Can Ovo really be trusted?

footyguy

Did anyone see Stephen Fitzpatrick (MD of Ovo Energy) on BBC News 24 yesterday evening. He was being interviewed by Huw Edwards of the BBC regarding the price rise announcement by British Gas. He was quite disparaging of British Gas, essentially calling them liars although not quite using those words.

He claimed British Gas stated the reasons for the price rise increase were:

1. An increase in the wholesale price of energy
2. The government's levy for environmental and social issues (green levy)


He basically poo-pooed both as reasons for increasing prices.

1. He stated that wholesale prices for gas and electricity were at worst flat compared to this time last year and at best slightly down. Therefore this was no reason whatsoever to increase prices. He said anyone could look at his website which shows the wholesale prices Ovo pay so people could see for themselves.
Well did he think no one would bother?
I look and see from the Ovo website, the wholesale price of electricity is about 2.5% higher than this time last year (about £52/MWh compared to about £49/MWh)


And for gas they indicate the wholesale price is about 7.5% more (now about £69 -£70/Therm compared to about £64-£65/Therm last year):



Source: http://www.ovoenergy.com/energy-tariffs/wholesale-prices/

2. On the government's green levy, he suggested that only makes up about 5% of the bill anyway, so that cannot justify the types of increase BG (9.2%) and SSE 8.2% have recently announced.

Well the Daily Mirror suggests the government levy adds about £132 per year to the average bill. I would say that is more like 10%, not 5%.
http://www.mirror.co.uk/money/personal-finance/energy-prices-rise-even-further-2368180

So I checked SSE and they say it actually adds about 8%



Source: http://www.southern-electric.co.uk/cost/


British Gas say (in 2012) it added £112 to the average £1188 annual bill (which is about 10%)
Source: http://interactivebill.outsideline.co.uk/BG_Figures_2011-2012.pdf

So to be fair, I though I would check the Ovo website and see what they say.

To be fair, they do actually say it makes up just 4% of their typical electricity bills, but it doesn't even mention it for gas


Source: http://www.ovoenergy.com/energy-tariffs/where-your-money-goes/

So who should we believe?

I took a look at the regulator's website, Ofgem. They say the levy makes up 6% of the average gas bill and a 11% of the average electricity bill
Source: https://www.ofgem.gov.uk/ofgem-publications/64006/householdenergybillsexplainedudjuly2013web.pdf


3. Finally MR Fitzpatrick failed to mention at all the 3rd reason quoted by BG for increasing prices, namely an increase in the transportation & distribution costs which it says are set by the regulator. Quite a staggering omission really since this appears to make up almost 25% of the typical bill.


Sadly, despite all the disparaging comments about BG from the Ovo MD dismissing BG's reasons for a price increase, Huw Edwards failed to ask the killer question. i.e. Does that mean Ovo will not be increasing prices?
We'll just have to wait and see, I suppose.

Bluebirdman_of_Alcathays

Superb post :T

Of course OVO will raise prices. They are very capable at increasing their own media footprint when there are price rises. I like you have noticed they have both barrels aimed at BG, I suppose it's easiest to pick the low hanging fruit.

OVO will have to pass on the same increasing market costs, and the same green levys as all the others. That is how a market works, and they have always risen prices eventually. I'm not saying the system is perfect at the moment, it patently isn't.

I think most people that complain would openly/secretly like things to be nationalised. Even as someone that owes my livelihood to the privatised energy industry, I would say fine. Do it. It will deliver many things, such as greater transparency. What I highly doubt it would deliver is a material reduction in price.

macman

Who is OVO's wholesale provider? Presumably not Centrica?
The press always make a lot of noise about the first two suppliers to raise annual prices. Now that's done, and SSE and BG are firmly cast as the villains this year, the other 4 of the Big Six (and the minnows such as OVO), can now put through their own increases over the next couple of months with relatively little attention being paid.

footyguy

macman wrote: »

Wh is OVO's wholesale provider? Presumably not Centrica?
...

They said they buy it on the open market, as the others are able to do.
(but he also made comments some of the big suppliers do buy from themselves, as they have their own supply business that Ovo obviously don't have, but they would surely only buy from themselves if the price was competitive with the open market. My understanding from evidence given to parliament by such large suppliers who do buy from their own supply/generating business is that such 'transfer' prices are stictly controlled by the regulator - that was the defence EDF gave when they said their retail business was losing loads of money, but their total business including supply was making a handsome profit.)

matelodave

Bluebirdman_of_Alcathays wrote: »

Superb post :T

Of course OVO will raise prices. They are very capable at increasing their own media footprint when there are price rises. I like you have noticed they have both barrels aimed at BG, I suppose it's easiest to pick the low hanging fruit.

