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    • sheffield lad
    • By sheffield lad 29th Oct 13, 4:20 PM
    • 1,949 Posts
    • 2,941 Thanks
    sheffield lad
    • #2
    • 29th Oct 13, 4:20 PM
    • #2
    • 29th Oct 13, 4:20 PM
    When are we all going to wake up,

    The UK is in the same boat as most other European countries energy prices are rising we are no dearer or cheaper just somewhere in the middle.

    Instead of gojng on about gready energy companies, shareholders, fat cats, nationalisation etc why don't we just face it.

    The era of cheap fuel is over we had a great run but for the last 5yrs and for the next 50-100 (bar them not getting cold fusion to work), we are all (the world), going to have to pay more for our energy be that petrol, gas or electricity.
    • shadowspy24
    • By shadowspy24 29th Oct 13, 5:11 PM
    • 232 Posts
    • 118 Thanks
    shadowspy24
    • #3
    • 29th Oct 13, 5:11 PM
    • #3
    • 29th Oct 13, 5:11 PM
    So EDF will announce price rises on the 1st January then...

    I've been watching the grilling and so far if I understand correctly, the big six have retail division and an energy generating division. The energy generating division then sells energy to the retail division at a "fair price" and then the retail division then sells it onto the customer and passes on any increases in costs.

    So basically they're selling energy to themselves and charging whatever they feel like for it and then blaming a rise in prices which they themselves set! Ridiculous...
  • zennith
    • #4
    • 29th Oct 13, 5:16 PM
    • #4
    • 29th Oct 13, 5:16 PM
    Stephen Fitzpatrick, managing director of smaller firm Ovo Energy, told MPs he "can't explain" the price rises being imposed, because his company was buying gas at a cheaper price than it had in 2009.
    • sheffield lad
    • By sheffield lad 29th Oct 13, 5:24 PM
    • 1,949 Posts
    • 2,941 Thanks
    sheffield lad
    • #5
    • 29th Oct 13, 5:24 PM
    • #5
    • 29th Oct 13, 5:24 PM
    So EDF will announce price rises on the 1st January then...

    I've been watching the grilling and so far if I understand correctly, the big six have retail division and an energy generating division. The energy generating division then sells energy to the retail division at a "fair price" and then the retail division then sells it onto the customer and passes on any increases in costs.

    So basically they're selling energy to themselves and charging whatever they feel like for it and then blaming a rise in prices which they themselves set! Ridiculous...
    Originally posted by shadowspy24
    But if I heard it right are BG only buying 10% of their total fuel from their parent company Centrica?

    That means they buy in 90% of the fuel off the wholesale market.
    • shadowspy24
    • By shadowspy24 29th Oct 13, 5:49 PM
    • 232 Posts
    • 118 Thanks
    shadowspy24
    • #6
    • 29th Oct 13, 5:49 PM
    • #6
    • 29th Oct 13, 5:49 PM
    But if I heard it right are BG only buying 10% of their total fuel from their parent company Centrica?

    That means they buy in 90% of the fuel off the wholesale market.
    Originally posted by sheffield lad
    Well if that's the case then if Stephen Fitzpatrick is to be believed, then we should still be be paying 2009 prices, as apparently the highest prices were in 2009.

    Also watch the second video on this news article where he gives this explanation:

    http://www.bbc.co.uk/news/business-24730122

    The guys behind him don't seem to pleased to hear him say this..
    • MillicentBystander
    • By MillicentBystander 29th Oct 13, 6:25 PM
    • 3,450 Posts
    • 2,225 Thanks
    MillicentBystander
    • #7
    • 29th Oct 13, 6:25 PM
    • #7
    • 29th Oct 13, 6:25 PM
    But if I heard it right are BG only buying 10% of their total fuel from their parent company Centrica?

