Is it time to re-nationalise energy firms?

DrSheldonCooper · 31 October 2012 at 9:30AM

Nationalisation would be insane, prices would either rise more than required the nationalised company would require ever increasing injections of capital to remain in business. The unions would gain control and with that control be able to exercise immense power and bleed money from all of use via demands for more pay, lower hours, platinum pensions etc. People see it as attractive simply because they know they will be paying the same unit price as their neighbour and not have to do anything about it.

The main problems with competition in this market is simply that so many people simply don't bother to switch. This means that if and when a supplier (new or existing) offers a price, product structure or service which is attractive it fails to get enough customers switching. Most consumers remain disengaged and seemingly content to keep paying which ever company sends the bill. If everyone switched in the next three months you would quickly see competition at work.

Competition will only work if consumers make companies compete for their business.

Alantheaged · 31 October 2012 at 2:11PM

Alas, even as a lifelong conservative, shortly to become UKIP, I am as convinced as Gaberdeen that privatisation hasn't worked on the key commodities - energy, water and transport, which are fundamental to the well being of the country. The other big issue now is not only the profits which are being earned by the mostly foreign companies, but also how much tax they are paying following the recent revelations of how various other foreign or multi-national companies have been ripping us off blind, quite "legally" of course.

I also wonder if the huge profits would ever have been paid to the nonsensical wind farms at vast expense to the consumer if the industry had been nationalised. Hopefully now it is actually becoming visible what a concerted rip off this has also been then it will finally be stopped and we can get back to the sensible burning of fossil fuels - and quickly too, far in advance of the provision of foreign owned and built nuclear facilities and without the major problems related to safety.

Fulham Mark also says "it's strange how people who argue for nationalisation can never point to a country with nationalised power where the price hasn't also gone up as much. Unless that country happens to have masses of gas or oil reserves". People who don't live in London are generally aware that we have now discovered a vast gas field which the Fylde has been sitting on all this time which seems to be larger than the deposits found in the North sea. So the potential for much lower energy costs is already there. If only it were nationalised so we could reap the full benefit of this resource rather than the likes of the big 5 but I suspect they will find a good reason to justify an increase rather than a reduction in price and milk us all even more!

ifan.goch · 31 October 2012 at 5:03PM

I don't think anyone should make a profit on essential utilities such as gas, water and electricity. People are dying because they can't afford to heat their homes while shareholders are making a profit - I'm sure no-one agrees with that principle.
As far as comparison sites are concerned, I would think that the person who said 10% of the population has no internet access is probably wrong. We are constantly being told that we have an increasingly elderly population which is way more than 10% of the population. It is mainly this age group that has no access to internet and would not know what to do if they did have access. Furthermore, many of this age group are the ones that most need the heat and are least able to afford it. Why deprive them of even more of their dignity by suggesting that they look to charities to help.
In my opinion renationalisation is the only fair answer.

stevemcol · 31 October 2012 at 5:20PM

ifan.goch wrote: »

I don't think anyone should make a profit on essential utilities such as gas, water and electricity. People are dying because they can't afford to heat their homes while shareholders are making a profit - I'm sure no-one agrees with that principle.
As far as comparison sites are concerned, I would think that the person who said 10% of the population has no internet access is probably wrong. We are constantly being told that we have an increasingly elderly population which is way more than 10% of the population. It is mainly this age group that has no access to internet and would not know what to do if they did have access. Furthermore, many of this age group are the ones that most need the heat and are least able to afford it. Why deprive them of even more of their dignity by suggesting that they look to charities to help.
In my opinion renationalisation is the only fair answer.

Ifan. My dad is 77. He communicates with all his friends of a similar age and older by email. They ALL take full advantage of internet promotions, comparison sites and the like. The silver surfer generation are more savvy than you suggest.
Of course there are still poorer and less confident people who would need support and that should be offered. It doesn't deprive someone of dignity to offer help.

I agree though, it would be nice to see energy utilities run not for profit, even nationalised. All idealistic though becuase I suspect it wouldn't reduce the costs much.

