ED HAS SPOKEN…

Ed has spoken out about the failure of the energy companies to pass on cuts in their domestic retails bills to customers after the falls in the price of wholesale gas and the energy companies have trembled. All well and good, it is more than reasonable for the energy regulator Ofgem to be given new powers to force firms to cut gas and electricity bills - to reflect falls in wholesale energy prices.

Since June last year, oil prices have gone down by 50% and wholesale energy prices have dipped by 30%. But the prices being paid by households to heat their homes have not fallen at anything like that speed. 

While EON is the first of the big 6 energy cartel members to cut their domestic energy bills, it is probably fair to say that this was not driven by an Ed inspired pre panic. Energy UK – the energy supplier’s trade body’s pronouncement that they (the energy companies) are already passing on price cuts to customers. Ofgem at present does not have the power to force a reduction in prices. It is worth noting that Wholesale energy costs have been dropping in recent months, with the price of a barrel of Brent Crude oil falling to below $49 dollars this week.

The Labour leader has said that he would demand fast-track legislation on energy in a House of Commons debate next week. When he served as Secretary of State for Energy and Climate Change from 3^rd October 2008 until 11^thMay 2010, he showed no great desire to regulate the unscrupulous activities of the energy cartel on our behalf. We have been here before with mumbled words of condemnation from the former New Labour energy minister calling for the energy cartels to pass on the benefits of wholesale energy price falls to its customers. 

Warm words aside, Westminster is incapable or unwilling to deal with this problem, so perhaps it’s time for a home grown solution to the problem. We need a new Welsh national energy company, an Ynni Cymru to break the stranglehold of the Big Six energy cartel members on the energy market.

We in Wales, need a ‘not for dividend profit’ company, as with Glas Cymru works within our water industry. This would firmly ensure that customers come before shareholders dividends and the City of London and that all the profits would be reinvested back into the energy sector in our country, ensuring that Welsh families, households and small and larger businesses get a good deal on their energy and our country will end up with secure sustainable energy supplies. 

PROFITS BEFORE PEOPLE

The news that the ‘Big Six’ energy cartel members are set to double their profit margins over the next year (and this is according to estimates by the regulator, Ofgem) probably won’t surprise anyone. Back in 2013, Ofgem estimated that suppliers would make an average pre-tax profit of £53 per dual fuel customer (a margin of 4%). Now, in the year ahead Ofgem expects the energy firms to make £106 per customer (increasing their margin to 8%). Naturally the cartel members have accused Ofgem of releasing inaccurate figures.

Ofgem has said that it was further evidence that the market was not working as well as it should. The big six (and the profits they make) have already been referred to the Competition and Markets Authority (CMA). Ofgem has also written to the suppliers asking why the falls in wholesale prices last winter have not resulted in lower bills for hard-pressed energy customers.

As part of the on-going struggle with the ‘Big Six’, Ofgem has also announced that electricity customers will see an average reduction of £12 a year on their bills, from April 2015. This follows plans to limit the prices that can be charged by Britain's six distribution companies, which carry power to homes and businesses. The price curbs could affect 29 million English, Scottish and Welsh energy customers. Ofgem's plans will also see the distribution companies spend £ 17 billion pounds to upgrade their networks. The distribution element makes up about 8% of a typical dual-fuel bill and is the only part controlled directly by Ofgem.

Five out of the six network companies (UK Power Networks, Northern Power Grid, SP Energy Networks, SSE Power Distribution and Electricity North West) were ordered by Ofgem to cut their prices. So far, only Western Power Distribution had its pricing and investment plans approved by Ofgem. The new energy prices will apply for eight years, from April 2015 until 2023. Ofgem will announce a final decision on the proposals in November 2014 after carrying out a consultation.

While this may bring a crumb of comfort to hard-pressed customers, it fails to address the fundamental problem with the so-called energy free market. The ‘Big Six’ can do because they are pretty much free from any meaningful and effective regulation. Any criticisms that may periodically emanate from Westminster can be pretty much ignored as the Westminster based political parties have little appetite to reform the deeply flawed energy market and even less inclination to curb the excesses of the ‘Big Six’ energy cartel members.

Meanwhile, in Wales, Plaid has been argued the case for the establishment of a ‘not for dividend profit’ company, simular to Glas Cymru which works within our water industry. This would firmly ensure that customers come before shareholders dividends and the City of London. An all Wales ‘not for dividend profit’ energy company would mean that all the profits would be reinvested back into the energy sector in our country. This would also ensure that Welsh families, households and small and larger businesses get a good deal on their energy and our country will end up with secure sustainable energy supplies.

POWER FROM THE PEOPLE

There are times when Westminster, the Euro sceptics and perhaps the City are happy for the 22 miles of water separating the British Isles from the European mainland to seem psychologically much wider than they are geographically. Economically at times, particularly when it comes to the model for energy production, distribution and ownership those few miles of water at times might as well be a thousand miles wide. 

I mention this because last week Ofgen referred the energy market (this is Ofgen speak for the big 6 energy cartel members) to the Competition and Markets Authority for a full investigation. Ofgem says that the investigation should ensure, once and for all, that competition works effectively for consumers, by bearing down on prices while driving improvements in customer service and innovation.

Let’s just say that I for one won’t be holding my breath... as our energy production and distribution model has been restructured (over the years) to primarily benefit the big 6 energy cartel members, their interests and their (City) profits. From the perspective of energy consumers and smaller scale energy producers, the problem is that all the Westminster based political parties had quietly bought into this cartel dominated model of energy production and ownership.

