Big Six Bosses v Energy and Climate Change Committee - Starts 2.30pm

[whinmoor]

Watch Online Here: Player


The Energy and Climate Change Committee has today invited bosses from the Big Six energy companies and other smaller energy suppliers to appear before Parliament on Tuesday 29 October starting at 2.30pm.

Sir Robert Smith MP said:
“The Committee has today decided to call in the energy bosses in the context of the latest wave of price increases.”
The session will explore a range of issues, including:

• Reasons and justification behind recent energy price rises;
• Difference of pricing policies between energy suppliers; and
• How the transparency of energy company profits can be improved.

 

[Worcester]

16:46 looks like it's all over, guess a usual late day for these guys... There again they probably think they haven't a lot to answer for

Here's the rub:
(And I thought ECO / HHCRO was supposed to be funded by the energy companies NOT the consumers)

 

[FB.]

I think too many consumers expect something for nothing. Any company should be allowed to make a fair and reasonable profit which will encourage investment if the profit is sufficient (just like many people jumped on the solar gravy train when tariffs were generously high).
They operate with wafer-thin net profit margins around 5%, which, along with being a political football, explains their lack of interest in building new powerplants.
How many people would bother running their business if the margin was only 5%?

While I am pro-renewables, I am not pro-renewables to the extent where we drive bills worryingly higher through a variety of extra costs such as decommissioning older "dirty" power stations (leaving a power shortfall - which, as you'd expect, drives prices up until the highest bidder remains), or the various costs of subsidies and incentives.

The worrying thing is that if "Red Ed" gets into power and price-caps the utility companies, he will almost certainly get the temptation to start capping other prices in the economy too, leading to shortages. Price controls and government controls fell with the Berlin Wall. We really don't want to go back there.

What I find hilarious is that the profit margin for utility companies is only around 5%. Yet nobody even queries the 13% profit margins made by food/household products giant "Unilever" or the Telecom company "BT" - let alone the 23% margin of United Utilities (NorthWest Water). All provide products and services as important as the gas/electric companies but while everyone is hysterically fixated on the low margins of the power/gas companies the other companies carry on charging far greater margins.

Lloyds, Barclays and suchlike literally laugh all the way to the bank with their huge 30% profit margin....and as for British American Tobacco: their profit margin is almost 40%.

So a sense of perspective would be useful as to which companies are the real rip-offs. Don't wish price controls on someone else unless you're prepared to accept price (or profit, or wage) controls yourself.

 

[Worcester]

They're back again (17:00)

 

[Worcester]

Was that all words, or any real information?

 

[Darkwood]

I think too many consumers expect something for nothing. Any company should be allowed to make a fair and reasonable profit which will encourage investment if the profit is sufficient (just like many people jumped on the solar gravy train when tariffs were generously high).
They operate with wafer-thin net profit margins around 5%, which, along with being a political football, explains their lack of interest in building new powerplants.
How many people would bother running their business if the margin was only 5%?

While I am pro-renewables, I am not pro-renewables to the extent where we drive bills worryingly higher through a variety of extra costs such as decommissioning older "dirty" power stations (leaving a power shortfall - which, as you'd expect, drives prices up until the highest bidder remains), or the various costs of subsidies and incentives.

The worrying thing is that if "Red Ed" gets into power and price-caps the utility companies, he will almost certainly get the temptation to start capping other prices in the economy too, leading to shortages. Price controls and government controls fell with the Berlin Wall. We really don't want to go back there.

What I find hilarious is that the profit margin for utility companies is only around 5%. Yet nobody even queries the 13% profit margins made by food/household products giant "Unilever" or the Telecom company "BT" - let alone the 23% margin of United Utilities (NorthWest Water). All provide products and services as important as the gas/electric companies but while everyone is hysterically fixated on the low margins of the power/gas companies the other companies carry on charging far greater margins.

Lloyds, Barclays and suchlike literally laugh all the way to the bank with their huge 30% profit margin....and as for British American Tobacco: their profit margin is almost 40%.

So a sense of perspective would be useful as to which companies are the real rip-offs. Don't wish price controls on someone else unless you're prepared to accept price (or profit, or wage) controls yourself.

This isn't about profit margin and comparisons its about you me and the old lady been able to afford to turn the heating on or cook a meal... your comparisons are choice markets in that its not life threatening if you can't afford your tobacco or buy the best phone ... you can't honestly belief the big 6 endless excuses yet always dodging direct answers, if energy profits were in line with other business structures it would price us out of the global market while marking a few fatcats extremely rich not that 2.5million after bonus to the boss is a bad deal from a company crying its hard times and showing record profits on the consumer market while maintaining they have there hands tied behind their backs...

