Can someone explain again - how are energy companies make so much profit?

sevenhills

TheGardener said:

 I'm no socialist, I believe in reward for hard work but let's face it  - we're all getting pretty shafted at the moment - well, that's what it feels like to me. 

Anyone that was really poor, would have opted for the free solar panels funded by the government.
The retired and those on benefits got an inflation increase on their income, on top of that they got over £1,000 in government help with energy bills.
I work and got some government help, but very few got inflation pay increases. When I visit my 70 year old sister, the heating of often off. Because she prefers to spend her money on other things. She has more money than me, still working at 70.
She goes to Barbados next month.

Spoonie_Turtle

Dolor said:

People will argue that they are working hard but the statistics indicate that we are 20% less productive than our US cousins. We are short of key workers but the thought of increased immigration remains an anathema to many. My daughter took her skills to Canada where she is now a senior vice-president of an international insurance company. I can see many others following in her steps with Western Australia making no secret of the fact that it wants our skilled workers.

By what metric are they more productive?  (Genuine question.  Edit: not implying I don't believe you, just wanting to know the context.)

In the US most ordinary people are having to work two or three jobs just to keep a roof over their heads, they have very little holiday and although perhaps productive, they are all burning out.  Not that the system cares, plenty more drone workers to exploit and expend because they all have to work so much just to afford the basics - and there are virtually no protections for employees, no statutory holiday, the sickness policy is basically 'you must never be off ill', and access to healthcare is contingent on their employer not firing them (most states are 'at-will' states so firing is an ever-present danger) yet somehow still horrifically expensive even after insurance. 

Many acquaintances from the US describe it as a "dystopian hellscape", we absolutely should not be looking at the US for ideas no matter how much the people in charge already want to.

[They also don't fund their schools properly, and are losing so many teachers that many schools are having to go to a 4-day week even with unqualified substitute teachers.  Before this crisis most of their teachers had to work a second job to make ends meet - let's maybe not do that to our teachers please?]

I don't know what the answer is, but it is categorically NOT to emulate the USA.

IanIanIanIanIan

If energy suppliers may only benefit by 2% and energy producers may not benefit their in house energy suppliers where do all the billions of profit they make come from?

Krakkkers

IanIanIanIanIan said:

If energy suppliers may only benefit by 2% and energy producers may not benefit their in house energy suppliers where do all the billions of profit they make come from?

The question makes no sense. Producers sell oil and gas at the market rate which is high at the moment.
The suppliers buy it high and sell it to us for a 2% profit.

Krakkkers

Generate your own energy, wind turbine, solar, etc or invest in oil and gas to take a share of the profits.
Energy is going to be expensive for a long time and wars will be fought over it.

pochase

IanIanIanIanIan said:

If energy suppliers may only benefit by 2% and energy producers may not benefit their in house energy suppliers where do all the billions of profit they make come from?

Producers are not allowed to sell cheaper to their own supplier company. So they sell to them at the same price as to othe rcustomers and make the same high profit in the "production" company.

The "supplier" company sticks with the 2% allowed by Ofgem.

ariarnia

IanIanIanIanIan said:

If energy suppliers may only benefit by 2% and energy producers may not benefit their in house energy suppliers where do all the billions of profit they make come from?

if there were two businesses. one factory that made widgets and one shop that sold widgets. then you could see why the one that made widgets (who can sell at whatever someone will pay to lots of shops) might be making lots of profit while the one that sold widgets might be struggling to break even? 

its the same in energy. 

shell global and centrica are making huge profits on there global operations. theyre the factory in this example.

shell energy uk and BG are the shop. they have to buy 'stock' at the same price as everyone else who doesn't have a parent that owns a factory. 

two separate companies who just happen to have the same parents. 

IanIanIanIanIan

So, The Government can change the regulations so the producers may sell to their subsidiary suppliers at a lower price at the front end, which filters down to the public consumer's pocket, instead taxing the windfall profits upstream and then distributing a little of their own money back to the consumer with the Government appearing to be the consumer's angel.  The producers and the suppliers make the same amount of money overall as it will not be taxed off of them.

Of course the money would stay in the consumer's pocket instead of vanishing into the Governments coffers.  Makes you wonder why they won't do that?

ariarnia

IanIanIanIanIan said:

So, The Government can change the regulations so the producers may sell to their subsidiary suppliers at a lower price at the front end, which filters down to the public consumer's pocket, instead taxing the windfall profits upstream and then distributing a little of their own money back to the consumer with the Government appearing to be the consumer's angel.  The producers and the suppliers make the same amount of money overall as it will not be taxed off of them.

Of course the money would stay in the consumer's pocket instead of vanishing into the Governments coffers.  Makes you wonder why they won't do that?

they could. but those rules are in place for a good reason. 

https://blog.ipleaders.in/the-competition-act-2002/

this explains it better than i could but basically if we let a global company set up a uk supplier and cross subsidise that supplier using global profits then in not to long we might end up with only one supermarket/energy supplier/electronics retailer etc. then they can hike there prices to whatever they want and you are forced to pay it because theres no one else to buy from. 

and you can say the government would step in but its like bulb costing the government 6 billon pound because it was 'to big to fail' but even worse as there are no alternatives. it sounds nice and simple on paper but in reality it would cause a lot more pain than the current system. 

the only realistic alternative is nationalisation but that has its own problems (including what i said before about us all being quite happy with the arrangements when it meant we could get cheap electric to waste as we wanted). 

and of course your point about tax. remembering that if the goverment get less tax then they also have less money to spend on things like the nhs and schools and nuclear reactors. so probably if were not happy with those things then we should all pay a bit more tax whatever the arrangement is not a bit less?

Spoonie_Turtle

sevenhills said:

TheGardener said:

 I'm no socialist, I believe in reward for hard work but let's face it  - we're all getting pretty shafted at the moment - well, that's what it feels like to me. 

Anyone that was really poor, would have opted for the free solar panels funded by the government.
The retired and those on benefits got an inflation increase on their income, on top of that they got over £1,000 in government help with energy bills.
I work and got some government help, but very few got inflation pay increases. When I visit my 70 year old sister, the heating of often off. Because she prefers to spend her money on other things. She has more money than me, still working at 70.
She goes to Barbados next month.

Many people who are really poor, rent.  They don't get a say in whether their landlord goes for one of those schemes or not.

We haven't had the inflantionary rise yet.  It's always a catch-up, we don't get *extra* purchasing power it just catches up to what we had a year previously.  And not all the benefits rise - help with rent is frozen at what was 30% of market rate in 2020, some income disregards are frozen, the savings thresholds are frozen, and most deductions are increased (same %, increased in cash terms).  It's not all rainbows and unicorns earning too much to be entitled to any financial help, but it not all unicorns and rainbows not being able to earn enough and having to rely on financial assistance to survive either.

Good for your sister she's fully able to choose where she spends her money, and able to work still at 70 - she sounds like she's in a better financial and physical position than most of her peers.