I also agree with some of the other posters that point out we just need to get used to more expensive energy as resources get scarcer.

nhc50 · 31 October 2012 at 9:20PM

Nationalisation won't work, but saying that any essential service such as fuel or water should only be able to be provided by social enterprises, it's wrong that a company whose purpose is to make a profit should be doing so by supplying people with something they have no choice about using. This idea could be extended to requiring grocers to have a social enterprise supermarket division supplying basic necessities. Would we as a society also say that telephone and digital services were essential to life?
A social enterprise might not be able to supply me with cheaper gas or electricity but at least I would know I wasn't paying share holder dividends and inflated salaries and advertising budgets at the same time.

d-b_2 · 1 November 2012 at 2:04AM

C_Mababejive wrote: »

No..the British whinged..so now they have made their bed,they can lie in it.

Anyway im not selling you my shares in BG,CNA,NG,BT

Sour grapes - you 'own' part of the utility companies but are not happy that others own land?! (according to your signature line). So it's OK to privatise utilities but land should be state owned? - like in Zimbabwe - previously breadbasket of Africa.

Duncs_ · 1 November 2012 at 10:38AM

Firstly, let me state, I donot work for any of the energy companies. I’m just anaverage Joe, putting forward my own views and perhaps getting a little bit ofperspective into things.

Owned by foreign companies.The only energy company not owner by a foreign company is, I believe, BritishGas. Centrica, its parent company, is British owned.

From ofgem’s website, www.ofgem.gov.uk, “Protectingconsumers is our first priority. We do this by promoting competition,wherever appropriate, and regulating the monopoly companies which run the gasand electricity networks. The interests of gas and electricity consumersare their interests taken as a whole, including their interests in thereduction of greenhouse gases and in the security of the supply of gas andelectricity to them.”

Ofgem has no control overwhat prices gas / electricity is set at. If you have a complaint about anoperator, you can write to ofgem who will investigate. However, there isnothing that “toothless” ofgem can do about price rises.

Return these companies intostate control? This would be the craziest thing ever. Surely we cannot forgetthe condition that these companies were in, prior to privatisation? Therewas no money for upgrades and changes to the infrastructure. Money washaemorrhaging from the system, with back-handers and bungs to politicians andthose who ran them. If these were still in public ownership, what conditionwould the country be in now? We are in a recession folks, and it would bea helluva lot worse. We may have low energy bills, but there would be no moneyfor infrastructure updates, so potential gas leaks—alright, an extreme example.As we are in recession, who’s to say that there would be no increase in pricesto help us out of it? We would have no money to introduce EU regulationson Greenhouse gasses by designing / building renewable energy sources. So, thatwould be more money out of already dwindling government coffers, to pay thefines that the EU would undoubtedly force on us.

Switch to another supplier.It may be cheaper just now, but they will ALL increase their prices at somepoint. All it takes is one or two to increase theirs, and it’s open day for therest. As long as they are not the first, it’s OK. So, soon you will have theothers following suit. They may not raise them just now, but the will raisethem.

Don’t pay your bill. Probablynot the best suggestion. All that will happen is you will receive severalreminders then, if you still don’t pay, your name will be passed to a debtcollection agency. If it means taking your plasma / HD TV, your Blu-Ray / DVDplayer, your computer etc. it makes no difference. AS long as the bill, alongwith the additional debt collection agency charges, is paid that’s all thatmatters to the company. As for disconnecting you, they would not disconnectyour electricity, as this is a basic human right. You need electricity to live,whether it be lighting, medical equipment or whatever. However, every home cansurvive without gas so if you didn’t pay your gas bill, all they would do isfit a pre-payment meter.

Fraud. No, they are advisingyou ahead of the increase, as they are required to by law. They are supplying aproduct which you are buying.

The government can’t do athing about it. They are privately owner companies. They set their own prices.In the same way that a bread company can set their own prices. The cost ofwheat has / will rise due to the bad weather. So, bread will increase in price.The cost of fuel has risen, so companies will pass on these additionaltransport costs to the consumer. The government can do nothing about theseprice increases.

