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. 

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?