MSE News: British Gas boss: Why I put your energy prices up

ihateyes

So people are complaining that over a year an energy company make £50 profit......

How much profit does the tabacco company make from you?
Your local supermarket?
Your clothes shop?
or your bookie?

Butterfly_Brain

Time to renationalise! I don't believe a word that the Utility Cartels spout.

spot1034

Butterfly_Brain wrote: »

Time to renationalise! I don't believe a word that the Utility Cartels spout.

If you want even higher bills. The idea that the government - any government - could run the industry at lower cost really is quite fanciful. Nationalised industries are notoriously inefficient, and would still have to venture into the market to purchase large amounts of gas and to import electricity from other countries via the interconnectors which run under the sea from France and the Netherlands.

Then there's the small matter of the £200 billion that the government expects energy companies to fork out in the next decade (from their profits to some extent, though they will undoubtedly have to borrow a lot of it) to build new generating capacity.

In the scenario where our energy industry was nationalised, where would this come from?

mcbob_2

Call me a cynic, but the orange part of that diagram, supplied no doubt by BG's Marketing dept, does not tell the full story.

It assumes there that BG's parent company has no influence whatsoever on the price of global energy commodities and is simply a victim of market forces.

This couldn't be further from the truth. Centrica is a major global power trading player and has a large trading division, where it makes money from the buying and selling of energy - oil, gas, power, LNG you name it.

No doubt they would claim this enables them to hedge and lock in lower prices for their customers...Whereas I would see the opposite angle, that is they trade to maximise current margins for their trading unit (after all BG is a separate legal entity), regardless of whether this means higher bills for customers at the end of the supply chain.

To me It looks like the consumer is paying the accumulated costs as a result of the Centricas, Glencores, Barclays, EDFs, BPs, Morgan Stanleys (I could go on) of this world who trade energy commodities, and at each point take a % profit.

This market is not regulated and it is here where the crux of the problem lies. Until this is fully regulated, bills will continue to rise and energy companies will keep on making hand-over-fist in profits from speculation, at the customer's expense.

grahamc2003

ihateyes wrote: »

Shock..... NO!

There is a merry go round every time their is increases.....

company a might lose to b now, but next time, or the time after they will get them back....

This is nothing new!

Yeah, and the merry go round which everyone seems to encourage probably costs at my estimate, about £250 per switch. The bigger the merry go round, the more switching adds to our bills. But most switchers seem happy with a £70 cashback in their account.

No wonder Uswitch and similar comparison sites say more people should switch (more kickbacks for them), I'm just very surprised why the government think switching is some sort of solution to anything when it is part of the problem. Competition should lead to efforts at customer retention, not to tens of thousands of people switching from a to b, while tens of thousands of others simultaneously switch from b to a, all resulting in multi-millions leaking out of the industry. That isn't competition, it's expensive madness - at our expense of course.

grahamc2003

spot1034 wrote: »

If you want even higher bills. The idea that the government - any government - could run the industry at lower cost really is quite fanciful. Nationalised industries are notoriously inefficient, and would still have to venture into the market to purchase large amounts of gas and to import electricity from other countries via the interconnectors which run under the sea from France and the Netherlands.

Then there's the small matter of the £200 billion that the government expects energy companies to fork out in the next decade (from their profits to some extent, though they will undoubtedly have to borrow a lot of it) to build new generating capacity.

In the scenario where our energy industry was nationalised, where would this come from?

There's more interference and control by the government now the industry is privatised than every there was when it was nationalised. It was certainly MUCH more efficiently run as the nationalised CEGB and electricity boards than it is now. They seemed to build a plentiful supply mix in those days, including the most efficient coal stations, along with several Nuclear stations and very expensive (though extremely cost effective) pumped storage, so your contention seems to go against history.