    That means they buy in 90% of the fuel off the wholesale market.
    Originally posted by sheffield lad

    You are backing yourself into a bit of a corner here and I'm quite surprised you didn't see it coming. Don't believe everything your employer tells you would be my advice.
    • Bluebirdman of Alcathays
    • By Bluebirdman of Alcathays 29th Oct 13, 7:06 PM
    • 2,748 Posts
    • 3,171 Thanks
    Bluebirdman of Alcathays
    • #8
    • 29th Oct 13, 7:06 PM
    • #8
    • 29th Oct 13, 7:06 PM
    Stephen Fitzpatrick, managing director of smaller firm Ovo Energy, told MPs he "can't explain" the price rises being imposed, because his company was buying gas at a cheaper price than it had in 2009.
    Originally posted by zennith

    Astonishing.

    His own company have risen prices to the same degree and at the same time as the big 6. Perhaps he can explain that?
    • davidgmmafan
    • By davidgmmafan 29th Oct 13, 7:19 PM
    • 1,447 Posts
    • 522 Thanks
    davidgmmafan
    • #9
    • 29th Oct 13, 7:19 PM
    • #9
    • 29th Oct 13, 7:19 PM
    "So basically they're selling energy to themselves and charging whatever they feel like for it and then blaming a rise in prices which they themselves set! Ridiculous..."

    Yawn. This has been covered many times on here. People just need to think about it a little bit. Centrica is massive. Lets say they were selling to themselves in the cosy way currently being suggested.

    If they were able to do whatever they wanted they could probably put all of the other suppliers out of business. Would this be good for the consumer? I doubt it.

    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.

    OVO's argument isn't as powerful as people seem to be making out. Other suppliers often speak of hedging strategies, their comments are just backing this up.

    Any new entrant would be mainly focused on current wholesale prices as by definition they haven't had much chance to thin about a hedging strategy.
    Mixed Martial Arts is the greatest sport known to mankind and anyone who says it is 'a bar room brawl' has never trained in it and has no idea what they are talking about.
    • davidgmmafan
    • By davidgmmafan 29th Oct 13, 7:50 PM
    • 1,447 Posts
    • 522 Thanks
    davidgmmafan
    So EDF will announce price rises on the 1st January then...

    .
    Originally posted by shadowspy24
    Technically they can announce it before then and still have it start then as they have to give 30 days notice.
    Mixed Martial Arts is the greatest sport known to mankind and anyone who says it is 'a bar room brawl' has never trained in it and has no idea what they are talking about.
    • sheffield lad
    • By sheffield lad 29th Oct 13, 8:00 PM
    • 1,949 Posts
    • 2,941 Thanks
    sheffield lad
    You are backing yourself into a bit of a corner here and I'm quite surprised you didn't see it coming. Don't believe everything your employer tells you would be my advice.
    Originally posted by MillicentBystander
    Err no I don't work for them but I must declare an interest. I have my mates share save allowance.
    • footyguy
    • By footyguy 30th Oct 13, 9:48 AM
    • 4,133 Posts
    • 1,684 Thanks
    footyguy
    Will Martin be hounding EDF like he did with, was it Eon, last year?

    Asking at every possible opportunity if prices will be going up on January 1st and by how much?

    Even attempting to enter into a wager I believe is now the standard that was set.
    • spikyone
    • By spikyone 30th Oct 13, 11:48 AM
    • 449 Posts
    • 639 Thanks
    spikyone
    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.
    Originally posted by davidgmmafan
    So it's nothing to do with the fact that, when grilled (or rather, lightly warmed) by MPs, the energy company can claim a tiny 5% margin, which is what the retail side is charging. Meanwhile the generation side that sold it to them is making a 30% margin.

    Don't get me wrong, I'm not the type of person who mindlessly criticises private companies for making a profit. I understand that they aren't charities. But at the same time, having a supply chain contained entirely within your own company and then pretending your margins are small (because the real profits are hidden in that internal supply chain) is simple dishonesty. Sadly, many consumers would not understand - or like - a 20% margin if the gas was sold directly to them by the generation side, even though this is much lower than an efficient manufacturing company makes when selling its products and would result in a lower price.

