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

Mazio_2

The point is are they making a reasonable profit or ripping us off.

The government should also take some blame as instead of having a plan for green energy they are reliant on the energy companies doing it because of the unpopular aspect of them becoming involved (tax).

MillicentBystander

HalloweenJack wrote: »

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...

And therein lies what has always been the problem.

meggsy

Cooperative Energy has members

grizzly1911

meggsy wrote: »

Cooperative Energy has members

The COOP is also expensive -Power, Groceries, Petrol/Derv.

Whatever divi you get back has already been paid for.

macman

So since we do have a privatised energy industry, perhaps I can ask: what do people consider is a 'reasonable' profit per customer per year? Somewhere between £15 and £125?

grizzly1911

HalloweenJack wrote: »

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...

Yes they would but they wouldn't necessarily make more overall profit we would all just pay a a more balanced rate (I was going to say fair but that is unlikely).

At the end of the day they are all only selling a basic commodity that gets delivered in the same way as every other supplier.

Begs the question why do we need private competition - instead of profit just read inefficiencies.;)

grizzly1911

macman wrote: »

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.

There may be 20 million accruing/drawing a pension. It would be good to see a distribution by amount. I would suggest there are a lot that are pretty poor either part time/poorly paid jobs where they are coerced into pensions e.g. low level social jobs which probably just lifts them out of benefits or private pensions that rack up nothing apart from providing the administrators with an income.

Of course their will be some nice top end ones too.

wozearly

grizzly1911 wrote: »

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.

EDF regularly releases a breakdown of how much each element contributes to the overall costs - I've repeated the figures below. Figures for gas are first, electric second:

Wholesale energy costs: 52% / 51%
Delivery costs: 20% / 19%
Operating costs: 20% / 19%
Social and environmental costs: 3% / 6%
VAT: 5% / 5%

Its hard to imagine that the rest of the industry looks all that much different.

I'm not an expert on the energy industry, but my understanding of why we don't see price swings directly linked to wholesale costs is that a significant amount of energy is bought by the companies in advance, so the price they're paying on any given day isn't necessarily what the wholesale price is on that day.

Although there is the perennial trick of putting prices up very quickly after a wholesale cost spike, then being very, very, very reluctant to drop them after a wholesale cost plunge. Especially not if the 5 others haven't...*sighs*

I broadly agree with you about FIT - at the moment, sticking solar panels on your roof is an expensive and inefficient way to generate electricity (compared to traditional energy generation) and without the subsidy people would lose money over the lifetime of the panels. Of course, if electricity costs keep rising then there will come a point where it makes economic sense.

In the meantime, it would be better to target those subsidies elsewhere.

grizzly1911

wozearly wrote: »

EDF regularly releases a breakdown of how much each element contributes to the overall costs - I've repeated the figures below. Figures for gas are first, electric second:

Wholesale energy costs: 52% / 51%
Delivery costs: 20% / 19%
Operating costs: 20% / 19%
Social and environmental costs: 3% / 6%
VAT: 5% / 5%

Its hard to imagine that the rest of the industry looks all that much different.

I'm not an expert on the energy industry, but my understanding of why we don't see price swings directly linked to wholesale costs is that a significant amount of energy is bought by the companies in advance, so the price they're paying on any given day isn't necessarily what the wholesale price is on that day.

Although there is the perennial trick of putting prices up very quickly after a wholesale cost spike, then being very, very, very reluctant to drop them after a wholesale cost plunge. Especially not if the 5 others haven't...*sighs*

In the meantime, it would be better to target those subsidies elsewhere.

Thanks for the split.

I accept they buy it in advance but why do they only seem to buy it when the price is going up;)

I expect they actually buy it in blocks at different times to spread the risk of large spikes , to them, but I bet they don't sell at loss anywhere in the cycle.

As they a largely european companies and they have bigger storage capacity on the mainland I wouldn't be surprised if they buy it cheaper and then supply it to us in smaller more expensive chunks as we can't hold such large stocks here to cover the winter period and provide supply during summer at the same time.

I also find it interesting that when we import a lot of LPG from mid and far east that summer/winter pricing has any real difference these days as presumably seasons have an equal and opposite effect on the other side of the globe?

When EDF say "wholesale" price is that the real global price or the transfer cost to retail form their wholesale arm?