Seems to me that under privatisation, construction seems to be hundreds of gas fired stations built under panic mode, and relying on the goodwill of many countries through which the gas pipes pass, and lots of windmills which don't even meet the basic critera of what the country needs regarding generating capacity.

backfoot

Dear Mr. Bentley,
I have read your article on Price increases on MSE and as a regular participant I have a few questions.
The average profit of £50 hides two main categories of customer. Standard Tariff and others (mainly online). What is the profit per customer of each category and how many customers are still on standard?
How can you be content that the non-switchers (standard) are charged significantly more profit than online? Do you agree with Ofgem’s proposals for Suppliers to make customers aware of your cheapest tariff?
What is the typical profit margin for Generators (of which you are one) within the wholesale cost? Has this varied between the two light bulbs?
Would you agree, that your assertion that you have little control over the majority of costs, is clear and obvious evidence that the so called competitive market for energy is pointless for customers? All suppliers will similarly be unable to influence the majority of costs and will require a similar profit margin. How can there be any price differentiation?
Thank you for your consideration.

callum9999

grahamc2003 wrote: »

Yeah, and the merry go round which everyone seems to encourage probably costs at my estimate, about £250 per switch. The bigger the merry go round, the more switching adds to our bills. But most switchers seem happy with a £70 cashback in their account.

No wonder Uswitch and similar comparison sites say more people should switch (more kickbacks for them), I'm just very surprised why the government think switching is some sort of solution to anything when it is part of the problem. Competition should lead to efforts at customer retention, not to tens of thousands of people switching from a to b, while tens of thousands of others simultaneously switch from b to a, all resulting in multi-millions leaking out of the industry. That isn't competition, it's expensive madness - at our expense of course.

That makes little sense. Why would people be moving from a to b while people are moving from b to a? To switch en-masse, one of those companies needs to be cheaper - so why exactly are people giving up a cheap tariff to move to a more expensive one?

Switching isn't remotely part of the problem - and I don't see why you think it is... In fact, I can hardly see how it's even theoretically possible - let alone it actually happening. Uswitch get "kick backs" when you switch via Uswitch, there is nothing at all stopping you from switching on your own - which is still encouraged.

And how on earth have you made an estimate that it costs £250 to switch? That sounds utterly ridiculous, what with you getting the exact same energy from the exact same source via the exact same infrastructure regardless of who your provider is.

callum9999

mcbob wrote: »

Call me a cynic, but the orange part of that diagram, supplied no doubt by BG's Marketing dept, does not tell the full story.

It assumes there that BG's parent company has no influence whatsoever on the price of global energy commodities and is simply a victim of market forces.
if
This couldn't be further from the truth. Centrica is a major global power trading player and has a large trading division, where it makes money from the buying and selling of energy - oil, gas, power, LNG you name it.

No doubt they would claim this enables them to hedge and lock in lower prices for their customers...Whereas I would see the opposite angle, that is they trade to maximise current margins for their trading unit (after all BG is a separate legal entity), regardless of whether this means higher bills for customers at the end of the supply chain.

To me It looks like the consumer is paying the accumulated costs as a result of the Centricas, Glencores, Barclays, EDFs, BPs, Morgan Stanleys (I could go on) of this world who trade energy commodities, and at each point take a % profit.

This market is not regulated and it is here where the crux of the problem lies. Until this is fully regulated, bills will continue to rise and energy companies will keep on making hand-over-fist in profits from speculation, at the customer's expense.

British Gas (to my knowledge) claim nothing of the sort.

By "regulate" I assume you mean "ban"? Otherwise what exactly are you alleging those companies are doing with commodities that would be stopped with regulation? In fact, what exactly are suggesting that % profit comes from? If we are simply talking about trading commodities, surely that % profit is coming from the people making investments (basically gambling) regarding commodities - and not from the actual commodities themselves? I'm not remotely an expert in this subject but what you say doesn't really make a lot of sense to me.

backfoot

MartinSmythe wrote: »

You're all missing the real problem.

£50 profit per customer per year is not unreasonable.

The Supply Business is a very low risk simple business model involved in passing on costs to an end user.

All it involves is setting a price to acheive a £50 profit.

Thereafter, they bill and collect using what should be established systems and direct debits. The administrative cost of which is in the bill.

So what added value are they offering within their service to justify £50 or any other value?

They haven't earned their customer base through competition but rather through legacy or aquisition.

You have also ignored the valid questions asked by many posters regarding the profit element in the generation part of the bill, of which many Suppliers are also Generators.

Is that level of profit acceptable ? Is it disclosed?

You have highlighted one element which inflates the bill but the thread concerns all the elements making up our energy costs and includes questions regarding Energy Business profits.