The reality is that the UK’s cartel dominated model for energy production and distribution is not necessarily the norm everywhere in Europe. Alternatives exist and prosper, a particularly good example of a balanced and healthy energy mix can be found in Germany. Here small may very well be beautiful, particularly in relation to energy, back in 2012 some 22% of the countries energy came from small scale green entrepreneurs. 

Community co-operatives (both urban and rural), farmers and homeowners are part of the 1.3 million renewable energy producers and part of the energy mix. Incidentally in Germany, citizens’, cooperatives, and communities own more than half of German renewable capacity. Small scale electricity generation is having a knock on effect encouraging change throughout the energy system.

In Berlin, a cooperative (Burger Energie Berlin – literally Berlin Citizens Energy) is campaigning to take control of the capital's electricity grid with some 35,000 km of underground cables. The cooperative is a free, cross-party coalition of citizens who are committed to a sustainable, sustainable and democratic energy policy in Berlin. Members have one vote regardless of the amount their deposit and anyone who wants the power network to be in civil hand, is welcome.

Ordinary Berliners have invested their cash in the venture with the intention of producing a reliable 100 percent renewable energy supply. The aim is to promote the integration of renewable energy into the grid and to invest a portion of the profits from this directly into the transition to renewable energy. At present the Berlin electricity grid is run by Vattenfall (whose concession runs out this year) regularly generates millions in profits, members of the co-operative believe that the profits from the grid operation should flow to Berlin’s citizens.  

This is grass roots energy generation that has potentially the power to change the nature of the energy supply system (in Germany and elsewhere). They aim to build an energy grid that is better handle the rise of green power and allows local use of locally produced energy. This may well be a case of small being both beautiful and perhaps more disturbing from the perspective of Westminster being both community beneficial and community owned. 

These developments are a million miles away from the alleged ‘Free market’ for energy that exists in the UK, which is dominated by the ‘Big 6’ energy cartel members. The way the current set up works, it is difficult to imagine ‘Government’ at most levels in the UK grasping  the concept, let alone the practicalities and possibilities of genuine community owned and community beneficial energy generation projects even crossing the collective mind of Westminster and some of the devolved institutions. 

TIME TO COME CLEAN ON ENERGY SUBSIDIES

The recent self generated row over the green levies is a classic attempt to distract people’s attention away from the realities of energy subsidies.  As the Con Dem government denounces proposals for a two-year price freeze as "socialism" the Westminster government has guaranteed EDF and Chinese state investors in the nuclear sector fixed above average prices for energy the next 35 years.

The small print of the deal for the new nuclear power station at Hinkley guarantees the French-owned EDF and Chinese state investors a strike price of £92.50 per MegaWatt Hour (or £89.50 if a second plant is built), this is around twice the current market rate for wholesale energy. This price per unit will rise in line with inflation and is being guaranteed for 35 years – so much of the ‘free market’.

The real irony is that in the event of wholesale prices falling or rising at a slower rate than expected, then it is we, the public who will pick up the tab in the form of higher taxes or higher bills. The Energy Institute at University College London has estimated that the annual public subsidy will be around £ 800 million to - £ 1 billion pounds. This is on-top of the current £ 2.3 billion pound annual subsidy most of which ends up as a form of funding to deal with legacy nuclear waste.

The problem is that we all face is significantly down to the cumulative effect of an almost unregulated energy market and the unscrupulous activities of the ‘Big 6’ energy cartel members who will continue to maximise their profits at our expense because they simply can get away with it. The three Westminster based political parties have dropped any pretence of trying to regulate the energy market, to curb excessive profiteering or even to attempt any long term energy planning.

There is no quick fix, as energy efficiency schemes install insulation help to reduce carbon emissions and reduce fuel energy bills over the long term rather than the short term. If green levies are to be reduced, and I don’t think that they should be, then energy efficiency and fuel poverty reduction schemes should be paid for out of (progressive) general taxation - with the burden placed on higher end of the income bracket.

MORE SMOKE AND MIRRORS

If you were looking for a classic bit of spin, then David Cameron’s promise to reduce or remove the so called ‘Green levies and subsidies’ of energy bills comes close to being it. This is classic misdirection, it makes DC look good, and distracts people’s attention away from the recently agreed guaranteed (and well above the market rate) energy price for the planned nuclear plants, something that should permanently skew the alleged ‘free market’ for energy.

It also effectively ignores the excessive profits that have been generated by the ‘big 6’ a situation that has been aggravated by a lack of effective regulation. One way of the other we are all paying the price for effectively having a pretty much unregulated energy market. This is one of the legacies of the last Labour government, who spent 13 years in office sitting back and watching this situation develop. 

Excessive profits and Tax evasion - surely not?

The ‘big 6’ energy cartel members, coincidentally ramp up the energy bills as our winter approaches, yet this is only part of the ‘corrupt’ legacy that surrounds the few remaining energy giants. The independent on Sunday (27.10.2013) and Corporate Watch (a not-for-profit research group) have revealed that more than 30 UK companies have cut their taxable profits by racking up interest on debt from their owners.

This minimises or in some cases entirely wipes out their UK corporation tax bill.  As most of the owners are based abroad, 20 per cent of the interest payments would usually have to be sent straight to HMRC, minimising the overall saving. As a result of swift footwork by the accountants, the money is lent via offshore stock exchanges this means that it qualifies for a regulatory loophole called the "quoted Eurobond exemption", no tax is withheld.

