british gas...centrica

cynicalgit_2

spot1034 wrote: »

What would you expect in a fiercely competitive market when all are dealing with the same set of rising costs?

In such circumstances, not wanting to be the first to put up prices they will all naturally hold back as long as possible. There comes a point, however, when they face running their business at a loss if they don't make a move, and there's little to be gained from being the one supplier that gets a lot of new customers if your costs are higher than your income.

Like I keep saying Its a cartel pure and simple.
Thats why they meet on the golf course and fix the prices.
When are people going to understand this!
There is NO COMPETITION.
Just look at their profits !!!!!!!
It is not in their interests to have competition, because thats how Oligopolies work.

spot1034

I do look at their profits, and - unlike many others - I look at the size of their businesses and the number of customers they have. If anyone was thinking of starting up a company and put forward a business plan with such low returns per client they'd be told to go away and think again.

Bluebirdman_of_Alcathays

cynicalgit wrote: »

Like I keep saying Its a cartel pure and simple.
Thats why they meet on the golf course and fix the prices.
When are people going to understand this!
There is NO COMPETITION.
Just look at their profits !!!!!!!
It is not in their interests to have competition, because thats how Oligopolies work.

Err, because it's nonsense?

I used to work in a pricing team for one of the big 6 suppliers. This was only for a portion of the business sector, not residential. The team consisted of 7 pricing analysts, and that was just for one small subsection. Within the whole organisation there must have been many more like myself.

If it was a case of deciding on the golf course one day, don't you think they'd do that so they could send all the many people they pay to set prices home?

How does having large profits indicate that there isn't competition? What, in your opinion, is the perfect competitive market? Supermarkets? Telecoms? No profit, no product.

And, incredulous as this may sound, BG and the other energy companies don't make that much profit. If you were thinking of going into business, and you could only make the margin Centrica make, you probably wouldn't bother.

tberry6686

cynicalgit wrote: »

Like I keep saying Its a cartel pure and simple.
Thats why they meet on the golf course and fix the prices.
When are people going to understand this!
There is NO COMPETITION.
Just look at their profits !!!!!!!
It is not in their interests to have competition, because thats how Oligopolies work.

If its a cartel as you say then why are the profits made amongst the lowest (in percentage terms) of any industry.

There is competition. The problem is that they all have the same base costs that have to be met (there are, of course, trivial variations).

The fact is that gas in this country is the cheapest in Europe and Electricity is pretty close to it too.

cynicalgit_2

If theres no profit what is the point in them continuing in business?
Ergo why Privatise in the first place?
Are you are seriuosly asking us to feel sorry for the Energy Companies?
If its that bad why dont they pull out and hand it back to the State?
Please study Economics and look up the word Oligopoly I'm bored of talking about it.

Bluebirdman_of_Alcathays

cynicalgit wrote: »

If theres no profit what is the point in them continuing in business?
Ergo why Privatise in the first place?
Are you are seriuosly asking us to feel sorry for the Energy Companies?
If its that bad why dont they pull out and hand it back to the State?
Please study Economics and look up the word Oligopoly I'm bored of talking about it.

What are you blithering on about?

The reason to privatise - simple. It was a costly state burden, and there were blackouts.

Nobody has said there is no profit at the moment - just that their margins are tiny.

I have studies economics. I understand the word oligopoly. Banks, grocery suppliers, pharmaceuticals and certainly the unilever/P & G situation, it's not unusual. What hasn't been proven in the case of the energy industry is that anything underhand is going on.

Profits on an annual bill are about 80 quid. Fine. Nationalize it, and have the 80 quid back. See how long that gets you in the long term when global prices keep going on the march.

MillicentBystander

Nothing like a bit of industry bashing in the OP to bring out the industry shills. What i can't get my head around is we are frequently told the energy companies buy their fuel sometimes many months in advance so as not to fall prey to short term volatility in the wholesale market (and that these agreements vary in length between the different suppliers). Given that most of the Big 6 increase their retail prices at more or less the same price are we really to believe they all basically bought their fuel at the same time and with the same length advance agreements? It all seems very cosy.

PS We don't seem to hear the 'gas prices are linked to oil prices' excuse/theory anymore? Why not?

DreamerV

Profits for BG for dual fuel are sitting at £49 now per year per household, which is down around £5 from a few years ago. The rest goes on costs of supplying/transporting energy, and other costs, as well as meeting government obligations. When people look at their dual fuel bills which average over £1000 these days, I wonder if they perhaps think the energy companies rake in huge profit from that amount. In reality, the large profits you hear about are from other parts of the business, as well as from having a very large customer base (a little profit from a lot of customers).

With regards to the prices is North America, they have had access to more supplies through vast fracking activity. Here, there are lots of protests against such activity (without people fully understanding/researching it), and the UK is struggling to meet energy demands in a more cost-effective way. It makes sense bills would be higher here...

DreamerV

MillicentBystander wrote: »

Given that most of the Big 6 increase their retail prices at more or less the same price are we really to believe they all basically bought their fuel at the same time and with the same length advance agreements? It all seems very cosy.

They all hedge their fuel prices but in the mean time they have similar obligations and rising costs forced upon them, so it makes sense bills all rise. In reality, some have more costs than others, but because there is competition, some will accept raising prices a bit less than they would have otherwise, bringing down their profit margin. This would keep prices roughly in line with each other...

MillicentBystander

DreamerV wrote: »

Profits for BG for dual fuel are sitting at £49 now per year per household, which is down around £5 from a few years ago. The rest goes on costs of supplying/transporting energy, and other costs, as well as meeting government obligations. When people look at their dual fuel bills which average over £1000 these days, I wonder if they perhaps think the energy companies rake in huge profit from that amount. In reality, the large profits you hear about are from other parts of the business, as well as from having a very large customer base (a little profit from a lot of customers).

With regards to the prices is North America, they have had access to more supplies through vast fracking activity. Here, there are lots of protests against such activity (without people fully understanding/researching it), and the UK is struggling to meet energy demands in a more cost-effective way. It makes sense bills would be higher here...

In a recession many business actually make losses! Probably because they are in a properly competitive market and can't up their prices by much due to that. So they look at costs. This is why I have long asserted on here that the energy industry (certainly for the Big 6) is a very easy business. You simply look at your costs each year and put your prices up by enough to make that £50 per household. There are 25 million households in the UK, plenty to go round the Big 6 without the need to actually, you know, try and really undercut your rivals to get some of their customers (the fall out from such a happening is the energy company's worst nightmare). Easy peasy.

Due to the uncompetitive nature of this industry there are no incentives whatsoever for companies to try and reduce their costs because they simply don't have to in order to make that easy profit.