Ofgem Bring In Forensic Accountants To Investigate Big 6

jhp

"The regulator Ofgem has brought in the forensic accountants BDO to see if energy firms understated their retail profits to justify higher prices.
BDO will look at trading profits, wholesale prices and how the firms hedge against price fluctuations.
The move marks a stepping up of its investigation into the big six energy suppliers.
The six major UK suppliers are British Gas, E.On, EDF, Scottish Power, Npower and Scottish & Southern "


Full article here http://www.bbc.co.uk/news/business-14608341

moonrakerz

If they find skeletons in the cupboard or bodies under the floorboards they still won't do anything !

MillicentBystander

moonrakerz wrote: »

If they find skeletons in the cupboard or bodies under the floorboards they still won't do anything !

Sadly, I agree. You just have to look at what they did to npower over the sculpting scandal and compare it to what Consumer Focus did to the same company over the very same scandal. Successive Govts aren't really interested in shaking the energy companies up as they cream 5% off the top from all of them. And if you look at the country's dire finances at the moment, why would they? If they didn't have the stomach for it when we were going through a boom, what makes anyone think they will have the stomach for it now?

backfoot

I sense a wind change with Ofgem's position. Appointing Independant Accountants seems like a good move to get behind the smoke and mirrors which has plagued the Industry in recent years.

I hope there will be a political will to back up any adverse findings.Fighting inflation for ordinary customers and business must be a priority of any government wanting to stay in power.

The political risk will be the need for investment in future generation capacity. If there is a severe rap the companies concerned may take the hump.

MillicentBystander

I genuinely believe that wind of change is backfoot-induced! But your last sentence could be the salient one here - the Govt/Ofgem I reckon are totally fearful of the energy companies taking the hump! It's OK for decent sized victories (taking nothing away from your efforts, backfoot, it was a stunning victory all the same) like the scrapping of exit fees after an increase but this wholesale stuff goes to the very heart of their operations IMO. But I really hope, like you say, backfoot, there really is a wind of change at Ofgem. Time will tell.

Cardew

If the findings show the companies have a case to answer, I would have thought that the EEC would have to be involved. Not only because the companies are multi-national but that UK prices are no higher on average than Europe, and cheaper in many cases.

Also if the retail companies are understating their profits, surely this would contravene rules for trading on the Stock Exchange.

MillicentBystander

Never going to happen because all the companies affected would simply put themselves up for sale (npower are allegedly after a buyer, maybe due to the £72 million they were forced to hand back?) and the Govt's plans for investment in future generation capacity would be in tatters. I hate to come across as some sort of conspiracy theorist but these things tend to get 'sorted' at a political level.

This shambles of an industry is all Thatcher's fault, of course.

moonrakerz

I fail to understood why it has never been made a legal requirement for energy companies to advertise their prices in the same that finance companies have to quote an APR figure when advertising loans.

Force all the energy companies to adopt the same method of pricing. If I go to Tesco I can immediately see if their petrol is cheaper that ASDA, it has to be priced per litre.
Just why do we have to put up with the crazy system where every energy company seems to dream up its own method of pricing ?

MillicentBystander

moonrakerz wrote: »

I fail to understood why it has never been made a legal requirement for energy companies to advertise their prices in the same that finance companies have to quote an APR figure when advertising loans.

Force all the energy companies to adopt the same method of pricing. If I go to Tesco I can immediately see if their petrol is cheaper that ASDA, it has to be priced per litre.
Just why do we have to put up with the crazy system where every energy company seems to dream up its own method of pricing ?

Couldn't agree more but they've been allowed to get away with it by successive Govts. whether blue or red and that's the problem. Confusion marketing is now just sort of accepted as the norm, which is absolutely crazy when you think about it! One price per unit of gas or electric and that's it, basically. But you would then find that the industry would have to become truly competitive and the cosy price collusion that exists today is out of the window. Some of the Big 6 would then be put up for sale, I'm sure.

davidgmmafan

"Never going to happen because all the companies affected would simply put themselves up for sale (npower are allegedly after a buyer, maybe due to the £72 million they were forced to hand back?)"

Shot in the dark here but I'm betting its got more to do with the massive debts of RWE which is the parent compant. Also Germany's decision to stop nuclear power has affected them and E.On I believe.