Scotia Gas, 50 per cent of which is owned by SSE, the energy giant which is about to put its prices up by more than 8 per cent, has avoided an estimated £72.5 million pounds in tax. UK Power Networks and Electricity North West, responsible for running large sections of Britain's electricity network, have both saved more than £30m. Scotia Gas is the second-largest gas distribution firm in the UK, serving 5.8 million people in Scotland and in the South and South-east of England.

Half of it is owned by SSE, the rest is owned by the Ontario Municipal Employees Retirement System and the Ontario Teachers' Pension Plan. After they bought the networks from National Grid Plc in 2005, the new owners lent the majority of their money – about £530m at a 12.5 per cent interest rate – through the Channel Islands Stock Exchange rather than investing it in shares in the company.

Scotia has since paid interest of £537.3 million pounds on these loans. The £268.7 million pounds  of this that went to the Ontario pension funds cost the UK an estimated £72.5 million pounds in tax revenues. SSE Plc pays full UK corporation tax on the interest it receives as it is based in the UK but will have signed off the scheme.

More than 30,000 people contacted the Citizens Advice Bureau in the 13 days after SSE started the latest round of price hikes. It announced its increase on 10th October and was quickly followed by British Gas, Npower and Co-operative Energy. The massive rise in those contacting the charity represents a 55 per cent increase on the number of consumers normally seeking advice about the best power deals.

The Ontario Teachers' Pension Plan also owns National Lottery operator Camelot and Bristol Airport, both revealed to be using the tax-avoidance scheme last week. It is among several foreign pension funds investing through this legal loophole. Two of Britain's 14 privately run electricity networks – Electricity North West and UK Power Networks – also use the loophole.

A portion of every Briton's electricity bill payment is given to their local power network to pay for the running and maintaining of cables in their area. UK Power Networks, which owns and maintains power cables and lines for eight million people in London, the South-east and East of England, has avoided an estimated £38 million pounds since 2010 from paying £164.4 million pounds via the Cayman Islands to firms controlled by Li Ka-shing, a Hong Kong tycoon and Asia's richest man.

The Cheung Kong group also owns Northumbrian Water, among several water firms that use the quoted Eurobond exemption. Electricity North West owns and operates the region's electricity distribution network, connecting 2.4 million properties to the National Grid. It has avoided an estimated £30 million pounds in tax after sending £107.2 million pounds to its owners, JP Morgan Infrastructure Investments Fund and Colonial First State, since they bought it in 2007.

The Eurobond exemption was introduced in 1984 to encourage third-party investment into UK companies. But analysis of listings on the Channel Islands Stock Exchange and UK company accounts shows firms across the economy are using it to minimise tax bills by borrowing from their owners. More than £2 billion pounds a year has left the UK as interest payments to owners, avoiding an estimated £500 million pounds compared with if loan amounts had been invested in companies' shares.

Considering that other stock exchanges such as the Cayman Islands and Luxembourg also qualify for the exemption, the reality is that the total amount of tax being avoided is likely to be much higher. Incidentally HMRC, who are busy shedding jobs and cutting services to the bone, know that the exemption is being misused and even considered restricting it last year, but they backed down after lobbying from the financial industry. 

A HARSH CHOICE THIS WINTER: HEAT OR EAT

As the evenings draw in and days get colder the news that SSE have bumped up their domestic energy charges by 8.2% to cash in on the predictable spike in demand for winter heating will not come as no surprise. I have no doubt that the otherfive of the energy cartel members, known collectively as the ‘big 6’, will similarly raise their prices to rake in the cash at

A harsh choice: Heat or Eat?

our expense (British Gas were the first). Sadly this state of affairs is something that we have all become used to with an effectively unregulated energy market and little action beyond weasel words from successive Labour or Conservative Westminster governments. This winter, as never before, people will be put into a situation where they have to make a stark choice between literally heating their homes and putting food on the table. Rather than mumbled words of condemnation from a former New Labour energy minister (Ed Milibrand, as Secretary of State for Energy and Climate Change from 3^rd October 2008 until 11^th May 2010, showed no great desire to regulate the unscrupulous activities of the energy cartel) ) was for the energy cartels failure to pass on the benefits of wholesale energy price falls to its customers and their excessive profiteering, we need action. The Westminster elite (and I lose the term loosely) appears to be more focused on employment activities within the energy and banking sectors after they cease to politicians than stepping up to the mark to ensure proper regulation of the energy market and some degree of protection for the rest of us hard pressed energy customers. Westminster is either incapable or simply unwilling to deal with this problem, so perhaps it’s time for a home grown solution to the problem. We need a new Welsh national energy company, an Ynni Cymru to break the stranglehold of the Big Six energy cartel members on the energy market. Wales needs a ‘not for dividend profit’ company, as with Glas Cymru works within our water industry. This would firmly ensure that customers come before shareholders dividends and the City of London and that all the profits would be reinvested back into the energy sector in our country, ensuring that Welsh families, households and small and larger businesses get a good deal on their energy and our country will end up with secure sustainable energy supplies. 

A WELSH NATIONAL ENERGY FIRM

Plaid Cymru Shadow Energy Minister Llyr Gruffydd has rightly called for a new Welsh energy company to break the stranglehold of the Big Six energy cartel members on the energy market. Wales needs a ‘not for dividend profit’ company, along the lines of the way Glas Cymru works within our water industry. This would firmly ensure that customers come before shareholders dividends and the City of London. An all Wales ‘not for dividend profit’ energy company  would mean that all the profits would be reinvested back into the energy sector in our country. This would ensure that Welsh families, households and small and larger businesses get a good deal on their energy and our country will end up with secure sustainable energy supplies. 

