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.

SELF-INFLICTED WOUNDS

On the train to where?

There comes a moment, when you have had a long day, when it can become difficult to tell the difference between fiction and non-fiction or comedy drama and reality. That moment for me came on Friday night when I watched Newsnight on BBC 2. For the best part of twenty minutes I might as well have been watching an  episode of In The Thick of It, rather than actual news coverage of the Con Dems latest collection of self inflicted wounds e,g. George Osborne’s First class PR disaster,  Andrew ‘Thrasher’ Mitchell’s belated resignation (after 28 days of hoping the problem would go away) or David Cameron’s blundering intervention in relation to the ‘energy market’... perhaps  Malcolm Tucker can drop is and help get DC (and his clique) out of the mire...

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 BIT OF GIVE AND TAKE (MOSTLY TAKE)

A nice little earner...

The news that the members of the energy cartel plan to cut our domestic energy charges will be warmly welcomed by hard pressed customers. EDF Energy started the ball rolling announcing plans to cut a typical gas bill for UK domestic customers by £38, or around 5%, from 7th February. This move, which affected around 1.4 million customers, followed a sharp fall in the price of wholesale gas over the winter period due to the (so far) relatively mild weather. What was not mentioned was that that EDF ramped up its gas bills by 15.4% last November in response to rising wholesale gas prices. The move was rapidly followed by the others members of the energy cartel (British Gas, Scottish and Southern Electric, etc) fell over each other in their haste to announce pending cuts to domestic gas bills. Oddly enough not all of the energy cartel members (who control over 90% of the domestic market) have yet to mention of any intention to reduce the cost of its domestic electricity bills, the cost of which increased rose by 4.5% last November. As welcome as the promised cuts are it is worth remembering that barely six months ago had the Big Six energy suppliers ramped up their prices by an average of 17% for gas and 10% for electricity.

TALKING THE TALK?

We are all far too used to members of the energy cartel repeatedly raising their domestic customers bills, no doubt to help deliver a healthy profit and a healthy dividend to the shareholders. The latest was Scottish and Southern Energy (21st July) who were the latest gas and electricity supplier to announce a rise in prices.

Their domestic household electricity bills are set to go up by an average increase of 11%, and its household gas bills by an average 18%, from 14th September 2011. British Gas earlier in July also announced that the cost of its electricity and gas will go up from 18th August.

Members of the energy cartel are naturally blaming a 30% increase in wholesale energy prices. Scottish Power which is one of the big six announced price rises in June, with the cost of its gas going up by 19% from the start of next month, and its electricity rising by 10%.

The component parts of the Con Dem Government talked tough before the Westminster general election but just like it New Labour predecessor (in thirteen years of significant majority government) are set to do nothing to investigate or regulate the questionable activities of the energy cartel members.

"We are proud that we took the industry into public ownership. When we come to power, it will be reinstated as a public service for the people of this county and will not run for private profit."  

David Cameron, Nick Clegg, nope - Tony Blair (House of Commons 12th December 1988) - and people wonder why we all get cynical?