It's perfectly clear that whilst these companies are making hugeprofits, a large portion of this is going into the government coffers. This maybe in the form of corporation tax, income tax from the chairman / directorsetc. Without this extra cash, the country would be in a worse state than it is.

People keep banging on aboutwholesale energy costs. A quick search on the internet shows that suppliersneed to buy gas months in advance. So, if they buy gas today at say £1 percubic litre—or whatever it is—this gas will be used in 6 months time. Come 6months time, the wholesale price of gas may be £0.25 per cubic litre. So comeApril, when the price is low, people will bang on about the cheaper cost ofwholesale gas and ask why the companies are not reducing their prices by 75%.However, the gas that you are now using in April, was bought six months ago sothe company will be selling at a loss, reducing income, reducing tax paid,reducing investment etc.

Yes, every privately ownedcompany has to make a profit. If they don’t, they will go bust. This includesthe guy running the small corner shop, to the energy supplier. Yes, theseprofits look excessive. Yes, the directors etc. will receive large bonuses. Ican’t argue or agree with that. At a time like this, perhaps they should take apay freeze—which I have had to endure for the last three years—or receive nobonus for their “hard” work, just like I haven’t received a bonus for the lastfive years, despite knocking my pan in to get my work done. I don’t site on mybackside, worrying about what suit / tie I will wear tomorrow.

I agree that it will be toughfor pensioners. However, many suppliers have special schemes / tariffs forpensioners. There are many resources out there for them. I would suggest thatany pensioner, or anyone who knows a pensioner, contact their supplier and askabout any scheme they have. If that doesn’t help or they say they don’t, go toCitizens Advice who will help.

Our prices are not higherthan those on the continent because of subsidies. Our energy prices are higherbecause energy companies have to buy it in now. Stocks are dwindling around theUK, regardless of what people think / say. So, the only way we can get gas isto buy it in. This costs the companies, and brings into play the wholesale gasprice. Gas is used to heat homes, and to generate electricity via gas poweredpower stations. Because of this, gas and electricity prices rise. It is nothingto do with subsidies.

People as wasteful of energy. Leave lights on; put the heatingon full when not in / when doors are open; boil full kettles, when only a cupis needed; no loft / cavity wall insulation—which can usually be done free. Ifwe all did things to reduce our energy usage, we wouldn’t have such high bills.Let’s get back to old values, if we can only get into the mindset…if you’recold in the house, put on a jumper rather than turn up the heating; if you’remaking a cup of tea / coffee, only boil the water you need; get the loft /cavity walls insulated; have the central heating at reasonable temperature…say15 – 20 degrees; don’t leave light on; don’t run electrical productsunnecessarily – if this means reducing the time on Xboxes, playstations,computer etc. then fine; don’t leave things on standby, like TV’s and Hi-Fi’s.There is so much we can all do to reduce our energy costs. This has a doubleeffect…it reduces our energy costs and it reduces the energy companies profits.We’re not using so much, so they won’t make as much of a profit. If they puttheir prices up, look at other ways to reduce energy usage.

As I say, just my 2p’s worth.

Smedders11 · 1 November 2012 at 11:56AM

Who's to say prices wouldn't have increased if the firms were in Government control? Wholesale prices rise due to a variety of uncontrollable factors: political instability in source contries, dwindling supplies, public opposition to exploration and diversification (ignorants protects to shale gas, anyone?).

A private market brings far better prices than a Government-run organistion. Competition in the market drives down prices and improves efficiency. Improvements in extraction and utilisation are being fuelled by competition and cost saving: if you get more units of energy out of a single unit of resource then you have a greater supply than your competitors, driving down prices.

The only utility that seems worthy of consideration for nationalisation is water. There is no competition in the water industry; you're tied to your water company due to your geographical location. Maybe the Government has its watchful eye over water companies and makes sure prices are cheap, but maybe we aren't getting the best deal we can?

steve-L · 2 November 2012 at 5:22PM

Gaberdeen wrote: »

I'm sorry - but if energy companies were selling on a product at the cost of wholesale, explain why all energy companies are reporting record profits? It doesn't make sense if you're breaking even on the cost of wholesale gas or kerosene - you still have staff and maintennace / investment costs to cover.