Plaid Cymru Shadow Energy Minister Llyr Gruffydd said:

“For far too long, the big six energy companies have hiked their prices when the wholesale cost of energy goes up but don’t bring it down when they reduce.

“A Welsh national energy company, an Ynni Cymru, would follow the same successful model as Glas Cymru has done in the water industry.

“This Welsh energy company would buy gas and electricity at wholesale prices and sell direct to Welsh consumers and businesses.

“The company could be set up by the government at arms-length.

“Profits made would be used for protecting consumers from volatile wholesale prices and introducing energy efficiency measures to keep costs down for families and households.

“When we see that gas price hikes were the highest in Europe in 2011, and have risen consistently, then it is clear that families have not been best served by the private energy market.

“Plaid Cymru believes that we should move towards a system where investment and long-term development take priority ahead of shareholders’ profits.

“That is why at our party conference this weekend we will be having detailed discussion about the energy industry, including how we can ensure best value for hard-pressed families and a long-term energy policy for Wales.”

ED SPEAKS OUT...

According to Ed Miliband a newly elected Labour Government would freeze gas and electricity bills for every home and business in the UK for 20 months if Labour wins the 2015 election. The big energy firms would also be broken up and would be governed by a new tougher regulator to give people "a fairer deal". Eds says that this plan would will save average households £120 pounds and businesses £1,800 pounds per year and cost the energy giants some £4.5 billion pounds. Apparently the Labour leader said that energy firms had been overcharging "for too long" and that it was time to "reset" the market.

It sounds good, save for the fact the energy market that now exists under the control of the big 6 energy cartel members  came into existence when Labour were last in power (with a significant majority). Gordon Brown, initially as Chancellor and then later as Prime Minister did nothing to curb the excessive profits of the large monopolistic energy companies, so why would we seriously expect Ed do anything different.

 Potentially this is the first real break in the consensus on the profitable privatised nominally ‘free’ energy market by the Westminster focused political parties – since the late 1980’s. The big 6 have kicked off with warnings (threats) of power blackouts and a lack of investment in the energy sector and the usual former fleet street suspects have kicked off big time with ‘Red Ed’ like headlines. The ‘policy’ may have sounded good on the conference platform yesterday (naturally it did not go down well with the big 6 cartel members) but it (and Ed) did not quite have sounded so good or so convincing on BBC Radio 4’s Today Programme this morning.

The adoption of this new Labour position on energy, may seriously stir things up a bit as Cameron whatever his private (or some of the Conservative Party) feelings are on the matter cannot afford to look like the best mate of the ‘Big 6’ energy cartel members in the run up to the next Westminster General election. The problem is that in office Labour (under Blair and Brown) adopted not so much ‘a hands off approach’ as ‘a look the other way approach’ to the increasingly excessive profits raked in (at our, the energy customers expense) by the cartel members as long as the Treasury continued to receive its share of the profits in the form of extra tax.

The applecart may well be truly been upset if  the power companies cozy relationship with the political parties ends. Over the years some of the Political parties have got used to some of the perks of having a close relationship with the Power Companies – who sponsor free food at funded functions, glossy paid adverts in conference brochures, etc. One very old rule that Ed may have forgotten is that once you sell your virtue it stays sold, and once you sell your principles they stay bought and the end result is that the fabric of our democracy is damaged or tainted.

HOPING FOR A MILD WINTER

When I was a child I always hoped for long warm summers so I could enjoy them. Now that I am older and paying my own energy bills, I still hope for mild winters and warm long summers. Not I hasten to add so that I can enjoy them, but, because I like most the people are getting fiscally violated by the ‘big 6’ energy cartel members and I need to keep my energy bills down.

So news that households in England and Wales cut their energy use by a quarter over a six year period, according to the Office for National Statistics (ONS) should come as now surprise. The ONS report that average consumption of gas and electricity fell by 24.7% between 2005 and 2011 – this should be good for us the energy customers and good for the planet (less green house gases) - save for the fact that we (the energy customers) have faced steep increases in our bills over the period, and are perhaps trying to economise as a result.

Personally if I can make it to October before I put the heating on, or later, then that from my point of view is a bonus.  Ofgem (the energy regulator) says that energy bills have risen by 28% in the last three years. Some of the saving are down to increasing use of energy efficiency measures, with insulation, double-glazing and new boilers – ironically this is something that Plaid first advocated some thirty years ago – long before we started getting fleeced by the energy companies.

The ONS also said that another reason for the fall in consumption might be down to the introduction of energy ratings for properties and household appliances, something which may allow customers to make informed choices. Ofgem also noted the price rises, pointing out that the average duel fuel bill is now £1,420 a year.

ONS figures also showed that energy consumption is highest in England in the East Midlands, and lowest in the south-west of England, which has the mildest climate in the UK. The Department for Energy and Climate Change figures showed that Scotland still has the highest energy consumption of any part of the UK. They also noted that gas consumption in Scotland fell by 14% between 2005 and 2010, as shown by figures from March 2012.

One thing that could help is the smart meter, which show people exactly how much energy that they are using at any particular moment in time. While both the concept and the real thing have been around for a while, when it comes to installing them, the big six members appear to be dragging their feet. It is hoped that they will be installed in 53 million homes by 2020.

Household energy bills have become a major drain on finances, with people literally choosing between heating or eating. Fuel poverty is now alive and well here in the UK. Successive Westminster governments, both formerly New Labour and Con Dem have done little to curb the excessive profits raked in by the ‘big 6’ energy cartel members but have been happy to rake in extra taxes on profits.  

EXIT STAGE LEFT PURSUED BY SUBSIDY!