It was very interesting to see Ovo's representive revealing true market costs they paid over the last few years and expressing they wish to be a transparent energy supplier and reviewing all the market costs he commented that none of the calcs the big six put forward make sense...

When a business is the life line of the nation it needs strict control and profit caps the consequences would be dire to the uk's market otherwise... no company will set up or expand when they can't afford to pay for the Energy in Britain and investment would go elsewhere...

Regarding the profit margins 5% i will agree isn't much for a business but when you have a turnover of billions it not such a small amount, some of these suppliers are foreign companies now if the deal was so bad for them why on earth would they continue in the uk market.. ?

 

[FB.]

This isn't about profit margin and comparisons its about you me and the old lady been able to afford to turn the heating on or cook a meal...

Well, if the companies only make a profit margin of 5%, then that is the MAXIMUM cut which could happen. So even if the companies operated on a not-for-profit basis (or were state-owned with no competition - which tends to encourage bureaucracy rather than innovation; I've worked in healthcare and the number of middle-managers is outrageous) then a £1500 annual bill could be trimmed by £75.

That's it. £75 off a £1500 bill is the best that could be achieved even if the government takes ownership of the companies and - despite its already eye-watering debts - tries to borrow the vast sums needed to build new power stations and keep the grid functioning.

It's a mountain out of a molehill. There are many easier ways to make people's cost of living more affordable than bashing the low-profit-margin gas and electricity companies. But while everyone is hysterical about them it takes attention away from all the other rip-offs.

 

[FB.]

There are many easier ways to make people's cost of living more affordable than bashing the low-profit-margin gas and electricity companies. But while everyone is hysterical about them it takes attention away from all the other rip-offs.

For a start: the solar Feed-in-Tariff was set too high for too long (and then badly managed when the cut came).
But how did solar FiT payments benefit the poor? They didn't.
Substantial companies sprung up to exploit the over-generous FiT by rolling-out vast rent-a-roof schemes to earn the FiT payments. Entrepreneurs built large arrays to milk the excessive FiT rates - no need to work; just sitting back and watching the sun come up each day.
Before the FiT cuts the middle class bought panels for their roof to earn a good rate from the FiT; not many cared much about the bill savings, which were a small bonus compared to the generous subsidy paid by the poor.
Those who were unable to install solar panels (most likely due to the high upfront cost) are the ones footing the bill and the middle and upper classes are profiting from it.

Is that fair? I'd say it was less fair than the 5% profit margins of the utility companies.

 

[Worcester]

I though the interesting comments where when asked how the should keep the costs of ECO down they went on about ensuring only those entitled to it would get it - nothing at all about the value for money that was given and how the costs of eco could be brought down - they kept referring back to making sure only those entitled got it, and they needed more help from HMRC to check that entitlement...

As to how the ECO was accounted for, even more interesting when BG / Centrica where pushed about total profits thorugh the BG business, they kept saying that the profits from the service division where irrelevant and shouldn't be taken into account - yet the underlying message was that a shed load of highly profitable ' over charged (by BG services) eco work and other stuff was done by the service company and charged back to the energy division. - Just hope they really picked up on that as it really does start to force them to open up their books and internal accounting.

 

[FB.]

-
Centrica's (British Gas) operating profits (pre-interest charges, pre-tax) by division:

Electricity generation: £311m (11%)
Gas production: £919m (34%)
Gas storage: £89m (3%)
Transmission: n/a
Retail energy supply: £606m (22%)
Business energy supply: £175m (6%)
Energy Related Services: £312m (11%)
N.American operations: £331m (12%)

 

[FB.]

In Centrica's last set of results, they said:

