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

Cardew

backfoot wrote: »

Hi Cardew,

I presume the world market means oil, coal and gas imports . The Wholesalers (same Big 6) will still add a mark up to that prime cost.

I asked Mr.B what the margins were?

Until we know the size of those margins it is speculation whether or not there is scope for reduction.

You obviously know those figures and agree with him that all he can do is accept and pass them on.;)

Hi Backfoot,

Yes of course Mr B rings me daily and dicusses every financial detail about his company. I in turn have advised him not to deal with Mr Roman Abramovich because I don't like Chelsea FC.

I not sure I understand what you mean by 'Margins' in this context. He has stated the profit he makes per customer, and that of course can be verified by the certified company accounts.

If his costs, plus profit of £50 per customer, equate to 5p/kWh, he adds that to whatever he pays on the world market. Paying the energy producer 1p/kWh or 20p/kWh, he still adds on the 5p/kWh. Is buying energy for 1p and selling for 6p any different to buying for 20p and selling for 25p.(is that what you mean by 'margin'?)

If it is, what is your view of water companies who pay nothing for their product? They also charge us costs plus profit! What is their margin?

Obviously the contracts his firm has entered into are Commercial in confidence - as they would be by any firm.

I really don't want to argue against the Lynch mob mentality that manifests itself when profits of Utility companies in general, and BG in particular, are raised on MSE.

However to interpret his answer to your question as 'not caring' is simply incorrect IMO.

backfoot

Cardew wrote: »

Hi Backfoot,

I not sure I understand what you mean by 'Margins' in this context. He has stated the profit he makes per customer, and that of course can be verified by the certified company accounts.

Is buying energy for 1p and selling for 6p any different to buying for 20p and selling for 25p.(is that what you mean by 'margin'?)

If it is, what is your view of water companies who pay nothing for their product? They also charge us costs plus profit! What is their margin?

Obviously the contracts his firm has entered into are Commercial in confidence - as they would be by any firm.

I really don't want to argue against the Lynch mob mentality that manifests itself when profits of Utility companies in general, and BG in particular, are raised on MSE.

Yes there is a huge difference in your examples. The first is a 500% profit margin and the second is 25%.

Water Companies have huge costs in water collection,treatment and distribution.No idea why you say they pay nothing for their product.They have a profit margin just the same.

Contracts are commercially confidential but we are talking about profit per customer. Mr.B has explained in Supply he makes £50 per customer. The Distribution companies make their own amount.

I am asking what is the amount that is made in the wholesale market per customer?

Someone must know. I think Mr.B knows. You would expect one of our leading Industrialists to know or at least have an Advisor to tell him.

Flattered you have had to resort to lumping me in with the lynch mob. I honestly thought I usually argued my case well but I've been called much worse.:)

SwanJon

Probably going to get stoned for joining this debate...

You may be able to get a profit per household/supply point out of distributors, but transmission companies and generators/producers don't deal with them so they've no need to report that way.
You may be able to find margin per kWh/therm and extrapolate a figure for the 'average' residential consumer.
You might be able to get profit/meter for meter readers and operators, not sure how it would work with data aggregators though.

If our suppliers did keep their own generation/production 'in house', some/all would still need to buy on the open market, so there would still be a market price that they would be 'selling' under.

Cardew

backfoot wrote: »

Yes there is a huge difference in your examples. The first is a 500% profit margin and the second is 25%.

Water Companies have huge costs in water collection,treatment and distribution.No idea why you say they pay nothing for their product.They have a profit margin just the same.

Contracts are commercially confidential but we are talking about profit per customer. Mr.B has explained in Supply he makes £50 per customer. The Distribution companies make their own amount.

I am asking what is the amount that is made in the wholesale market per customer?

Someone must know. I think Mr.B knows. You would expect one of our leading Industrialists to know or at least have an Advisor to tell him.

Flattered you have had to resort to lumping me in with the lynch mob. I honestly thought I usually argued my case well but I've been called much worse.:)

Firstly I wasn't lumping you in with a Lynch mob - whilst we might disagree on some points, you at least argue reasonsably.

However you must admit that the standard of debate on this thread is hardly Oxford Union material!

Back to just the one issue. Using the examples I gave, if BG's costs plus profit are 5p/kWh and paying only 1p/kwh to the producer, you consider he is making a 500% profit margin. So what is he supposed to do?

If he got given his energy free - by a subsidy from the Government, as used to happen in some countries in the former Eastern Bloc - he still has costs of 5p/kWh to deliver the energy. So by your calculations is he making an infinite profit margin?

Profit margin is profit over expenditure. If a company spend on infrastructure/wages etc £50 million and make £5million profit you can argue in its most simplistic terms that they make a 10% profit.

The analogy with water companies stands. They pay nothing for their water. Yet like BG with energy, they have expenditure in delivering that water to our taps. Using your 500% profit margin claim as a baseline, how do you calculate their profit margin?

Edit:

Mr.B has explained in Supply he makes £50 per customer. The Distribution companies make their own amount.

I refer to BG in this context as a distribution company; they pay for use of the gas supply network and National grid. Strictly speaking they could be called supply companies.

backfoot

cardew,

I am afraid you have completely lost me and you are diverting away from the point I raised with Mr.Bentley. I don't mean anything disresptfully but i can't add anything further to the points i wanted to make and ask.