Big six energy firms face competition probe

Bluebirdman_of_Alcathays

BusyBoy wrote: »

And we have had some of the most cold winters centuries.

Those damned weather manipulating energy companies!

insanegloss

BusyBoy wrote: »

I never believed that something as essential as energy could be left with six private companies without any regulation and expect a free and fair competitive market. The market was never competitive from day one of privatisation. As a consumer it always felt to me to be a collusive operation between the six. It didn't really need OFGEM to come out a say that the six may have been preventing competition, we the consumers have known it for years.

They gave an impression of competition what with the price comparison sites also being in with it. I have always been a serial switcher and never really managed to save more than the odd £50 a year each time that I switched. Then over the years we have had firms duping vulnerable consumers at the door step into switching to expensive deals. These companies have been raking it for years. And now its going to take another 2 years for the findings of collusion to come out.

What I want know is - How are these companies going to compensate us for many years that we have we have been fleeced by them. Some of us had to make a choice between eating or heating?
And we have had some of the most cold winters centuries.

I don't know in what tack I'm going to say this, but it's just going to spill out as I type, so forgive me.

Firstly, competition in its very nature breeds barriers of entry in the market place in most industries. Think of it this way, your a company and to gain a competitive advantage you invest in some new kit to make whatever it may be and it's wildly successful. Other players in the market will probably copy by doing something similar, and investing in something. You have already raised the barrier of entry in the marketplace for any new entrants as they would need to at least match the new standard you've set otherwise they don't stand a chance.

So what I'm trying to say is basically, with barriers of entry as high as the energy industry (someone's got to stand paying for the offices, staff, licences, computer systems etc etc) it's no wonder why we've ended up with an oligopoly. It is simply the nature of the type of industry. Breaking up companies won't really have a long term effect either, as companies will look to takeover and merge with each other to improve themselves reducing the number of large players down again.

Secondly, there is an enormous amount of regulation in the industry and just because you don't see it doesn't mean it doesn't exist. Trust me on that.

From my perspective, I think as a society we are all too quick to place blame on others rather than looking in at ourselves. It's populist to bash the energy companies ad nauseam, but I genuinely believe quite a lot of the issue is education and that is the real problem. We all see the posts "Oh big bad energy company X has sent me a bill for loads" only to find its a catch up of an estimate. The fact is, the vast majority just don't understand energy and understand markets even less. Imagine a world where everyone understood that the price you pay is a standing charge * number days + kWh used * a price. It is NOT difficult, and yet it happens all day every day.

Bottom line, people have to take control of their own lives and not just rely on others making choices that aren't hard with a few hours research. Until that happens, even the best and most efficient markets won't help.

For what it's worth, I think there should be an open market place for wholesale energy that is transparent and companies should sell all their energy generated on there. Not because I believe it will be cheaper, because I don't, but because transparency is key to trust.

To summarise, people need to get some initiative educate themselves about markets and energy and maybe we'll see real change for the better.

undaunted

captainhindsight wrote: »

I'm not saying there aren't any other energy companies because there are, what I am saying is such a large proportion of the market should not be in the hands of such few companies and it should never been allowed to happen.

Things are obviously moving in the right direction and hopefully it will lead to a fair and competitive market.

I wouldn't entirely disagree with you but on this occasion I'd have to agree with "bluebirdman" that it's a bit much to blame it all on the labour party - we are nearing the next election & what have Cameron & Clegg done to improve things?

undaunted

BusyBoy wrote: »

I never believed that something as essential as energy could be left with six private companies without any regulation and expect a free and fair competitive market. The market was never competitive from day one of privatisation. As a consumer it always felt to me to be a collusive operation between the six. It didn't really need OFGEM to come out a say that the six may have been preventing competition, we the consumers have known it for years.

They gave an impression of competition what with the price comparison sites also being in with it. I have always been a serial switcher and never really managed to save more than the odd £50 a year each time that I switched. Then over the years we have had firms duping vulnerable consumers at the door step into switching to expensive deals. These companies have been raking it for years. And now its going to take another 2 years for the findings of collusion to come out.

What I want know is - How are these companies going to compensate us for many years that we have we have been fleeced by them. Some of us had to make a choice between eating or heating?
And we have had some of the most cold winters centuries.

Pretty much agree with you. Ofgem has known it for years too & just chose to do nothing. As for compensating us or even a vast improvement in future I wouldn't hold your breath.

dude89

I wonder what the response of everyone would be if this review came out saying customers weren't being ripped off and was as competitive as it could be. Not likely to happen but would love to see everyone's response if it were to happen

davidgmmafan

"The energy industry puts new competitors at a much higher advantage, they have an effective tax break when it comes to the green levies. The barriers to entry for new competition in energy are therefore much lower than other industries."

