davidgmmafan wrote: »
All it means if you are involved in both generation and supply is there is a better balance to the business as if one does badly then they other may pick up the slack and vice versa.
davidgmmafan wrote: »
If the margin is so high (and therefore ridiculous) how come we have some of the cheapest prices in Europe?
spikyone wrote: »
If that's directed at my last comment, then - with the greatest of respect - you've proven my point about misunderstanding margins.
No-one claimed the margin was ridiculous, it's just hidden by the way energy companies operate. A good, efficient manufacturing company will have a far higher margin - maybe 40%, maybe more, depending on the product. But this margin doesn't translate directly to profit for the company; they have other costs (Indirect costs) that are not related to the cost of making their product, but that must be covered by the margin they make. For instance, they will have employees in a payroll department, whose wages must be paid, but those people's costs are not part of the manufacturing cost so aren't included in margins for any given item that the company makes.
The company will then sell the product. Let's assume the simplest kind of supply chain - they sell it on to a shop (in fact it may be first sold to a distributor/wholesaler, or may be sold to another manufacturer who build it into their product). The shop marks up the price to cover their own additional costs of sale, and an additional margin, because they're a business that also exists to make a profit, and they're a business with their own indirect costs to cover.
In the case of energy companies, they act as manufacturer, distributor, and retailer. But they operate these businesses separately, so that the retail side can 'legitimately' say "our margin is only 5%" - and this figure almost certainly isn't by accident, as they often compare it to supermarket margins. However there is an additional - far bigger - margin made by the generation side of the business. It's all part of the same company, and the margin is still associated with the same unit of energy.
Now, if they came straight out and said "our margin is 30%" (the likely true margin including generation and retail), people who don't understand margins - or politicians looking to win a few votes - would be infuriated. However, that kind of outrage might actually lead to lower prices, because it would make the energy companies incredibly uncomfortable - they wouldn't be able to disguise their true margins or plead poverty.
Finally I'm not sure what your point is about prices in Europe, as this depends on many country-specific factors. It doesn't mean that margins in the UK are lower. For instance, http://www.energy.eu/ shows that we depend far less on imported gas than many of our European neighbours. France, Germany, and Spain import 2 to 3 times as much as the UK, as a percentage. Just because our unit costs are lower, doesn't mean we're getting a better deal.
Trix3y wrote: »
Many people live on fixed incomes
When you pay at supermarket fuel pumps
DON'T assume your landlord covers you
Incl £2ish sun cream & £1.50 disposable BBQs