    As for Centrica putting other companies out of business if they did as they pleased, the EU and the Competition Commission would soon act to break them up if they got anywhere near a monopoly - just look up the company formerly known as BAA. The current cosy club of 6 suits all of them down to the ground - not enough competitors to require real competition (and significant barriers to entry), but enough that no-one could claim a monopoly.
    • molerat
    • By molerat 30th Oct 13, 1:22 PM
    • 20,859 Posts
    • 15,132 Thanks
    molerat
    E.On last year, EDF this, I wonder whose turn it is to be the "good guy" next year.
    Last edited by molerat; 30-10-2013 at 6:26 PM.
    https://www.helpforheroes.org.uk/give-support/donate-now/
    • davidgmmafan
    • By davidgmmafan 30th Oct 13, 1:27 PM
    • 1,447 Posts
    • 522 Thanks
    davidgmmafan
    If the margin is so high (and therefore ridiculous) how come we have some of the cheapest prices in Europe?
    Mixed Martial Arts is the greatest sport known to mankind and anyone who says it is 'a bar room brawl' has never trained in it and has no idea what they are talking about.
    • jrawle
    • By jrawle 30th Oct 13, 1:28 PM
    • 235 Posts
    • 137 Thanks
    jrawle
    EDF's Blue+ Price Promise March 2015 tariff is (for my region anyway) cheaper than their standard tariff, and there are no fees for leaving early. So why would anyone remain on the standard tariff that could go up in January 2014 when they could pay less now and be guaranteed no price increase for more than a year?
    • spikyone
    • By spikyone 31st Oct 13, 7:45 AM
    • 449 Posts
    • 639 Thanks
    spikyone
    If the margin is so high (and therefore ridiculous) how come we have some of the cheapest prices in Europe?
    Originally posted by davidgmmafan
    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.
    • MillicentBystander
    • By MillicentBystander 31st Oct 13, 9:47 AM
    • 3,450 Posts
    • 2,225 Thanks
    MillicentBystander
    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.
    Originally posted by spikyone

    I've been making this point for ages on here. Don't worry, the industry shills know this to be the absolute truth but are compelled to continue with the company line. It's a very lucrative business at the end of the day and they will protect their (largely unseen) margins with all their might. We've already seen OVO's head honcho subjected to a smear campaign on here (and I'm sure all over other forums). Interesting that not one of the highly paid execs from the Big 6 who were sitting beside him at the meeting attempted to debunk what he said at the time. They were, after all, pretty serious allegations..
    • Trix3y
    • By Trix3y 1st Nov 13, 3:59 PM
    • 37 Posts
    • 37 Thanks
    Trix3y
    Being Ripped Off
    I will keep my post brief and simple. Energy prices have tripled in the past ten years,this is not sustainable.In the twenty first century people should not be forced to choose when and if they can afford to heat their homes. Many people live on fixed incomes which are barely subsistence level,even working people are struggling to pay their fuel bills. Other countries in Europe with higher energy costs have especially where older people are concerned much higher pensions. What is the point of OFGEM? an organisation in name only,makes you wonder if staffed by the energy big six. Finally as previously posted a government that has millionaires in it, has absolutely no concept of how it is to try and manage on a tight budget. I wonder how many jumpers the Prime Minister wears at home, I suspect none.It is incredible given the scale of increases in heating and electricity that it has taken so long to reach this level. Fingers crossed everyone for a mild winter.
    • footyguy
    • By footyguy 12th Nov 13, 10:58 AM
    • 4,133 Posts
    • 1,684 Thanks
    footyguy
    So EDF actually will delay their price rise for an additional 48 hours from what was anticipated. Yipee!

    Do you think EDF knew this was going to happen when they proudly announced their price pledge in front of the parliamentary commitee?

    Or was it that having visited parliament and meeting with their counterparts from the rest of the industry, as soon as they got back, they called an emergency board meeting to discuss the fact everyone else was increasing prices, so why were their shareholders not being similarly rewarded?
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