A member of the Big 6

If you are searching for material to build the character of a pantomime villain then perhaps you need look no further than the members of the big six energy cartel, who are busy squeezing every ounce of profit out of their customers (most of us) when not flogging off free low energy light bulbs, etc. With that in mind the news that Centrica, who own British Gas owner reported a rise in half-yearly profits, following the unusually cold winter boosted gas consumption should come as no surprise. Centrica's adjusted operating profit increased by 9% to £ 1.58 billion pounds in the six months up to the 30th June, rising from £ 1.45 billion pounds for the same period in 2012.

Amidst the statistical wizardry and smoke and mirrors that passes for energy profit related statistics, the  residential arm (of British Gas) saw its profits rise 3% to £ 356 million pounds, up from £ 345 million pounds one year ago. Like all the other cartel members last November (2012) British Gas upped its energy prices by 6% - basically because - in their largely unregulated farce that passes itself off as the ‘free energy market’ – they could. The news of Centrica's results came a day after EDF (the French energy company) announced that its UK pre-tax profits were some of £ 903 million pounds.

Interestingly enough, just before the profits were announced, House of Commons, Energy and Climate Change Committee (ECCC) realised a report which said that Ofgem (the Energy regulator) is not doing enough to make sure that energy company profits are transparent. MPs stated that the watchdog was "failing consumers by not taking all possible steps to improve openness". The committee also noted that "working out exactly how their profits are made requires forensic accountants".

Energy Profits before People?

The ECCC believes that Ofgem should force energy companies to standardise their bills to make it easier for consumers to compare the value for money of different energy providers. They also believe that it should be possible to break down the total cost of the bill into its components, i.e. wholesale energy prices, supply costs, the cost of implementing government energy policies, operating costs, and profit. And that consumers should be given details of price changes in pounds and pence, and not just in percentages

At the same time EDF stated that it was pulling out of the US nuclear power market because of the widespread availability of shale gas. This later announcement should come as no surprise, as at the end of the day it comes down to chasing easy money (and making excessive profits) when faced with a complicated and pretty much free energy market (one literally awash with resources) the cartel members will tend to back off seeking permanent subsidies (easy money) which make farcical any suggestion that the UK energy market is neither free or open for completion.   

YOU COULD NOT MAKE THIS UP...

If you give someone enough rope then they will probably hang themselves, that old saying could well be applied to the latest escapade of one of the big six energy cartel members. They collectively continue to fleece their customers and to maximize their profits at every opportunity.  The latest scam, involves the energy firm E.On who have been has been hit with a £3 million pound penalty for failing to prove that it distributed free energy-saving light bulbs to its consumers. It gets better, it turns out that some of the free energy saving light bulbs were sold in the Irish Republic, while E.On was unable to prove that others were handed out to its customers.  

Now the free low energy saving light bulbs were supposed to be part of an energy efficiency scheme that had been ordered by regulator Ofgem back in 2010 as part of a carbon reduction programme. Some £2.5 million of E.On's penalty will end up being used to reduce the bills of vulnerable households next winter, as it will go into the pot of money that’s is regularly put aside for those of us who face fuel poverty and receive support from the Warm Home Discount. The remaining £500,000 will go to the Treasury as a fine.

The good news is that E.On has apologized and has claimed that it had distributed almost 25 million free energy saving light bulbs to customers back in 2010 to comply with a government programme to save energy, known as CERT. Sounds plausible, save for the fact that it was only able to account for around 21 million of the bulbs. Three thoughts cross my mind, one is why should any of the customers of the big six energy cartel members be remotely surprised that this happened, secondly a fine of £ 3 million pounds if nothing else shows how toothless the energy regulator actually is and thirdly, accepting that this is a relatively minor misdemeanor on the part of a cartel member, so what exactly do they have to do before the farce that passes itself of as the free market for energy is finally sorted out? 

SMALL IS BEAUTIFUL

Small may very well be beautiful in relation to energy in Germany (2012), 22% of the countries energy came from small scale green entrepreneurs.  Community co-operatives (both urban and rural), farmers and homeowners are part of the 1.3 million renewable energy producers. Small scale electricity generation is having a knock on effect; the energiewende is encouraging change throughout the energy system. In Berlin a community cooperative Is aiming to take control of the capital's electricity grid with some 35,000 km of underground cables. Co-operative members have taken on the established energy companies and are attempting to fight off the Chinese state grid which is trying to get a foothold in the German energy market. Around 1,300 Berliners have invested their cash in the venture. This is grass roots energy generation that has potentially the power (no pun intended) to change the nature of the energy supply system (in Germany and elsewhere). They aim to build an energy grid that is better handle the rise of green power and allows local use of locally produced energy. This development is a million kilometres away from the so called ‘Free market’ for energy that exists in the UK, which is pretty much dominated by the ‘Big 6’ energy cartel members. With the way the current monopoly is set up, it is difficult to imagine ‘Government’ at any level in the UK buying into the concept, let alone the practicalities and possibilities of genuine community owned and community beneficial energy generation projects even crossing the collective mind of Westminster and Whitehall. 

LET THE GOOD TIMES ROLL...

