'Energy companies price hikes... they’re just doing their job!' blog discussion

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Please click 'post reply' to discuss below.
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  • For those of us already in fuel debt-and I know that there are many, changing supplier is not an option until the debt is cleared. I'm on a meter for both electric and gas, I am a single parent of 3 big children all in full time education. I work and earn a food salary but spending 70 -90 pounds per week keeping my 3 bed house warm(not hot). God help us if things get worse. You can't blame the consumer. If burning wood or coal was an option I would be doing that
  • MSE_Martin
    MSE_Martin Posts: 8,273
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    clarkypoos wrote: »
    For those of us already in fuel debt-and I know that there are many, changing supplier is not an option until the debt is cleared. I'm on a meter for both electric and gas, I am a single parent of 3 big children all in full time education. I work and earn a food salary but spending 70 -90 pounds per week keeping my 3 bed house warm(not hot). God help us if things get worse. You can't blame the consumer. If burning wood or coal was an option I would be doing that

    I agree with you on this - and hopefully this section of my blog,

    "Of course, there are some on pre-pay meters or in fuel debt who are trapped, and that is a much more difficult scenario. Yet this is about the many who could act, and cut their bills by 25% but don’t, and get energy grants, and help, but don’t. "

    makes that clear.

    Again though we need regulatory action to ensure those in fuel debt aren't overly penalised (and we have had some improvements on that recently.)
    Martin Lewis, Money Saving Expert.
    Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.
    Don't miss out on urgent MoneySaving, get my weekly e-mail at www.moneysavingexpert.com/tips.
    Debt-Free Wannabee Official Nerd Club: (Honorary) Members number 000
  • magyar
    magyar Posts: 18,909
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    Martin, thanks for a sensible post on the subject. I get frustrated when I constantly hear that companies are evil (it's such a nonsense word in this context anyway). I will be open here and say that I do work for one of these companies.

    One thing I would like people to remember is that the utilities do not just buy electricity/gas and sell it on to you at a profit. They are also responsible for maintaining the electricity generation fleet and most importantly building new generation to 'keep the lights on'. And all of this has to be paid via the electricity bill - there is no other form of subsidy available.

    But most importantly, the message to consumers should be to use the rights they have to the full. Switch regularly.

    My message of Ofgem has long been that they need to concentrate on
    (1) making bills easier to understand, and to make it simpler to compare two tariffs - I find it impossible and I work in the industry!
    (2) making the switching process simpler and quicker - there's no reason it couldn't be as easy as changing mobile phone or broadband supplier, which seems to be smoother to me.

    It is this lack of power which drives down competition which ultimately keeps prices higher than they should be. If with all this competition prices are still high, well then that shows the price was fair all along.
    Says James, in my opinion, there's nothing in this world
    Beats a '52 Vincent and a red headed girl
  • opaque
    opaque Posts: 183
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    As my parents say 'It's winter!, it's going to get cold!'
    So it's not much of a surprise that prices are going to go up. And of course there are very good reasons for them to go up. It's when the prices go down they never seem to drop them by a comparable amount when that happens.

    They are businesses of course and are in business for profit but then you would hope that an body tasked with keeping an eye on them would be able to force some changes if the business doesn't (eg if after a year the wholesale price has gone down and after x months the prices haven't then force a refund or discount)

    The funny thing about all these companies that people say are evil are exceptionally important to most of us in work. After all which companies do you think pension schemes have shares in? I know that my pension scheme has a very large amount of Vodaphone shares in it. So tax avoiding or not the share price means something to me!
  • I just got my finger out and switch from BG standard tariff, should have done it months ago.
    Nothing to see here, move along.
  • fishter
    fishter Posts: 17 Forumite
    Martin,

    I take your point about the companies having to get the best return for their shareholders. I was recently in Denmark doing some work for a utility company called SEAS-NVE. They are a co-operative. Their customers are "members" of the co-operative and the aims are not to make massive profits, but to provide a service to the members.

