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.   

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.

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.

IN THE MONEY

Here we go again; British Gas has announced increases to the gas and electricity prices it charges customers. The company (a member of the ‘Big 6’ energy cartel) has announced that it will raise its charges for both gas and electric by around 6%, which will add around £80 a year to the average dual fuel bill, from the 16ht November 2012. This not unexpected decision follows SSE (which trades as Scottish Hydro, Swalec and Southern Electric) announcement that it will increase its domestic gas and electricity prices by an average of 9% from 15 October.

SSE (also one of the ‘Big 6’) has blamed the increases on the extra cost of using the gas and electricity networks and rising costs in energy wholesale markets. Around 3.4 million gas and five million electricity customers will be affected with an average standard dual-fuel bill will pay an extra £102 for the year, or £1,274 in total. Back in May 2012, British Gas, reported a 2% rise in annual pre-tax profits to £1.33bn, though profits in its division which supplies electricity and gas to homes and businesses fell 20% to £321.6m.

Npower has also joined its fellow cartel members (sorry colleagues) British Gas in and SSE by announcing it is increasing gas and electricity prices in the UK. Npower announced that it will increase the price of gas by an average of 8.8% and electricity by 9.1% from 26th November. And then there were three…

In 2011, all the big-six energy suppliers raised their prices, in some cases twice. Earlier this year the ‘Big 6’ all staged a token gesture round of small price cuts, which affected their gas or their electricity customers. SSE cut its gas prices by 4.5% in March this year. British Gas last raised its tariffs in August 2011, gas prices rose by 18% and electricity prices by 16%. Back in January 2012, it cut its electricity prices by 5%. Centrica (which owns British Gas) in May 2012 warned that continued increases in the wholesale price of gas might lead to renewed domestic price rises this autumn.

The silence from the Con Dem Government is almost deafening. Truly we have come a long way from the heady days of opposition, when back in October 2009 the then Tory Energy Spokesman, Greg Clark  (currently 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. 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 into the Energy companies refusal to pass on reductions in wholesale energy prices to customers would have been very welcome along with the promised 'Energy Revolution' to overhaul the energy sector billing structure and charges. Oddly enough a Conservative Government started the whole sorry mess in the first place, 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?

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. No doubt in the next few weeks the other cartel members will feel duty bound to roll out energy price increases to their customers, I mean you have to keep the dividend up somehow and keep the shareholders happy.

Few of us this winter will have as snug and cozy 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. Prior to 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.

Sadly any faint hope that an inquiry into the nefarious activities of the energy supply cartel which might have had the power to reform the industry, encourage new entrants to break the hold of the Big 6 on the nominal free market and even possibly impose price caps quietly died in the summer months of  2010. Perhaps there should be an inquiry into the dubious (and financial rewarding) relationship between the Westminster based 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) – perhaps not?

TIBERIAN LOGIC OR SYMANTICS AND DIVIDENDS

The Roman Emperor Tiberius, discussing the raising of tax revenue from the imperial provinces said "It is the duty of a good shepherd to shear his sheep, not to skin them." Certainly when it comes to the current unscrupulous activities of the energy cartel members, it is pretty clear that we are all being skinned if not properly fleeced.

By now most people should be aware that British Gas owner Centrica has reported operating profits of £1.3bn in the six months to 30 June, down 19% on the same period last year. The Centrica results also include a 54% fall in operating profits at its residential energy division, British Gas, to £270m.

British Gas not surprisingly says that higher wholesale gas prices are responsible for the fall in profits. By coincidence British Gas is prepares to raise gas prices by 18% and electricity prices by 16% in August. The BBC suggests that this increase will push up the average bill for around nine million customers by £190 a year.

British Gas getting its retaliation in early has said that it has been selling gas at a loss since April due to the rising cost of gas on the wholesale markets. They also say that the core business of home gas supply British Gas has lost customers and lost market share when compared with the same period last year.

Customer accounts for gas were down 0.7% from last year and market share down 0.5%, though it picked up customers for electricity supply. Oddly though British Gas did record an increase in total customers in the same period up 159,000 to 16.1 million accounts.

Centrica (British Gas's parent company) is a major gas producer and sells gas on the wholesale market and reports increased profits from operations, which include production in the North Sea and Trinidad, which increased by 14% to £414m. British Gas is one of the 'big six' energy companies (basically an energy cartel) which control 99% of the UK energy market leaving scant opportunities for any new small energy producers - so much for the free market?

Any chance of regulation on unsavoury business practices and cartel like behaviour from the Con Dem Government - I suspect that hell might freeze over first!

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?

A POVERTY OF IDEAS?