Profits before people

One of the real long lasting legacies from the blighted wasted years of Conservative and New Labour rule in the 1980's, 1990's and 2000's is the fact that the members of the 'Big 6' energy (cartel) companies can continue unchecked to fleece their customers with little or non existent regulation. Ofgem (which nominally regulates the energy industry) has produced statistics that show that members of the 'Big 6' have more than doubled their retail profit margins over the last 18 months and are earning an average of £95 pound profit per household on those who hold dual fuel bills (a 7% profit on previous figures). Ofgem estimates that profits per household will reach or pass the £100 pound mark within the next 12 months. Recently acquired statistics from EDF, British Gas and the rest of the cartel members show that their profit margins from power generation, which is run as a separate operation form the business of energy sale to customers, came in at around 24% in 2011 and has risen since. Ofgem revealed that the average profit margins for energy generation within the cartel rose from 18.4% in 2010 to 24.4% in 2011. All of the 'Big 6' cartel members ramped up their energy charges between October 2012 and January 2013 to squeeze as much as they can from their customers. Even the members of the 'Big 6 ' energy cartel are perhaps getting a little embarrassed by their own blatant profiteering and their own management bonus culture as save for via Ofgem and the press it is becoming increasingly difficult to find just how much they are squeezing from us.

NOT SURPRISING REALLY

Quids in!

The news that Energy supplier SSE has been fined £10.5 million pounds by the Ofgem (the energy regulator) for misselling gas and electricity should come as no real surprise. Neither should the fact that this is the largest ever imposed on an energy supplier by Ofgem. SSE, the energy company formerly known as Scottish and Southern Energy, was found guilty of "prolonged and extensive" misselling as a result of management failures. The misselling related to a combination of telephone, in-store and doorstep sales and was exposed by customers. They had been  contacted by SSE and were exposed to misleading statements, inaccurate and misleading information on SSE's charges, and misleading comparisons between SSE's charges and costs of other suppliers. Customers were told they could save money when in fact they were switched onto a more expensive contract.

Ofgem no doubt hopes that a "clear message" has been sent to energy suppliers who failed to treat customers fairly. This is the second of four misselling cases that were started by Ofgem in 2010. Back in March 2012, EDF Energy paid out £4.5 million pounds to vulnerable customers after they breached marketing rules. Scottish Power and Npower are also subject to ongoing investigations. Considering that we have what is in effect a fairly unregulated energy market, one that is dominated by a 6 member energy cartel, where profit is the only motive this should not surprise anyone. The energy company bosses rake in fat bonuses (Centrica, who own British Gas, split £16 million pounds between themselves recently).

Before the last Westminster General election, the  Conservatives talked about having 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. This, was, however, quietly kicked in to the long grass by the Com Dem Coalition Government. So there we have it successive Westminster Governments (of the formerly New Labour and the Con Dem coalition variety) have done nothing to regulate the culture of excessive profits that predominates amidst the ‘Big 6’  and we should not expect anything to be done soon to help us hard pressed customers. 

DON’T PANIC! MR CAMERON…

With temperatures dropping yet again and a problem with one of the major gas (UK - Belgium) pipelines (it may have been closed for 1.4 days) there may well be a faint whiff of panic in the air. What with former (Climate Change) Ministers claiming (in the Radio 4 Today Programme) that the UK is down to less than 36 hours worth of gas supplies, it should be pretty clear by now that any UK strategic energy reserve leaves a great deal to be desired.

With the privatisation of the UK energy sector in the 1980’s it is pretty clear that any provision for future energy planning and provision was abandoned to the whims of the free market. A healthy gas reserve would not only cushion (domestic and commercial) customers from potential shocks, it would also potentially curb the prospects of fat profits on the members of ‘the big 6’ energy cartel. With little prospect of any effective regulation of excessive profits being ramped up it is clear that we are going to continue to get fleeced for a good few years yet.

As of March 2012 around two thirds of UK primary energy demand was met from domestic production. Coal accounted was barely 4% of final energy consumption by fuel in 2010. Almost all UK oil and gas production came from the seas that surround the UK. Peak oil (for the UK) incidentally happened in 1999, and Peak gas production took place back in 2000 - something which may explain the Unionist panic over the prospect of Scottish independence. Since then the UK has moved from a position of relative self-sufficiency to one of dependency on imported oil and gas.

By 2009, imported gas was around 32% of the total gas used. 58% came from Norway, 25% from liquefied natural gas (LNG) from various different countries, 16% came from the Netherlands, and 2% came via the Belgian interconnector pipeline. The increased reliance on imported oil and gas left the UK far more open to supply risks associated with global supply constraints and price volatility. The UK Government periodically punted plans to reduce the need for oil and gas imports, by pushing primary energy production, and by developing low-carbon alternatives such as electric vehicles, biofuels and fuel efficiency.

The writing is not so much on the wall as on TV, one Tuesday evening in February saw a TV first, the first airing of a Gazprom advert on UK domestic television advert – they sponsor the European Champions League.  Russia has periodically put the squeeze on gas exports to the Ukraine, (currently some 80 per cent of Russian gas exports to the EU flow through the Ukraine) so the real dangers of relying on imported energy from unreliable sources have been clearly highlighted.

As for gas, some states have made efforts to protect themselves against external shocks to their energy needs; France was able to store 122 days of gas and Germany able to store 99 days worth (2013 figures). Here in the UK the almost entirely market driven approach turned out to be entirely inadequate,  the UK has a storage capacity which would last for only up to 20 days (up from 15 days in 2009).

New Labour took the best part of a decade to recognise the need to increase storage capacity and the UK has been playing catch up ever since – and still little has been done to resolve the problem. One consequence of this lack of storage capacity is that UK had to sell gas during the summer and purchase gas again when it is needed in the winter. The Conservative’s headlong dash to gas in the 1980’s was accompanied by a complete if not abject failure when it came to strategic energy planning.

