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.   

IN THE MONEY...

It's not often that the National Grid, who happen to amongst other things keep tabs on the gas industry makes headlines. The news that some of the UK's largest energy suppliers held back gas in storage tanks as the 'free market' ran into a serious if not acute gas shortage will not surprise many of the less than dispassionate observers of the expensive farce that passes itself off as the alleged energy 'free market' in the UK. Thanks to the failure to develop a sensible storage capacity of gas and the failure to develop serious serious alternative sustainable energy supplies the UK came within six hours of running out of gas on March 22nd this year. 

National Grid, which leases out storage space in it's Isle of Grain Liquefied Natural Gas (LNG) terminal, to Centrica (who own British Gas), BP and other large energy suppliers, noted that the terminal was 40% full on March 22nd. It also noted that the South Hook planet (here in Wales) was 52% full; at a time when a combination of pipelines problems and demand (due to the cold weather) led to a spike in gas prices (which reached 150 pence a therm). National Grid owns and operates the gas storage facility but leases out storage to a number of third party users (including Sonatrach (Algeria) and GDF (France). The implication is that these large energy suppliers were holding back stocks of gas during a time of crisis so that they could profit for the high price for gas. 

If nothing else this should make it abundantly clear that the ideologically driven and pretty much unregulated 'free market' for energy has failed abysmally. We need, like Scotland and other countries to develop clean, safe and secure renewable energy supplies. I have come to the stark conclusion that the 'Big 6 energy cartel members have proved entirely focused on driving up profits and have neglected the safety of supply. They should play no part in developing, administering and overseeing any sustainable energy supplies as they will only endeavour to  extract as much profit as they can from the process. 

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.

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...