    Is this an alternative way forward for energy providers?
  • magyar
    magyar Posts: 18,909
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    fishter wrote: »
    Their customers are "members" of the co-operative and the aims are not to make massive profits, but to provide a service to the members.

    Is this an alternative way forward for energy providers?

    There's no reason why it can't be, but I doubt it would end up much cheaper overall. The typical profit per customer is I think in the region of £80-100 per year (i.e. about 10% gross margin).

    So a small co-operative would have to effectively be only £80-100 more expensive in terms of wholesale purchasing and overheads. Since small companies tend to be more expensive to run than large ones (on a per-customer basis) this could be challenging.

    I think better ideas are locals investing into their own small generation for small communities. A typical small hydro scheme for example, might generate 1MW and will qualify for a feed-in-tariff giving an income of ~£500,000 per year. It will cost around £3m to build, but you can borrow about 80% of that, so if say 500 people invested £1000 each, they will effectively get a government-backed return of about 15% for 20 years.

    That's money that you can use off your electricity bill!
    Says James, in my opinion, there's nothing in this world
    Beats a '52 Vincent and a red headed girl
  • "The energy companies are only doing their job."
    True. I only do my job too when I try to maximize the profits of my business too.
    However, the huge difference is that there are more than six window cleaners in the UK.
    That's why we need more than a toothless tiger of a watchdog to act for us.
    Speaking of watchdogs, a customer once told me that his dog was "only doing its job" after it bit me.
    I wasn't too impressed that time either :D .

    I do accept that the wholesale price of the stuff is only one (large) part of the overall picture. That's why I see it as hypocritical when they quote wholesale prices to put the price up and business running costs not to bring the price down.
    F***ing hypocrites IMO.
  • Every minute of every day I hear about something that is supposed to "save lives".

    We're told not to drive too fast, as slow driving "saves lives". We're told not to smoke, or drink, as it might cause us problems that could lead to us dying before our time.

    The fact is, making gas more expensive hurts poor people and the elderly, and could very easy end up killing people. If this was the pharmaceutical industry, and it released a pill into the public domain that killed people, then they'd find themselves being sued for hundreds of million pounds. So how are energy companies simply able to put up prices at a time when people are struggling financially?

    Why did we even privatise these industries. It's not like heating our homes is something we do for fun, it's something we do to stay alive. Why are these things run as businesses, they should be non-profit making services that generate revenue only to keep the services going, and nothing more. It's utterly ridiculous to allow these companies to profit from the misery of millions.

    I'm lucky, I can just about afford to heat my house, and with a new baby, it's my priority. I just wonder if there are people in my street that are struggling to cope, and how many lives will be lost this year because of greed.
  • magyar
    magyar Posts: 18,909
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    I do accept that the wholesale price of the stuff is only one (large) part of the overall picture. That's why I see it as hypocritical when they quote wholesale prices to put the price up and business running costs not to bring the price down.
    F***ing hypocrites IMO.

    The problem is that the public simply doesn't understand the detailed explanation. There's technically no such thing as 'the wholesale price'.

    A utility will typically forward buy and forward sell electricity and gas. So a year ago, they might have bought 10% of the power they will need to supply tomorrow (30 Nov). Then six months ago, when the price has moved (up or down) they might have increased this to 25%. Then three months ago, this might be 75% and then within the last few days they will have been looking at weather forecasts, demands etc. and buying additional power to sell on so they can meet 100% of the demand. Even then they might have to buy/sell within the half-hour before energy is distributed.

    This process is known as hedging, and itself is part of a trading system called the balancing mechanism (which 'balances' supply with demand).

    So it's very, very hard to do a detailed comparison between Utility A and Utility B because they will all have different hedging strategies.
    Says James, in my opinion, there's nothing in this world
    Beats a '52 Vincent and a red headed girl
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