The situation has been made worse by the current Government's decision to somewhat half-heartedly look at developing diverse reliable alternative energy sources whilst pursing yet another dash for gas.
The last New Labour Government and the current Con Dem Government largely ignored repeated warnings that the lack of sustainable energy has set the UK on a path towards higher domestic energy prices and potential power blackouts. Over the next four to six years almost all of our old nuclear reactors, along with nine major coal and oil-fired power stations, will be run down and closed, with nothing ready to replace them.

We are now in the situation where we will become even more dependent upon imported gas from either unstable regions or dubious suppliers. The Con Dem’s solution to was to rush to go Nuclear and to effectively hand the Nuclear industry lock stock and barrel over to French energy companies who are busy paying off large loans to the French government. Anyway that was the plan, although the wheels seem to be still wobbling on that particular wagon as well.

OUR POUNDS IN THEIR POCKETS...

News that British Gas profits have risen because a colder 2012 meant people used more gas won’t surprise many people, let alone British Gas customers. British Gas revealed that profits from the residential energy of £606 million pounds for 2012, up 11% from the previous year, gas consumption had been up 12%. Profits are up 16% to £312 million pounds at its residential services unit, which covers services such as repairing boilers. Centrica, British Gas’s parent company, has reported an adjusted operating profit of £2.7 billion for 2012, up 14% from 2011.

Lest we forget, this winter British Gas raised its gas and electricity prices by 6% in November 2012, as did all of the other big six energy cartel members. Ofgem (Energy regulator) provided details of the plan last week, which will also limit the number of tariffs that suppliers can offer and force them to make bills clearer. The energy cartel’s excessive winter profit taking even provoked the Prime Minister David Cameron to step in and state that he was going to force them to put customers on their cheapest tariffs.

While this was nice, but it was more about being seen to look good as the Conservative pre-election pledge for an independent inquiry into the £25 billion-a-year energy industry long subject to lengthy and repeated criticisms about accusations of profiteering on electricity and gas was quietly dropped in August 2010.  The Conservatives have moved on from October 2009 when then Tory Energy Spokesman, Greg Clark (now Financial Secretary to the Treasury) said that the "cartel" of the big 6 energy firms would be referred to the Competition Commission by an incoming Conservative Government.

An 'independent' investigation into the Energy companies refusal to pass on reductions in wholesale energy prices to customers would have been nice as would the promised 'Energy Revolution' to overhaul the energy sector billing structure and charges. Then Tory Energy Spokesperson 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.

Oddly enough wholesale prices for domestic gas are currently lower than they were five years ago. At the moment it’s all about our pounds being in their pocket and maximising the cartel’s profits which coincidently boosts the Treasury’s tax revenues. Few of us this winter had as snug and toasty a relationship with the energy companies as that which exists between the political parties within the Westminster village (and without) and the energy supply companies.

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 and repeatedly demanded an inquiry by the Competition Commission. Now the party formerly known as New Labour is busy trying to make political capital from the Con Dem’s failure to failure to tackle prices charged by the Big Six suppliers, something they conspicuously failed to do in the thirteen years they spent in office.

GAS PRICES AND GAS PROFITS

Here we go again - British Gas - owner Centrica is to raise its average prices by 6% from today (Friday 16th November 2012), they have stated that the price rises are due to costs that are out of its control. Meanwhile Centrica, with 15.8 million customers, says that required investments and measures to meet carbon reduction targets have added about £50 to the average bill. The company, which recently issued a trading update, stated that wholesale gas prices were now 13% higher this winter than last. The company will report its full-year profit figures in February 2013.

Centrica stated that average UK residential gas consumption for the first 10 months of 2012 was 9% higher than for the same period of 2011, while average electricity consumption was 1% lower. On Wednesday (14th November 2012) SSE (one of the UK's biggest energy suppliers) reported a 38% rise in half-year profits. They made £397.5 million pounds profit in the six months to the end of September, this compares with £287.4 million in the same period last year. SSE, along with most of the members of the big 6 energy cartel, raised its domestic gas and electricity prices by an average of 9% one month ago.

Plaid has long voiced its concerns over allegations that the 'Big Six' energy companies have been manipulating wholesale gas prices in an attempt to save millions of pounds. The allegations, brought forward by a whistleblower, are currently being investigated by City watchdog the Financial Services Authority, whose findings could trigger a crisis of confidence in the energy sector similar to that in the banking industry following the rate-fixing Libor scandal. Plaid is concerned that the people of Wales are suffering disproportionately as a result of the 'Big Six' monopoly due to the fact that they're less likely to switch energy suppliers and therefore receive higher bills than anywhere else in the UK.

Plaid Cymru MP Hywel Williams said:

"These allegations against some of the 'Big Six' energy companies are deeply troubling and hold the potential to prompt a fresh crisis of confidence in yet another sector of British society.

"Just as was the case with the Libor scandal where the inter-bank lending rate was fixed, claims that wholesale gas prices have been manipulated raise serious questions over scrutiny and transparency.

"Most of the 'Big Six' energy companies are already under fire having declared intentions to push up their prices before the end of the year. This will see ordinary families having to keep an even closer eye on their budgets while the eldest and most vulnerable face an increasing risk of hypothermia or malnutrition as they're forced to choose between heating and eating.

"It is clear that the competitive market fails the neediest within our society. The Party of Wales believes that utilities should be operated on a not-for-distributable-profit model, like Glas Cymru, where profits are reinvested rather than pocketed by shareholders.

DON'T HOLD YOUR BREATH...

