to a rise in Oil Prices something which will also hit us at the pumps and elsewhere with increased food and energy costs and you would think that developing cheap sustainable safe secure energy would be pretty important.

This is more than important,it's the potential game changer and is far to important to be left to the profit chasing whims of an energy cartel. We need to seriously and actively pursue the development of sustainable, reliable and secure energy supplies here in Wales and elsewhere in the UK with a serious degree or urgency. What makes this interesting is that some of these energy can and should be community owned and community beneficial, something that could generate green energy and green jobs here in Wales.

GOOD OLD UNCLE VLAD...

With the Russian Orthodox New Year rapidly approaching and with temperatures dropping; Vladimir Putin will no doubt pick his moment to revive the long standing feud with Ukraine over gas prices. This time last year the Russians decided to reduce gas exported into Ukraine, through which 80 per cent of Russian gas exports to the EU happen to flow, something which highlighted the real dangers of relying on imported energy.

So what you may say does this have to do with us? A lot is the answer, while Russia may have declining cash reserves over the long term and an economy that is heavily reliant on its trade in oil and gas – the risk of shortages as a consequence of the Kremlin and Mr Putin's geopolitical games is something we in the West can truly all do without. We are in the middle of a cold snap at the moment, and gas is the fuel that is used to heat about two thirds of Britain's homes.

On Monday (4th January 2009) the National Grid issued a warning (a Gas Balancing Alert) to energy providers that demand for gas is threatening to outstrip gas supply. This warning (the last one was sent out in March 2006) follows a 30 percent rise on normal seasonal demand as the cold snap continues. Natural Gas prices rose to their highest level in 10 months (reaching 45 p per therm) – this triggered the import of extra gas from Belgium and Norway via the natural gas (liquefied) importation terminal in Kent.

So what you may ask? Well - quite alot including the prospect of higher energy bills (because we the consumer pay for the shortsighted self interest of the energy companies), higher profits for the energy cartel (sorry companies) and more tax for Gordon Brown’s government. Now while other countries insured themselves against external shocks to their energy needs; successive UK Government’s left it to the market to sort out – so what did the energy companies do, they chased quick short term profits at our expense.

The UK’s market driven approach has been entirely inadequate. One year ago as of January 2009, France could store 122 days of gas and Germany 99 and the UK had storage capacity which would only 15 days. In the 1980’s and 1990’s developing a long term energy strategy or making sensible long term decisions in relation to energy supply was never an option for the Tories during their last tenure on government.

Likewise, the New Labour Government took the best part of a decade to recognise the need to increase storage capacity. The consequence is that UK has to sell gas during the summer because we cannot store it but UK energy suppliers often struggle to purchase gas again when it is needed during a particularly prolonged cold spell as we have at the moment.

The complicit insanity of the Conservative’s headlong shortsighted dash to gas in the 1980’s has been compounded by a real failure in basic strategic energy planning and made worse by the Government's perverse decision to half-heartily look at developing diverse reliable alternative energy sources. This New Labour Government has ignored repeated warnings that it was setting the UK on a path towards higher prices and blackouts.

As I have said before (and will say again) that as a matter of urgency the Westminster Government, the Scottish Parliament, the National Assembly and the Northern Ireland Assembly should work with the Irish Government to make these islands entirely self sufficient via renewable non market driven energy resources.

If we develop a flexible self-sufficient energy development strategy within these isles that encourages decentralised micro generation schemes and by actually implementing it this could create jobs, useful skills and help to bootstrap the economy out of the developing recession as well as helping consumers.

COLD COMFORT

The Ofgem, the UK energy regulator’s warning to energy supply companies that households must benefit from a fall in wholesale gas prices, will bring cold comfort to those families who may be forced to make a choice between putting food on the table for their family and heating their home, this winter.

That aside, I welcome the fact that the energy companies will face a further investigation into their retail prices which will be launched in the New Year, and the fact that the energy regulator says it ‘will not shy away from proposing radical reform to protect the interests of consumers’ – this is especially welcome as it has been revealed that energy company profit margins in dual fuel bills stand at a five year high and that they may rise further.

Ofgem has said that if wholesale gas prices continue to fall, then bills must come down in the New Year to avoid the customer losing out. The regulator has also said that companies must not "use investment as a shameful excuse to overcharge their consumers.

In truth what we have is not a virtual monopoly on energy supply in the UK, but an actual monopoly, as the number of energy supply companies has fallen to six in the last ten years, with less that £30 differential between all of the energy supply companies, which works out to be no more than a few pence a week difference in bills, and what we have an energy cartel which brings minimal benefit to hard pressed energy customers.

Now Energy companies have always been very quick to blame rising oil and gas prices, and equally quick to rake in the profits and the Government has been equally happy to rake in the extra tax revenues – the only loser in this happy picture is us, the energy customers.

This situation has arisen of a culture that rewards short-term financial recklessness in the city of London, which had promoted a vast increase in cheap credit on the back of an absurd house price boom – that is how we have arrived at the credit crunch which has brought real economic hardship to the many through no fault of their own and enriched the few.

