MSE News: We'll freeze energy prices, Ed Miliband tells Labour conference

verydeeppockets

Pont wrote: »

All I want (is it too much to ask?):-
stuff including...
Can't we simply have price per unit useage from all suppliers? We would then have a sensible choice and then could 'vote' with our feet so to speak).

2) I believe our so called 'green levy' is a red herring which is costing us all dearly. I do not wish to pay this levy and would like the option to opt out.

3)
...the removal of VAT of fuel bills ......

I'll vote for that

Rotor

cepheus wrote: »

The problem with the 'catastrophe theory' as I can see it is that energy companies must have spare money if they can afford to pay dividends to shareholders and large salaries to board members, money which could be used on investment or reducing bills. If they weren't paying dividends and the share prices were dwindling like a penny stock I would have some sympathy with this view. They aren't.

This is really what makes me suspicious that most people on this thread are more worried about the stockmarket than energy bills.

So your evidence for excess profits is that they 'pay a dividend'? That is the quintessential purpose of a company.

I also see you've used the ruse of of implying that anyone who doesn't agree with Labour and yourself must be a share holder and therefore,presumably, their views should be discounted ( unlike yours, of course, which are utterly fair and balanced?)

JezR

cepheus wrote: »

The Labour leader has called the big six's bluff, and he will win despite the desperate scare-mongering his pledge has prompted- debunking the desperate nonsense being talked by the energy companies and their political and media allies.

http://www.theguardian.com/environment/damian-carrington-blog/2013/sep/25/energy-energy?CMP=twt_gu

I read through that and see that the most of the 'big' initiatives outside of the headline/vote-grabbing 'freeze' are to undo the changes to the electricity market that were introduced during the term of office of the 1997 Labour Government, which led to the current market set-up. In particular prior to this power was nearly all sold through a pool arrangement, and suppliers were with one exception forbidden to own generation capacity in excess of 15% of their market. The wholesale pool prices were completely transparent; the replacement market is effectively opaque as it is bilateral trading, and has encouraged vertical integration, which hadn't been a feature of the electricity generation & supply business in England and Wales since at least the second world war. No regulations were put in place to stop this consolidation. They also of course created Ofgem which now they want to replace with something else.

It was a bit different back then in that the suppliers to electricity consumers were by and large still the private successors to the regional electricity boards.

verydeeppockets

Nilrem wrote: »

I'm tempted to get a generator and some UPS unit's for my PC, as I can see it becoming necessary within the next few years to protect them, and provide me with light/power for essentials.

Two ebay wood burners here, one also heats the rads and hot water. All my wood has been scrounged, and is saving me roughly £300 a year in gas.
When a bulb blows, an eco one takes it's place.
My kids are terrorised - unplug that charger, why's the telly still on etc etc.
We wear jumpers in the house when it's cold.
I have a secondhand UPS that will keep our central heating and back boiler running through a four hour power cut.
I have considered a generator as well.

A number of our power stations are being shut down by the EU. Most are cleaner than the far eastern stations being thrown up almost daily, but that's another topic.
Coal, biomass, gas - demand is going through the roof.
Nuclear takes years to get up and running.
Fracking could keep the lights on, but I'm unconvinced as to it's safety.

Why do we have smart electricity meters if it isn't to work out when the power can be cut, to save firing up extra generators? The EU have discussed using smart meter tech to shut down cookers and fridges during periods of high demand already. Cup'o'tea in the Corrie break? Best get brewing beforehand.

No one is reinvesting in UK generation or storage - and with politicians circling, no one is likely to in the future. Ed the donkey added roughly 15% to our bills with the eco nonsense - looks like he's trying for the double. None of the politicians can see further than the next election.We WILL have power cuts if we don't stand up to the EU - we should have started building replacements a decade ago - and whoever is in number 10 when the lights go out and industry grinds to a halt will be voted out for a long long time.

samizdat

insanegloss wrote: »

You've got to look at rising profits not in absolute terms, but in % of turnover other wise it doesn't show how efficient a company is converting its turnover into net profit. On that measure energy companies have been at a fairly consistent margin of 5-10% (closer to 5% on average) over the last few years.

Now, I don't know about you, but those figures are fairly low (yet produce sizeable absolute profit figures) simply as they have so many customers.

It also means, that there wouldn't be much of a reduction on your bills if they made no profit. Between £65 and £130 pounds a year off on a £1300 dual fuel bill, or £5.41 to £10.82 per month. Also, that would mean that they couldn't build any new infrastructure (after all, you've just covered the costs of the bill and no more) and shareholders wouldn't get a dividend.

Now, most people scoff at 'shareholders and their dividends'. However you're more than likely one of them if you have a pension, and the profits these companies make indirectly would be yours building up in your pension pot.