Energy direct to consumer selling is one of the lowest profit areas for integrated energy companies.
In an Integrated Energy Company covering Chemicals, Upstream, Power Generation and Power Sales the majority of profitability is in the Upstream E&P and Energy Trading. The rest is just portfolio risk management for the company.
(If the gas price goes down then the E&P Profitability drops but this means cheaper gas to power stations.....) If the oil price goes up then this means cheaper delivery to refineries and for petrochemicals.

I can't post links but take a look for yourself in the year end financial reports (available on the investor site for the companies)

When British Gas was split into Centrica + British Gas and BG Group Centrica was essentially given Morecambe Bay as a producing asset just to make the company financially viable.

BR Group the other half made some initial investments in utilities and power generation. They sold the last of these off in 2009. (Again see the 2010 BG Group financial report)

I suspect there is a cartel at work here. Adam Smith, the father of modern capitalism admitted as much when he said;

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public"

I work in the oil & gas industry as a measurement specialist & it always surprises me how readily people will accept the notion that increasing oil prices mean increasing gas prices. They are two completely separate hydrocarbon products - there is NO correlation between the cost of producing oil and gas - except in the instance where you consider the companies that produce them. Demand for oil doesn't inherently mean an increase in demand for Gas - yet this country blithely accepts this to be the case.

Production Costs and Demand are two separate things except when it comes to what is commercially viable to produce. The main difference is that gas is subject to local demand whereas oil is not.
In many areas worldwide gas is simply a waste product flared into the atmosphere. This is only slowly changing in demand for LNG that then produces the same non local price/supply and demand.

steve-L · 2 November 2012 at 5:41PM

stevemcol wrote: »

Does it matter that the tariffs are obscure and complicated if the comparison sites can cut through it all on our behalf?

The companies are now forced to tell you your annual consumption in straight forward KWh and the comparison site do seem to handle that value quite well.

But they can't? More-over why should we trust them in that they have 'cut through it'? The Tariffs are deliberately written to obfuscate the costs. In reality each energy supplier seems to have 4-6 tariffs (kWh and either standing charge or Tier1-2) they then make more or less complex in terms of conditions.

I just want a simple list of tariffs (kWh and either standing charge or Tier1-2) available to me but NOONE seems to be able to give me one.

I don't see why a comparison site or energy provider need to know my current usage or not.

Why is this so hard? ISP's can give this equivalent.... mysupermarket can show me the price of a tin of beans without knowing how many I buy a year etc.

One issue is we are given in most cases today's price when tomorrows might be completely different....and some of the cost comparison sites actually are wrong... if the big 4 all show me the best for me is different then how can all three be correct? At least 3/4 must be wrong... and I suspect all 4.

There is really no excuse for the energy companies not publishing this information. If the watchdog had teeth they would simply need to do as the autoroute do for fuel in France.

On French autoroutes the petrol price is published for the next 4-5 stations... this ensures the driver can choose before deciding how far to drive on their current tank.

This is all that is required for people to make the calculation themselves. I have no objection to the comparison sites making it AS WELL but that is not a replacement for people to be able to make their own calculations.

We can have legislation about cookies on sites and credit cards publishing an APR but it seems not that energy companies must publish this simple information.
Equally it should be available for those that ask on the phone or by post...

On the matter of privatisation or free market the real question is which way will it go. The present situation is not a free market, if it were I would have this information at my fingertips, I could switch supplier 2x a week if I want and they can.

If I look for a credit card (using the excellent resources on this site) I want to know the annual charge and cashback, I'm not interested in APR because I don't have time to stooge and in 25+ years i have NEVER failed to pay in full every month.
Someone else might want to transfer debt and someone else have a fallback.... so CC companies publish APR/Annual Fee and then benefits like cashback.
Why can't utilities do the same with kWh and standing charge/tier1-2?

Is it time to re-nationalise energy firms?

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free