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

Dave_save

There is no close comparison between say Tesco and British Gas when it comes to profits. Tesco, Asda, Morrisons, for instance have been criticised for forcing some of their suppliers to either reduce the supply costs or they end the contracts. This forcing of suppliers to operate more efficiently, reduce their own costs, etc eventually feeds into the customers final basket prices and/or final company profits. This is how I see a truly competitive market working. Could you see British Gas or Scottish Power having the clout, expertise, incentive to be able to do the same with the large wholesale suppliers? No, it doesn't happen because the energy industry isn't a true model of competition.

The point being made here is correct. Profits are being made by the Big 6 on a small controllable cost. There are several ways that any of these energy suppliers could increase profits. One way is to better negotiate longer term deals with wholesale suppliers. But, what incentive do they have for doing this when they can just 'top up' the final customer bill with a figure of £50, seemingly plucked from the air.

MillicentBystander

Dave_save wrote: »

There is no close comparison between say Tesco and British Gas when it comes to profits. Tesco, Asda, Morrisons, for instance have been criticised for forcing some of their suppliers to either reduce the supply costs or they end the contracts. This forcing of suppliers to operate more efficiently, reduce their own costs, etc eventually feeds into the customers final basket prices and/or final company profits. This is how I see a truly competitive market working. Could you see British Gas or Scottish Power having the clout, expertise, incentive to be able to do the same with the large wholesale suppliers? No, it doesn't happen because the energy industry isn't a true model of competition.

The point being made here is correct. Profits are being made by the Big 6 on a small controllable cost. There are several ways that any of these energy suppliers could increase profits. One way is to better negotiate longer term deals with wholesale suppliers. But, what incentive do they have for doing this when they can just 'top up' the final customer bill with a figure of £50, seemingly plucked from the air.

No chance as it would directly impact on their wholesaling/excavation businesses. Yet more evidence that it truly isn't a competitive industry. They are effectively supplying each other with the fuel in the first place. Crazy.

grahamc2003

backfoot wrote: »

hi Cardew,


I am focussing on whether I agree that the energy companies should be allowed to make supply Profit of £50 per customer on a cost base of £100 for doing so little.

I am also pointing out that this is only the tip of the iceberg in terms of profit made along the path from generation to end user. Supply Profit is only one element and I am trying to find out how much average profit per customer is charged by the likes of Centrica.

I have asked Mr. Bentley who hopefully will explain.

Some people seem content with this non competitve market producing additional costs to energy end users. I feel differently and find it dreadful that people in fuel poverty have to continue to meet shareholder returns from the various business players.

In my view, the deregulation has added cost rather than saving it and that compettion has not worked.

I think there area couple of valid opposed viewpoints here. Privatisation itself meant profit making companies had to run the fragmented businesses - so given that, it's implicit they must make a reasonable return for shareholders.

However, I think your point is that the actual supply business is a trivial business function, with pretty much zero added value - a sort of non-function, a simple admin task of sending out bills. Other functions they have spawned since privatisation are completely parasytic - the switching process, the overcomplex tariff structure invention. They are man made non-central business processes which simply didn't exist pre-privatisation. To make any sense of privatisation, the (high) cost of these supplier functions have to be exceeded by savings elsewhere in the industry due to the competition supposedly introduced.

My view is there aren't ANY savings anywhere in the industry due to competition, and ultimately, our bills have risen by 100% of the cost of the newly introduced parasitic supplier functions (which in addition to adding no value, actually apply an obligation on every account holder to spend several hours each six months to ensure he is not being ripped off on his chosen tariff).

It is very difficult to make any comparisons with the supplier business with any other private sector business, because, by definition, all other businesses actually add some value to something somewhere.

My view is privatisation has failed pretty spectacularly if the aim was to give consumers lower bills than they would have had through a nationalised power industry.

MikeR71

Aldridge_Andy wrote: »

I think that next week will be a shock for BG and other energy providers as the customers switching tariffs start to become visible.

I'm convinced that some of the big players will lose a shed load of customers and may actually have to do something to attract or keep customers, what though I'm not sure,

Actually nothing will change. The prices rise for existing customers while each company has a cheap deal for NEW customers. So it's like a merry-go-round. For every customer they lose, they get a new one.

minislim

why is it year upon year we have energy prices rising well above inflation and yet these energy companyies report record profits too.

british gas are always one of the first to hike prices up and yet they always seeme to be alright when it comes to the money they make off their customers.
thats why i just dont trust british gas at all. they always seem to put themselves first before their customers.

thats why i've never ever used them and kept well away. i'd rather my hard earned money went elsewhere.

nearly got fooled recently too with a sainsburys energy dual fuel deal that seemed quite good with bonus nectar points too. till i read the small print and it was only avaliable on their highest dual fuel tarrif which wasnt even fixed. the nectar points where given in the quarterly bills.
and to my suprise it turned out their energy was provided by british gas now and not edf like previously.

so steered well clear of that. the information was so unclear it seemed too good to be true. having found out its british gas know its confirmed its too good to be true!

rtho782

Maybe if we weren't all subsidising solar panel feed in tariffs for homeowners and BTL landlords that have £10k in the bank and venture capitalists that have realised giving homeowners free solar is a higher and safer return than investing, we wouldn't have these massive increases.

So, all those on lower incomes that live in flats (no pitched roof) or rent, subsidise the homeowners through their energy bills. Wonderful.

mcbob_2

callum9999 wrote: »

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.

I'm not talking about banning of course, but introducing a government regulator to the commodity trading industry. I repeat what I said earlier, here lies the crux of the problem. Commodity price fixing is the tip of the iceberg - especially around the benchmarks using data supplied by the firms themselves - this will be LIBOR mark 2.

brat673

[/QUOTE]
Whilst British Gas dosen't make that much money, what about it's parent Centrica??? Doesn't it siphon off the cash???

TeddyG

In the past I have exchanged several e-mails with Mr Bentley - or at least with his team of switched-on (pardon the pun) graduates. There is no doubt BG puts a lot of effort into PR and is very good at it (remember the customers are paying for that as well).Unfortunately like most PR its a gloss to divert people from the nitty-gritty.

Its of no surprise that Mr B did not dwell on their 23% INCREASE in half-year profits. If the increases in prices are outside BG's control and going in other organisations' pockets where did their very substantial increase in profits come from?

I have already offered Mr Bently this alternative to their latest slogan - 'British Gas - Looking after Ourselves'. I don't expect a response any time soon.

spot1034

TeddyG wrote: »

Its of no surprise that Mr B did not dwell on their 23% INCREASE in half-year profits. If the increases in prices are outside BG's control and going in other organisations' pockets where did their very substantial increase in profits come from?

Have a look at what happened the previous year.