So, for me the whole debate around energy companies is a distraction and not a good one. Yes, there are issues to be tackled such as customer service and ensuring profiteering doesn't occur. However, the problem in my eyes is the inequality in the economic fortunes of the customers, i.e all of us. Surely that is where to target big reform instead of damaging something as fundamental as energy?

Too much sanity.

I used to be a utilities analyst in the City. The fact is the electricity industry requires huge investment in infrastructure (e.g. new power stations to replace the 20% coming from ageing nuclear plants), the costs of which can only be recouped over the very long term (think 25+ years).

Meanwhile, the price of electricity varies considerably over time, based on factors not within the control of any single company, e.g. the commodity cost of gas (gas is used to generate electricity).

You cannot expect private investors to fund this type of proposition, which is very risky, without allowing them to earn a profit if things turn out in their favour.

If politicians such as Ed Miliband want to play the populist card and interfere in market prices, this will simply be seen (rationally) to have increased the risks of investing in infrastructure, which will directly increase the cost of capital (the money needed for building the new infrastructure) to the utility companies. In other words, it will cost the companies more to raise the necessary funds for investment.

Guess what that will do to utility prices? They will rise in anticipation of any Labour victory at the next election (even the mere chance of it). Even if Labour don't win, there will be a perception internationally that UK political risk to the industry has increased, because other parties may be forced to react in ways that would also interfere with the market.

Ed Miliband has literally scored a huge own goal, and has damaged the UK as an investment prospect, and not just as regards the utility industry.

Of course, there are genuine problems of market failure in the utility industry, but this is not the way to deal with them.

minislim

the biggest danger to the uk economy is in the form of labour!

almost every counter measure they come up with against the coalition is typical of labour!

unrealistic, unaffordable, unsustainable and down right stupid!

these are the key reasons we got into a mess in the first place!

that is the one and only reason why they should not be allowed anywhere near the running of this country!

JezR

The market has already shifted - shares in SSE for example are down £1.20 over the last two days. Legal & General as the largest British shareholder has experienced a paper loss of just under £45 million.

undaunted

Obviously_the_best wrote: »

This whole article is just Labour pointing out once again that they are utterly insane.

They've risen further ahead of the tories in the polls than pre conference so presumably yuo must think those polled / much of the country insane too?

As people accepting terrible service because a particular supplier offers the lowest price on a comparison price consistently shows you can buy votes (and customers) with ease in this country. Millibands promise may not be as daft as it looks from Labours point of view. He may even be an MSE user as he's apparently now suggesting other areas - such as petrol could be treated similarly if necessary

undaunted

cepheus wrote: »

The Labour leader has called the big six's bluff, and he will win despite the desperate scare-mongering his pledge has prompted- debunking the desperate nonsense being talked by the energy companies and their political and media allies.

http://www.theguardian.com/environment/damian-carrington-blog/2013/sep/25/energy-energy?CMP=twt_gu

Thanks, thats a great article, before just blindly accepting that Ed is obviously an idiot (on this) do at least read & consider it all.

I doubt that share prices falls will prove anything other than a temporary blip and when one price falls another will rise. The pensions funds etc are always going to invest in something!

samizdat

undaunted wrote: »

Thanks, thats a great article, before just blindly accepting that Ed is obviously an idiot (on this) do at least read & consider it all.

I doubt that share prices falls will prove anything other than a temporary blip and when one price falls another will rise. The pensions funds etc are always going to invest in something!

Sorry, it is actually a terrible article. It is nothing more than a cover-story from a newspaper allied to the Labour cause.

A few points:

1. If you were an investor, would you welcome political interference to cap prices in an industry you were thinking of investing in? Obviously not. This will increase the cost to companies of raising money in the financial markets, which will directly add upwards pressure on utility prices.

2. The article lauds Miliband's plans to dismantle what is referred to as the "cosy" vertical integration in the industry, whereby companies that supply electricity and gas to consumers also own upstream gas production and electricity-generating capacity.

However, vertical integration actually makes an enormous amount of sense here, because it just means that you as a company are offering consumers something that you can produce, without having to engage in complex long-term supply agreements with upstream producers, or putting yourself at risk of short-term price movements.

Absurdly, the Guardian characterises this as "[companies selling electricity] to themselves at secret prices".

Now I recognise there is an attempt by Labour here to create a more liquid market in electricity and gas, to allow companies without upstream resources to compete as suppliers, but the reality is that the supply business is not really extracting huge profits from consumers.

The main problem is that electricity and gas cost a lot to produce, and it is a very long-term business (i.e. capital-intensive with long payback periods). All political parties seem to be committed to offering price-certainty to those investing in new infrastructure, but this must inevitably be subject to political risk, e.g. if the prices offered turn out to be too generous - and they have to be generous in order to provide an incentive.

Politics and long-term investment just don't mix very well, and the fact that Miliband has cynically sought to exploit this issue for short-term political gain is just a very bad idea, and hugely damaging to his credibility. It is also damaging to the attractiveness of the UK to investors, and yes, we do need to attract investors.