MSE News: Guest Comment: The problem with energy firms

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"Adam Scorer, from lobby group Consumer Focus, explains why he believes the market's not working ..."

Read the full story:
Guest Comment: The problem with energy firms

Pincher

A total re-structure of energy acquisition funding.

Background:

1. Military budget cut mercilessly

2. Billions spent on energy

We create a new military division, funded by energy customers.
They conquer and occupy and extract oil and gas from unstable countries. This also means we can have massive tax cuts as the military budget is now largely taken care of by the energy users.

Competition in this scenario is provided by opposing armies from USA, Russia and China, so we have to learn to share or we won't get any.

Cardew

As pointed out in the article, it is the link between the Generating and Distribution Companies(e.g. Centrica/British Gas) that is a major problem.

It is a valid argument that the Distribution companies themselves do not make excessive profits. IIRC BG’s profits in recent years has varied between a loss on every customer to £60 pa for each customer.

However that said, if BG are paying their parent company Centrica ‘over the odds’ for Energy it makes a mockery of their claim to have modest profits.

There are two aspects that were not covered in the article mthat have an impact on our Utility bills.

COST OF RENEWABLE ENERGY

Both the present and previous Governments are committed to increasing generation of ‘Green’ energy. To encourage this huge subsidies are paid out and these subsidies are paid for by a levy on all customers. However it is just not possible to discover just how this impacts on our bills.

Lord Lawson – the ex Chancellor of the Exchequer wrote the following article

http://www.dailymail.co.uk/news/arti...uel-bills.html

Two quotes:

A fatuous obsession: The Coalition's absurd energy policy is damaging industry and adding hundreds of pounds to every family's fuel bills


What is doubly unacceptable, however, is that the public is being made to pay for this by stealth. This is why, in the cause of proper transparency, our electricity suppliers should be made to reveal in our utility bills the extent of this hidden tax element, which is costing families an average of £200 more a year.

This policy, incidentally, will also greatly exacerbate the problem of ‘fuel poverty’ (officially defined as the number of people who are obliged to spend more than 10 per cent of their household income on fuel), as the charity Age UK has pointed out.

Whilst conceding any reservations we all have about the Daily Mail, and knowing Lord Lawson’s stance on Climate Change, he has made some quite specific allegations – i.e. it is costing families £hundreds a year.

Is this true? And if so why isn’t it given more publicity.

SOCIAL TARIFFS

The Utility Companies have been coerced into providing social tariffs for low income families. Also to reduce the price of pre-payment tariffs because they are predominantly used by low income and those who default on Utility bills.

Both the social and pre-payment tariffs run at a loss and are subsidised by other customers. Again it seems very difficult to find out just how much this adds to our bills.

Surely low income families should get support from Social Security funded by taxation.

Paulgonnabedebtfree

I will tell you what is wrong with energy firms. They are liars.
I am a Scottish Power customer - though I will probably break contract and leave. I need to see what's out there first though. There is only one good thing I can say about Scottish Power. There bills are clear and esasy to understand compared with some of the offerings I have seen. Indeed, you can clearly see on the web how your usage is going, what you have used and what you have paid. Full marks for that bit.
However, the press have been giving out numbers for a price increase due on August 1st of about 10% for electricity and 19% for gas. This is total bullsh**.
I've received my email this morning telling me what my increases will be (if I stick around that long).

Electricity - early units work out at 33.6%
Thereafter - 29.5%

Gas - early units 56% (can you believe THAT?)
Thereafter - 23.3%

I'm assuming that their press release of 10% and 19% was an average.

Did they include all the people on fixed/capped tariffs in that average then? If so, that is scandalous. Surely that's the only way they could arrive at 10% and 19%?

Price increases like this are bad enough but even at those prices I will find a way - especially as I am a very frugal user anyway.
The bit that really sickens me though is being taken for an idiot.
SP. DO NOT TAKE YOUR CUSTOMERS FOR IDIOTS !!

I'm sick of all this stuff. It's like the prat who decided that there would be 1,000 megabytes in a gigabyte to make his hard drives sound larger (there are 1,024). Like the company (AMD I think) who made their computer processors sound faster by comparing the clock cycles per second to a spurious number on an Intel processor, like the window cleaning supply company who made their poles sound 3 feet longer by quoting the height it reaches (from the hip) rather than the actual pole length, like someone who produces a graph without making it clear that it hasn't started from zero, like the shop chain that quotes a very low price but when you stand next to the sign with a hubble telescope next to you, yoiu can just aboutr make out the word "from".
I've had enough of these bullshi**ers and charlatans - I really have. If I ran my business that way I would have gone under years ago - and deservedly so.
If I had my way the directors would be up in court on personal criminal charges.
Any vacancies on "Grumpy Old Men"?

backfoot

At it's simplest level,the competitive market has proven not to be competitive. Numbers of Suppliers has reduced by half, allowed by the Regulator and Governments.