It's official, more than a fifth of all households in the UK were affected by fuel poverty in 2009, so says the Department of Energy and Climate Change (DECC). Repeated increase in fuel bills mean that the number of homes affected rose by one million, or 22%, to 5.5 million. The government defines fuel poverty as being when a household is has to spend more than 10% of its income keeping warm.

DECC noted that "between 2004 and 2009, energy prices increased: domestic electricity prices increased by over 75%, while gas prices increased by over 122% over the same period" and this led to the rise in fuel poverty. They (DECC) also predict that the numbers for 2010 and 2011 will have increased because of further rises in the price of energy.

Apparently the answer is more competition and the free market... Hmm...isn't that what we have all been living with (and paying for) over the last twenty plus years. An unregulated 'free market' or more accurately an largely unregulated privatised effective monopoly has clearly not worked. Surely to continue to repeat the mistakes of the past is a bad idea to say the least...or is HMG too busy thinking about windfall taxes on excessive profits...

PROFITS BEFORE (FUEL) POVERTY?

Perhaps they thought is was a good day to bury bad news, what with the News of the World / News Corp scandal raging to quietly announce yet another rise their prices and boost their profits. News that British Gas have decided to increase their profits by increasing their domestic customers bills should not shock us. The members of the energy cartel have long put the dividend and their profit in advance of any fears of putting people into fuel poverty. That's the price we all pay for the alleged 'free market' in energy supply.

For the record:

• Scottish Power will raise their gas prices from August 2011 by 19% (electricity prices will rise by 10%
• EDF (who incidentally owe the French Government some 44 billion euros) raised their gas prices by 6.5% and their electricity prices by 7.5% in March 2011
• NPower raised their gas prices by 6.5%  and their electricity prices by 5.1% in January 2011
• Scottish and Southern raised their gas prices by 9.4% in December 2010

Some 9 million British Gas customers will see their gas bills rise by some 18% next month - they will also face a 16% (on average) rise in the cost of their electricity. They (British Gas) even admitted that there was little point in people trying to change suppliers as the other members of the energy cartel are likely to raise their prices as well.

With some customers facing a 24% rise in their gas prices, many will face a rise of nearly £190 in their annual dual fuel bills. With according to uSwitch.com some 6.3 million households across the UK in fuel poverty this is not good news. With a painfully weak Con Dem Government on Westminster who dropped any ideas of investigating the energy market last year what hope have the ordinary energy consumers have of fair energy prices? None as far as I can see...

OUCH!

The news earlier this week that Scottish Power are going to raise the costs of their UK gas bills by 19% and electricity bills by 10% from August 1st, should not come as any great surprise. This is merely an unsavoury aspect of the the energy cartels behaviour. They have been at it for years. Centrica (back in May 2011), which incidentally owns British Gas, warned customers that they would face higher energy bills. Centrica says that "end-user prices" do not reflect the price they are paying for gas on the wholesale market.

Back in December 2010, British Gas customers were told that they faced a 7% rise in gas and electricity bills which came 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 greater demand, and coincidentally a greater profit to be made.

Scottish and Southern Energy also intend to raise their domestic gas charges by 9.4% at the start of December, blaming wholesale prices for the increase in customer bills. This 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.

Domestic energy consumers (and any other kind of consumers for that matter) are facing the sharp end of sharp practice from the energy cartel. New Labour did nothing to curb rampant excessive profiteering from the energy companies during the 13 years in was in Government. Consumers can expect little from this Tory dominated Government which continues to sacrifice the people's interests before those of a fat profit for their dubious friends in the City?

Any pre Westminster election promises to investigate the 'energy market' have been already quietly dropped in August 2010 (the height of the silly season and slap bang in the middle of parliamentary recess) no doubt with the hope that hard pressed consumers and voters would not notice...

UPDATE:  the actual narrowness of the 'energy free market' and the real limit of competition can be quite surprising - Radio 4 (during the business news section) announcing that the Con Dems are planning to 'open up' the energy market to competition (from newer smaller companies), quietly understated that the Big 6 control some 99% of the 'energy market'. Wow that's a pretty good if extreme example of monopoly capitalism / cartel-like behaviour at its worse...

GAS PRICES, PROFITS OR DIVIDENDS?

Centrica Shareprices

Centrica, which owns British Gas, has warned that customers may face higher energy bills. Centrica says that "end-user prices" do not reflect the price they are paying for gas on the wholesale market. Additionally the company also stated that it was likely to cut investment in the UK after the Government raised taxes on North Sea oil and gas production. Centrica says that the tax hike would erode profit growth in 2011, sending the company's shares down more than 4%. Hmmm gas prices? falling profits or fresh dividends for shareholders? Your new bill coming to a letter box near you...