Gordon Brown and Tony Blair's New Labour is entirely complicit with the energy companies, as their failure to help the people who will need help over the winter months and New Labour's failure to consider a windfall tax to curb excess profits from the utility companies speaks volumes as to how far New Labour has left behind the ordinary people in favour of courting the money men in the City.

Sadly for growing numbers of ordinary families across Wales this winter it may well come come down to a stark choice of eating or heating as the interests of big profit for big business in comes before the needs of ordinary families.

THE TORIES AND ENERGY

The Tory Energy Spokesman, Greg Clark has said that the "cartel" of the big 6 energy firms will be referred to the Competition Commission by an incoming Conservative Government.

Said 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 will (if it happens) will be welcome along with an 'Energy Revolution' to overhaul the energy sector billing structure and charges

Now don't get me wrong, this all sounds great, but, if my memory serves me correctly wasn't it 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?

Well that was one reason for it, that and helping to feed the fat wallets of Tory chums in the City?

THE GREAT ENERGY RIP-OFF

The Energy companies have reaped a 500% increase in profits over the last five years have been quick to blame rising oil and gas prices, and quick to rake in the profits, as the average annual dual fuel bill has risen from £662 a year in 2005 to 1,048 in 2007. The New Labour Government has been happy to rake in the extra tax revenues and the Energy companies have been slow to pass on reductions in energy costs to their customers – the only real losers are the energy customers.

While Crude oil has fallen from $147 a barrel in July last year to about $70 a barrel and no one is disputing that the six main energy suppliers have not cut their prices since the beginning of the year, energy bills are still too high. Consumer Focus research suggests that current gas bills should be at least 7.4% cheaper (£60.10 annually) and electricity bills at least 3.1% cheaper (£13.80 annually). Customer Focus’s new research for the first time shows the reality, that the energy companies are pocketing £1.6bn extra, while millions of households struggle to make ends meet.

Lets be brutally honest here, what we have here is an effective monopoly on energy supply in the UK. This is a direct result over the last ten years of the number of energy supply companies falling from twenty two to six - that's the way the market works we have been told don't worry about it. Now with less that £30 differential between all of the energy supply companies, which works out to be no more than a few pence a week difference in bills, so what we have is an energy cartel which brings minimal benefit to hard pressed energy customers and maximises it's profits and which feeds the government impressive amounts of tax.

The complicit insanity of the Conservative’s headlong dash to gas in the 1980’s has been compounded by a real failure in basic strategic energy planning and made worse by the Government's perverse decision to half-heartedly look at developing diverse reliable alternative energy sources. This New Labour Government has ignored repeated warnings that it was setting the UK on a path towards higher prices and blackouts. Over the next six years almost all of our old nuclear reactors, along with nine major coal and oil-fired power stations, will be closed, with nothing ready to replace them.

We are now in the situation where we are now even more dependent upon imported gas from either unstable regions or dubious suppliers and we the customers face unnecessarily expensive bills. As a matter of urgency the Westminster Government, the Scottish Parliament, the National Assembly and the Northern Ireland Assembly should work with the Irish Government to make these islands entirely self sufficient via renewable non market driven energy resources. By developing a flexible self-sufficient energy development strategy that encourages decentralised microgeneration schemes and by actually implementing it this could create jobs, useful skills and help to bootstrap the economy out of the developing recession as well as helping consumers.

LADY K - LEST WE FORGET

As Lady K sales off into the sunset retirement home for former politicians, aka the House of Lords it worth noting (The Western Mail (Monday 15^th June 2009)) that Neil and Glenys Kinnock were the recipients of more than £10million in pay, allowances and pension entitlements accrued during their time working at the European Union in Brussels. Lady Kinnock (who as a Labour MEP may have mentioned Wales twice in 10 years) was appointed as Europe Minister by Gordon Brown this month, was a MEP for 15 years. Her other half who failed to win a General Election as Labour leader, made a mint as an EU Commissioner for ten years until 2004 and blocked investigations into allegations of fraud.

Lord and Lady K – with a total of £775,000 in wages for Lady Kinnock and £1.85 million for her husband clocked up £2,625,000. A £64,564 ‘entertainment allowance’ for Lord Kinnock. Allowances for Lady Kinnock’s staff and office costs of £2.9million. A total of five publicly-funded pensions, worth £4.4million, allowing them to retire on £183,000 a year. A housing allowance that allowed them both to claim accommodation costs although, as a married couple, they lived in the same house in the Belgian capital between 1995 and 2004.

We now can see why Lord and Lady Kinnock remain loyal servants to the Labour party; loyalty will always be rewarded to the few at the expense of the many. With Lord Kinnock in the House of Lords and Lady Kinnock in Gordon’s cabinet you could say they are both members of the greatest un-elected quango of them all - over seeing what go's on in Wales. May be this is Gordon Brown’s New Labour redefining "Champagne Socialism"?