It started as a story in the Gruinad (The Guardian 13.11.2012) stating that the City watchdog, the Financial Services Authority, is now investigating claims by a whistleblower that the UK’s £300 billion wholesale gas market has been "regularly" manipulated by some of the big 6 power companies. The Guardian also notes that Ofgem (the energy regulator)  has been separately warned by a company responsible for setting so-called benchmark prices, ICIS Heren, that it had seen evidence of suspect trading on 28th September (this is end of the gas financial year) and gas prices on this date can have an important influence on future prices.

The claims suggest that dealers made unrealistic bids (on the 28th September) when information was being gathered to set the wholesale gas price, basically to suit their own trading position (maximise profits). The alleged manipulation is said to have reduced the wholesale price, and as such does not imply any knock-on impact on the retail price paid by customers. Later today the Con Dem Energy Secretary Ed Davey will make a statement to the House of Commons later as regulators investigate claims that wholesale gas prices have been manipulated.

Now the wholesale gas market includes everything from the UK's own North Sea gas supplies, to gas from Norway or elsewhere, or arriving in the UK by ship as LNG, liquefied natural gas. Energy companies buy gas at the wholesale price and then sell it on to businesses and domestic users. The cost of wholesale gas makes up the majority of our energy bills - 45% of the average energy bill is made up of the cost of wholesale gas, supply costs and profit margins.

The whistleblower, who worked for ICIS Heren, flagged up their concerns after identifying possible attempts to distort the prices reported by the company. These prices are especially important because many wholesale gas contracts are based on them and even small changes in the gas price can cost or save companies millions. These revelations come at an unfortunate time for UK’s energy sector, with many of the big six suppliers (the cartel) under fire for alleged profiteering on household energy bills and mis-selling on the doorstep. So far four of the UK's big six energy suppliers have released statements denying any involvement.

When it comes to regulation of the energy market the silence from the Con Dem Government has almost deafening. In the heady days of opposition, back in October 2009 the then Tory Energy Spokesman, Greg Clark (now Financial Secretary to the Treasury) stated that the "cartel" of the big 6 energy firms would be referred to the Competition Commission by a Conservative Government. He also  condemned the unacceptable lag between the cost of wholesale gas prices and household energy bills and noted that customers were on average being charged some £74 pound too much for their energy per year.

An 'independent' investigation into the Energy Company’s refusal to pass on reductions in wholesale energy prices to customers would still be welcomed by many hard pressed energy customers. As would the promised 'Energy Revolution' which was supposed to overhaul the energy sector billing structure and charges.

In many ways it is somewhat ironic that we find ourselves here, as a Conservative Government started the whole sorry mess in the first place, by privatising the energy market in the first place. This threw 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 and since the effective demise of any real competition in the ‘market place’ we have all been regularly fleeced.

As for any inquiry into irregularities in the energy market, it is worth noting that once in Government that was consigned quietly to the too difficult pile. The 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. So I won’t hold my breath.

WINNERS AND LOSERS

News that one of the 'Big Six' is due to announce a raise in profits at a time when many people are trying to avoid or to live with fuel poverty is never going to go down well with hard presser domestic energy customers. On Thursday Centrica (who own British Gas)are expected to reveal a group operating profit of £2.5 billion pounds, up four percent on 2010.

This unfortunately timed announcement comes against a backdrop of growing fuel poverty, which affects around 5.5 million households in the UK. Fuel poverty is defined as being when a household spends more than ten percent of their disposable income on gas and electricity. Fuel poverty is one of those things that the previous (and former) New Labour Government and the current Con Dem Government have done nothing about.

Nothing has been done or will be done to curb or regulate excessive profits from the energy companies via windfall tax. The talk about customers benefiting from dual fuel bills, etc, is mere distraction. What we have here is a dual political failure that speaks volumes as to how far both the former New Labour Government and the Conservatives (and their Lib Dem coat holders) have gone to drop even the pretence of standing up for the interests of ordinary people in favour of courting the City.

For growing numbers of ordinary people this winter it has come down to a choice of heat or eat, literally choosing between putting food on the table and heating their home. The only winners here are HM Government (with extra tax)and the big six energy companies (with fat profits) all of us as customers are losing hand over fist as the energy cartel ramps up its profits - I have not doubt over coming months that the rest of them perhaps slightly shamefaced (or perhaps not) will ever so quietly announce their profits as well.

A LUXURY WE CANNOT AFFORD…

The Con Dem Government has announced that it is going to cut the subsidy for solar power by half for new installations from 12th December. Solar panel makers and solar panel installers are concerned that the cut may lead to the loss of thousands of jobs and a reduction in investment in this form of renewable energy. This decision also means that consumers who register for the scheme after that date (even if the deposit has already been paid) will see their return halved.

The Westminster government has launched a fast-track consultation on the change, which it says reflects falling panel prices. The proposed new tariff of 21 pence, which is down from the current 43p, will come into effect from the 1st April 2012 and be paid to anyone who installed their solar system after 12th December 2012. One interpretation of this is that the last few Westminster governments have just not really been serious about energy security and developing secure sustainable energy resources.

Sadly it certainly looks like the Con Dem Government is about as serious about developing renewable energy resources, as was the previous New Labour Government. That said, there may be other motives, perhaps no one (in Government) really wants micro-generation schemes to work because then we (the consumers) will have less need of the Big Six and of course profits / share prices and dividends could be hit, and we (sorry they) would not want that it might upset the chaps over dinner.

This decision certainly does seem to be a slap in the face for this sector of the renewables, let alone any consumers and customers seeking to develop sustainable energy. One interpretation could be that this decision will make life just that little easier for the energy cartel members. That aside, we appear to have a Westminster Government that's not serious about developing sustainable energy and that's one luxury that none of us can afford.