MSE News: Energy firms' profits soar, as they hike our prices

wozearly

The original article mentioned Ofgem's plan to simplify standard tariffs and make non-standard ones all fix their prices for a year...not really explored here, but definitely a distinct step in the right direction to counter the current "confusion marketing" model of charging.

Best thing that could happen for the consumer would be for Ofgem to push as far as possible to commoditise the way energy is sold. Commoditisation is a nightmare for companies, because it forces them to compete openly and transparently on price (and to a lesser extent on service levels and extras) and accept lower margins - conversely, its often a significant price benefit to the customer as a result.

Its almost ironic that I'm actually suggesting that, because the actual product in terms of supplying of gas and energy is entirely commoditised - there's no difference in the energy you receive from British Gas vs E.On, for example.

That there are such a plethora of different tariffs and complex calculations suggests there's something deeply wrong with competition. So credit where its due, Ofgem, you're at least moving them in the right direction.

macman

MillicentBystander wrote: »

Do your research before posting. Far be it from me to defend Tesco (I actually detest them as a company and I love the way utility company apologists/employees always seem to use them to justify their company's practices, lol) but their gross profit in the first half of this year worked out at 5.3% of turnover. Back to the drawing board with that theory, macman.

Which is almost exactly the average utility co. % profit over the last two years then.
I agree that the fluctuations are too wide though.
For me the most interesting fact that came out of this report is that 75% of UK customers are still on standard tariffs. Assuming, say 20 million households in the UK, 15m of them are ignoring an average potential saving of around £200pa, which means £3 billion a year additional profit-or an average £150 per customer.
If people can't be bothered to help themselves...
And I think you'll find that Tesco's UK profit was 5.55%. Worldwide group profits drag that down a bit.

wozearly

macman wrote: »

For me the most interesting fact that came out of this report is that 75% of UK customers are still on standard tariffs. Assuming, say 20 million households in the UK, 15m of them are ignoring an average potential saving of around £200pa

Two things;

a) If all customers suddenly engaged with switching, you can bet that the companies would start raising prices to make up that lost £200pa. So, actually, it benefits the proactive moneysavers currently...

b) There are a number of barriers to switching that aren't just laziness. I'm not sure it accounts for 75% of all customers, but Martin did a blog on this recently that would be worth looking at (if you haven't already):

http://blog.moneysavingexpert.com/2011/09/23/note-to-energy-minister-its-not-just-laziness-that-stops-switching/

Consumerist

Swipe wrote: »

So much for the recent price rises that were necessary to cover to wholesale costs. Ever get the feeling we've been had?

Yes, and by whom?

Who do you suppose is funding the very generous feed-in tariffs paid to the few through (back-door) green taxes paid by the many through their energy bills?

thor

macman wrote: »

On the other hand , when it was £15 profit pa (less than1%) a year ago, it make you wonder why they bothered at all?
Even at £125 it is about 9% margin on a typical dual fuel cost of £1350pa.
Can you name a business which does not at least aim to make a margin of around 10%?

Why do the apologists always make it sound like fat cats' wages are solely derived from their profits? 10% profit is the surplus left after expenses such as wages. They have already been well paid even before touching the profits. That is why they bother at less than 1%!

macman

You seem to have difficulty distinguishing between a director and a shareholder. The big 6 are public companies, and the biggest shareholders are probably the companies managing your pension funds.

diamonds

macman wrote: »

You seem to have difficulty distinguishing between a director and a shareholder. The big 6 are public companies, and the biggest shareholders are probably the companies managing your pension funds.

That will be the 90what % of us that cant afford basic standard of life as we dont use credit whom CAN afford a private pension *rollseyes*

grizzly1911

I understood the (5 to be clear profit afteroperating costs and the cost of the "gas/electric". I wonder what profit is made on the wholesale bit?

I don't know but I surmise that the actual cost of the commodity itself is relatively low in relation to the average £13/14 00 bill. that is the reason we don't see th eprice following the wholesale "swings".

What we also pay for is the green costs, the FIT subsidies:mad:, and investment in future generation & infrastructure, insulation grants oh nearly forgot about £100 a time in wasted admin costs each time I switch supplier each year:mad::mad::mad: and £50 in VAT.

I would certainly prefer the amount we spend on FIT going into strategic generation solutions.

I certainly believe the tariffs need to be sorted out but I guess the suppliers will still run rings round the regulator as they largely fund them.

Perhaps wholesale and retail should be completely split with no cross ownership allowed?

macman

diamonds wrote: »

That will be the 90what % of us that cant afford basic standard of life as we dont use credit whom CAN afford a private pension *rollseyes*

90% dependent on the state pension? I don't think so. there are nearly 20 million people currently drawing or accruing in occupational pension schemes.

HalloweenJack

if everyone moved to cheaper online tariffs (the current government advice) then the energy companies would increase prices to compensate teh reduced profits - there first responsibility is to the shareholders...