We have an essential service operated by businesses who have introduced costly front end marketing,designed to churn customers from one confusing deal to another. At the same time,those without the impetus or skills to wade through the maze are left picking up the bill at the highest levels.

There is no long term planning or strategy towards assisting the wider economy regarding costs of production,economic recovery or price stabilty.Instead we are at the mercy, of short term shareholder satisfaction and short term market forces.

We used to have reserves to ride out the market fluctuations.

At the back end, the remaining companies are woeful in the extreme with regard to the even the basics of customer service. Bills are wrong,confusing,full of tricks and added charges.Try contacting them and you face a wall of obstacles.

Commentators poo poo the idea that renationalisation could ever be efficient as an 'old fashioned' ideology.

Isn't the evidence of at least the last 5 years enough to see that our existing energy policy is in tatters?

Pincher

backfoot wrote: »

We used to have reserves to ride out the market fluctuations.

Alas, every cubic meter of gas sitting in a container is cash sitting there doing nothing. That's why some people fill up £5 of petrol at a time. For each extra day of reserve, I'm guessing somebody has to keep half a billion pounds tied up. If the operators can get away with it, they will go for a just-in-time system, with no reserve at all.

What we really should do is get the Russians to rent a storage depot on UK soil, at Ramsgate or something. Give the depot diplomatic immunity so it's technically Russian soil. The oil and gas are still owned by the Russian oil company, so we can save a lot of money on keeping reserves.

The problem is of course, that the Russians will secretly bring in soldiers and tanks and nuclear missiles in the oil tankers, and workers will defect and find jobs in London.

backfoot

I meant financial reserves.

Dave_save

It's no surprise that those of us who do switch regularly are finding it more difficult to get competitive deals from these companies. I did read that around 15% of consumers have remained with their original suppliers since switching was possible, thus subsidising the rest of us. As this figure reduces the 'big 6' are finding it more difficult to maximise their revenue from the apathetic consumer. I know of 2 couples in their 90's who were being constantly told by their original supplier that they are getting a 'good deal' and 'stick with us'! When I looked at their bills they were paying a premium of 50% over what would have been the cheapest tariff. These companies have no morality. Then we have Chris Huhne, who comes out with the statement that we all need to switch to 'hit these companies where it hurts'. Is that guy living in the real world? Does our out of touch Energy Secretary not know that consumers have been switching for years, and still the competition that Thatcher promised is no more than a sham.

I just wonder what these companies actually give me in way of a service. They appear to be no more than energy brokers, who pass on the total market risk to the consumer at the first sniff of a price rise.

I'd like to see much more innovation in the way they negotiate energy supplies and prices. (Where is the incentive for them to do this? No point in getting the best deal from wholesalers, their overheads remain constant so all they have to do is increase a tariff or 2).

I'd like to see less waffle from them about how good they are with 'green energy', and how many useless windmills they've put up. We all know this costs us a fortune as a consumer/taxpayer and I'd much prefer to know how much it is rather than how good they are at it. (I would guess few consumers actually care about where their energy comes from, and we all know that this is little more than a PR exercise to make us think they actually care too).

I'd like to see these companies actually value their customers loyalty instead of using the balance sheet calculations of price against consumer numbers. (It's no coincidence that the 'big 6' suffer from poor consumer perception - why do they have to try? They lose a few customers, fiddle with the tariffs, and hey presto all is well, and more of us sheep walk in!)

But you won't get any of this with the current status quo. How about having one company, negotiating on behalf of the UK consumer, vast reduction in overheads, bigger buying power, fewer tariffs, energy generators and energy wholesalers in fierce competition to sell? But then again we did have that at one time.

undaunted

Ofgem & Consumer Focus are good at making statements & press releases but it's aboout time they showed the b*lls to actually confront the problems rather than merely consult with some of these suppliers - who are obviously oonly gooing to respond in their own interests rather than the consumers - & bring about poositive change instead of just offering largely meaningless words.

With the retail & distribution shared by what are basically the same companies / people involved (eg Centrica & British Gas) it's very difficult for the consumer (or even Governments) to know what the true profits of these coompanies are but you can be sure that not oone of them is skint whatever the PR machines & expensive accoountants may try to lead us to believe

A._Badger

Dave_save wrote: »

How about having one company, negotiating on behalf of the UK consumer, vast reduction in overheads, bigger buying power, fewer tariffs, energy generators and energy wholesalers in fierce competition to sell? But then again we did have that at one time.

However bad things are now - and I agree they are very, very bad - the answer is most certainly not to have one company in any position of market dominance.

Anyone who suffered under Post Office Telephones, British Rail and the rest of the state monopolies will remember why.

What is needed is proper competition and ruthless examination of the business models by a regulator with brains and teeth - quite unlike the current one, in other words!

backfoot

A._Badger wrote: »

Anyone who suffered under Post Office Telephones, British Rail and the rest of the state monopolies will remember why.

You didn't mention the Gas and Electricity Boards?