[TABLE="class: bwtablemarginb"]
[TR]
[TD="class: bwpadl0 bwvertalignt bwalignl bwsinglebottom"]For a 2012 average gas and electricity bill of £1,188* the costs are:
[/TD]
[TD="class: bwsinglebottom"][/TD]
[TD="class: bwsinglebottom"][/TD]
[/TR]
[TR]
[TD="class: bwpadl0 bwvertalignt bwalignl bwsinglebottom"]External Costs
[/TD]
[TD="class: bwsinglebottom"][/TD]
[TD="class: bwsinglebottom"][/TD]
[/TR]
[TR]
[TD="class: bwpadl0 bwvertalignt bwalignl bwsinglebottom"]Wholesale energy costs
[/TD]
[TD="class: bwsinglebottom"][/TD]
[TD="class: bwpadl0 bwvertalignt bwalignr bwsinglebottom"]£568
[/TD]
[/TR]
[TR]
[TD="class: bwpadl0 bwvertalignt bwalignl bwsinglebottom"]Delivery to your home
[/TD]
[TD="class: bwsinglebottom"][/TD]
[TD="class: bwpadl0 bwvertalignt bwalignr bwsinglebottom"]£283
[/TD]
[/TR]
[TR]
[TD="class: bwpadl0 bwvertalignt bwalignl bwsinglebottom"]Environmental and social policies
[/TD]
[TD="class: bwsinglebottom"][/TD]
[TD="class: bwpadl0 bwvertalignt bwalignr bwsinglebottom"]£112
[/TD]
[/TR]
[TR]
[TD="class: bwpadl0 bwvertalignt bwalignl bwsinglebottom"]Taxes
[/TD]
[TD="class: bwsinglebottom"][/TD]
[TD="class: bwpadl0 bwvertalignt bwalignr bwsinglebottom"]£72
[/TD]
[/TR]
[TR]
[TD="class: bwpadl0 bwvertalignt bwalignl bwsinglebottom"]Our costs
[/TD]
[TD="class: bwsinglebottom"][/TD]
[TD="class: bwsinglebottom"][/TD]
[/TR]
[TR]
[TD="class: bwpadl0 bwvertalignt bwalignl bwsinglebottom"]Operating costs
[/TD]
[TD="class: bwsinglebottom"][/TD]
[TD="class: bwpadl0 bwvertalignt bwalignr bwsinglebottom"]£104
[/TD]
[/TR]
[TR]
[TD="class: bwpadl0 bwvertalignt bwalignl bwsinglebottom"]Our profit
[/TD]
[TD="class: bwsinglebottom"][/TD]
[TD="class: bwpadl0 bwvertalignt bwalignr bwsinglebottom"]£49
[/TD]
[/TR]
[/TABLE]

 

[FB.]

Centrica's pre-interest, pre-tax operating margins of relevance to consumers, 2012 and 2011:

Retail energy supply: 6.6% (6.9%)
Business energy supply: 5.7% (6.8%)
Energy Related Services: 18.6% (16.4%)

 

[Darkwood]

Well, if the companies only make a profit margin of 5%, then that is the MAXIMUM cut which could happen. So even if the companies operated on a not-for-profit basis (or were state-owned with no competition - which tends to encourage bureaucracy rather than innovation; I've worked in healthcare and the number of middle-managers is outrageous) then a £1500 annual bill could be trimmed by £75.

That's it. £75 off a £1500 bill is the best that could be achieved even if the government takes ownership of the companies and - despite its already eye-watering debts - tries to borrow the vast sums needed to build new power stations and keep the grid functioning.

It's a mountain out of a molehill. There are many easier ways to make people's cost of living more affordable than bashing the low-profit-margin gas and electricity companies. But while everyone is hysterical about them it takes attention away from all the other rip-offs.

I have no argument regarding the other big profit companies, tax payments etc but this isn't what this thread is about thats for another debate altogether, but you seem to just be preaching what excuses the big 6 keep spouting yet under scrutiny the cracks are appearing, OVO gave them a massive blow in expressing the way the calculate energy costs in advance yet when they evidently over estimate they don't reduce costs to suit, OVO's representative also was totally transparent about the wholesale costs which have been pretty much level the last three years (you can research and check this quite easily) yet every year the big six have maintained the wholesale price has gone up and up - NOT TRUE!... they were directly questioned regarding the rises with some very tough questions they didn't expect and lets just say they all gave smokescreen answers or totally evaded a direct answer.

The charges and green taxes etc are all passed directly to the consume they were actually questioned on how they represent 5% as been there profit and it starting to look like the numbers don't match they are playing very clever deceptive figures that mask true profit and now big cracks are opening up in their reasoning ... this should insight others to dig deeper ..if they were so confident and truthful why dont they open their books and be transparent ... don't let the excuses brainwash you that's what they want .... when a country is outpricing the poor and elderly on the consumer energy market then their is something deeply wrong especially when massive bonuses are been handed out like confetti.

Everyone should have affordable energy, yes failure by both previous governments and energy suppliers to re-invest in the infra structure has had a big hand in this but when we are in this situe we are then changes need to be made about how we get, generate and supply the end user.

We are sitting on the biggest bounty of shale gas anyone could ever have imagined and even tapping 10% would give 50 yrs of supplies the rumours are that the scaremongering about fracking is been generated from within the big 6 .... imagine a new source of cheap gas with long term stocks under our feet would do to the big six shareholders and profit margins.... its already had a large effect in America and brought Energy costs down dramatically. Any argument can be made to look one sided when you tailor the answers to question you expect the thing is in front of the committee today the big see were showing their true colours.