OVO will have to pass on the same increasing market costs, and the same green levys as all the others. That is how a market works, and they have always risen prices eventually. I'm not saying the system is perfect at the moment, it patently isn't.

I think most people that complain would openly/secretly like things to be nationalised. Even as someone that owes my livelihood to the privatised energy industry, I would say fine. Do it. It will deliver many things, such as greater transparency. What I highly doubt it would deliver is a material reduction in price.

I doubt very much that a nationalised energy market would be cheaper - none of them, gas, electric, telephone, railways etc were anywhere near efficient when they were and wouldn't be now. They would have the monopoly and charge what they like.

At least with the system that we've got at the moment we can swap about a bit and save. None of that would be possible if it was government controlled.

The unions would be rubbing their hands with glee as they'd have us by the short & curlies again. Have you noticed how its still the public sector that still have the strike mentality, give them back the energy industry and we'd be well and truly stuffed. Arthur would be rubbing his hands with glee

andy_spoo

These companies pay there share holders dividends. Also, they class massively over paid directors wages as "costs". Apple, the worlds richest company, pays it's share-holders 'squat'. There is also no reason why a public company can't employ the same people as a private company.

Electricity in this day-and-age is an essential thing. If these companies keep upping there prices when-ever they feel like it, there will eventually be riots in the streets. They WILL be nationalised if they keep taking the p*ss".

matelodave wrote: »

I doubt very much that a nationalised energy market would be cheaper - none of them, gas, electric, telephone, railways etc were anywhere near efficient when they were and wouldn't be now. They would have the monopoly and charge what they like.

At least with the system that we've got at the moment we can swap about a bit and save. None of that would be possible if it was government controlled.

The unions would be rubbing their hands with glee as they'd have us by the short & curlies again. Have you noticed how its still the public sector that still have the strike mentality, give them back the energy industry and we'd be well and truly stuffed. Arthur would be rubbing his hands with glee

Bluebirdman_of_Alcathays

andy_spoo wrote: »

These companies pay there share holders dividends. Also, they class massively over paid directors wages as "costs". Apple, the worlds richest company, pays it's share-holders 'squat'. There is also no reason why a public company can't employ the same people as a private company.

Electricity in this day-and-age is an essential thing. If these companies keep upping there prices when-ever they feel like it, there will eventually be riots in the streets. They WILL be nationalised if they keep taking the p*ss".

Food is much more essential than Electricity. Nationalise Tesco? They make much more profit, both in gross terms and per unit, than any energy company

andy_spoo

I'll think you'll find that 'GreenPeace' does NOT class nuclear as green energy, just because the conservatives do. Trains are used to transport waste (they're not solar powered trains!), mountains are tunnelled in to to bury waste (it takes a lot of fuel to tunnel in to a mountain). It may not create CO2 directly, but indirectly, it produces CO2 in every other way. As for nuclear it's self, it's just swapping one type of pollution for another. You can't say the government paying over-the-odds for nuclear, is adding to the 'Green Bill', it's just adding to the regular bill.

If you're not willing to pay a few extra quid a year to help save the planet, then I hope you don't have kids, because they'll be spitting on your grave in disgust when it all goes wrong.

Germany shows the way (search google for germany-breaks-world-solar-power-generation-record-july-2013-51-twh-leaves-us-dust).

Germany has a similar climate to us and is arguably the most successful current country in the world (DEFINITELY better than ours). Germany has a long term view. The trouble with the UK is many of it's people have a short term, small minded mentality.

andy_spoo

"To be fair, they do actually say it makes up just 4% of their typical electricity bills, but it doesn't even mention it for gas".

That's because there is currently no such thing as GREEN GAS! Green electricity can be made from solar, or wind, or wave. Gas is a fossil fuel and if therefore not green! Gas can be made from waste, but methane is really bad for the atmosphere. Waste can also be burnt, but shouldn't be produced in the first place.

Joyful

I think the smaller suppliers can get away with increasing their costs by less as they do not have to contribute to the Green and ECO schemes or if they do it will be a fraction of the cost to the big 6. Most of them are also not forced to take part in social initiatives such as the Warm Home discount. I believe they have to have over 250,000 to be included in the latter.

flyingjock1

Another factor is that the smaller companies dont have to reinvest profits in order to build/maintain/replace aging gas/electric infrastructure. All they do is buy the product and sell it on at a profit with hardly any overheads.