In the energy market newer companies don't pay green levies but the also don't have the sticky customer to stiff, whoops I mean rely on, like the existing suppliers have.

It is not acceptable to blame customers for not switching as companies have done everything in their power to make things confusing and almost everything Ofgem does has the opposite effect to what they intend. The standing charge debacle is just the most recent example.

Cardew

insanegloss wrote: »

For what it's worth, I think there should be an open market place for wholesale energy that is transparent and companies should sell all their energy generated on there. Not because I believe it will be cheaper, because I don't, but because transparency is key to trust.

Some thoughts.

Firstly any commercial company, in any field, will maximise profits - i.e. rip off customers if possible.

However!

1. Regardless of the company, the same gas and electricity is delivered to our properties using the same 'pipes and wires'!

2. The gas and electricity is bought by companies on contract from the same suppliers.

3. The UK has some of the cheapest gas(in particular) and electricity in Europe.

4. The overheads for all companies must be broadly similar.

5. As said earlier, on deregulation a score of companies like Virgin etc entered the market and subsequently quit the market because they couldn't make a worthwhile profit.

If huge organisations like Virgin couldn't succeed, it is difficult to see profit margins for the Big 6 being huge. Indeed the audited profits of the Big 6 are usually between 2% and 5% and at times have shown a loss.

A non-profit making company like Ebico is non-competitive for most customers.

6. Take this quote:

Profits made from supplying gas and electricity have increased from £233 million in 2009 to £1.1 billion in 2012 with no clear evidence of suppliers becoming more efficient in reducing their own costs.

There are about 20 million properties in UK. If that figure of £1.1 billion is correct, it means that the average profit made per household is around £50 p.a. which IMO hardly seems excessive.(Tesco, Sainsburys Asda etc all make higher profits than £1.1 billion)

7. The fuel for the production companies(gas/oil/coal) is bought on the international market, and surely it is doubtful if the UK companies are buying well below market prices.

So are we going to have an 18 month enquiry that will conclude the we are being overcharged £10pa or so???

misterbarlow

for those saying how can just six companies rule, there used to be lots of them before, etc, yes sure there were (and technically there still are, they are just owned by one of the big six as a brand name), but when there were lots of them you could only get your electric supply from ONE, your local electric supplier and everyone had BG for gas, and that was that..!!
So surely even the choice of six is better than just the one for each we had before???

you_llneverwalkalone

Cardew wrote: »

Some thoughts.

Firstly any commercial company, in any field, will maximise profits - i.e. rip off customers if possible.

However!

1. Regardless of the company, the same gas and electricity is delivered to our properties using the same 'pipes and wires'!

2. The gas and electricity is bought by companies on contract from the same suppliers.

3. The UK has some of the cheapest gas(in particular) and electricity in Europe.

4. The overheads for all companies must be broadly similar.

5. As said earlier, on deregulation a score of companies like Virgin etc entered the market and subsequently quit the market because they couldn't make a worthwhile profit.

If huge organisations like Virgin couldn't succeed, it is difficult to see profit margins for the Big 6 being huge. Indeed the audited profits of the Big 6 are usually between 2% and 5% and at times have shown a loss.

A non-profit making company like Ebico is non-competitive for most customers.

6. Take this quote:



There are about 20 million properties in UK. If that figure of £1.1 billion is correct, it means that the average profit made per household is around £50 p.a. which IMO hardly seems excessive.(Tesco, Sainsburys Asda etc all make higher profits than £1.1 billion)

7. The fuel for the production companies(gas/oil/coal) is bought on the international market, and surely it is doubtful if the UK companies are buying well below market prices.

So are we going to have an 18 month enquiry that will conclude the we are being overcharged £10pa or so???

I have to agree with the above.

The energy companies do not make absurd amounts of profits. The government should be probing the supermarkets instead.

The price of food is an absolute rip-off and nobody seems to care the big supermarkets make billions in profits yet an energy company that makes an estimated £50pa profit on each property are ripping us off! :eek:

NPowerUser

you_llneverwalkalone wrote: »

I have to agree with the above.

The energy companies do not make absurd amounts of profits. The government should be probing the supermarkets instead.

The price of food is an absolute rip-off and nobody seems to care the big supermarkets make billions in profits yet an energy company that makes an estimated £50pa profit on each property are ripping us off! :eek:

The £50 is what some companies make from the retail side.

Some of the Big 6 also make money from generating and transmission as well as the retail side.

A bit like me selling potatoes, owning the land, the farm and the wholesalers, warehouse and selling it to myself.

I could turn round and say I only make 50p on a tonne of potatoes, doesn't sound very much does it?

I can then keep from you, how much I have made along the supply chain?

Don't be fooled by this 5% rubbish, nobody knows what some charge themselves via connected companies within the supply chain.

That's why the competition enquiry needs to provide us with greater transparency showing how much they make selling electricity etc to themselves?