 

[Gavin A]

We are sitting on the biggest bounty of shale gas anyone could ever have imagined and even tapping 10% would give 50 yrs of supplies the rumours are that the scaremongering about fracking is been generated from within the big 6 .... imagine a new source of cheap gas with long term stocks under our feet would do to the big six shareholders and profit margins.... its already had a large effect in America and brought Energy costs down dramatically. Any argument can be made to look one sided when you tailor the answers to question you expect the thing is in front of the committee today the big see were showing their true colours.

The US and UK gas markets are completely different to each other, there's absolutely not chance that fracking will impact UK gas prices in the same way it did in the US for the very simply reason that the UK is effectively a gas hub capable of exporting huge volumes of gas to the rest of Europe, whereas the US had almost no gas export capacity at all.

When shale gas delivered a glut of gas in the US there was nowhere to absorb that extra gas until the price was low enough to undercut coal for power generation because the gas couldn't be exported.

In the UK any shale gas produced effectively just feeds in to the entire European gas market, so will have a relatively negligible impact on price, though it may well help to slow the rate of price rises to some degree if it can be produced cheaper than LNG.

The US gas price is likely to rise again fairly rapidly in a couple of years time when they get LNG gas exporting facilities on line and start exporting. Unless they impose export controls, the price will probably pretty much equalise with European gas prices minus the costs of LNG compression and transport.

 

[jason121]

Will the Govt slash the FIT due to the rise in energy prices ???

 

[Darkwood]

The US and UK gas markets are completely different to each other, there's absolutely not chance that fracking will impact UK gas prices in the same way it did in the US for the very simply reason that the UK is effectively a gas hub capable of exporting huge volumes of gas to the rest of Europe, whereas the US had almost no gas export capacity at all.

When shale gas delivered a glut of gas in the US there was nowhere to absorb that extra gas until the price was low enough to undercut coal for power generation because the gas couldn't be exported.

In the UK any shale gas produced effectively just feeds in to the entire European gas market, so will have a relatively negligible impact on price, though it may well help to slow the rate of price rises to some degree if it can be produced cheaper than LNG.

The US gas price is likely to rise again fairly rapidly in a couple of years time when they get LNG gas exporting facilities on line and start exporting. Unless they impose export controls, the price will probably pretty much equalise with European gas prices minus the costs of LNG compression and transport.

Fair point about the difference in the US and UK markets but either way ive watched the grilling by the Energy and Climate change Committee .... and its hard to see the Big six are playing a fair game ... OVO's seated member has dealt some massive blows against the big six and they really couldn't respond... hmmm strange how shareholder companies can't provide a transparent open account of when they purchased and how much for yet a non shareholder company is happy to offer all their accounts up and follows up with a blowing comment on how the big six are manipulating the prices... again no comments but some very sheepish looks. As i have already said before this grilling the 5% they claim to make is smoke screened clever manipulation of the sums and there explanations for them in the light of yesterdays questioning committee are showing the sums don't quite add up.

 

[Badged01]

Just to add my two pennies worth to all this debate! Energy companies are there to make a profit and are not the slightest bit interested in the end user regardless of all the bullsh*t they spout out about customer satisfaction! If they are making their profit margin to satisfy the shareholders then they are happy, and if the customer is happy thats a bonus. If they arent making their margin then prices will only go one way ....... they hold the monopoly, if you dont like it go elsewhere for your energy! Ooops, you cant, there isnt anyone else .....

 

[Darkwood]

Strange how the non shareholder companies have kept their prices pretty much stable the last few years yet the big 6 who have to answer to their shareholders have bleated rising wholesale costs etc .... you'd think a small independent energy supplier would also have to pass on these costs.... Oh wait! they have shown the wholesale price over the last few years has been generally stable and they even have shown this to be so... The minute you float a company on the stock market it becomes all about profit and seeing how hard you can push the customer before they break...

 

[FB.]

The minute you float a company on the stock market it becomes all about profit and seeing how hard you can push the customer before they break...

It also becomes about being as efficient as possible to maximise profits. Unfortunately, anything run by the government is plagued by large numbers of (expensive) middle managers and high union membership which makes it difficult to control costs.
I have no doubt at all that the utilities back in government ownership would result in even higher prices due to lack of any need to innovate or be efficient (unless the government subsidised it, but a subsidy still has to be paid by someone else's taxes). I worked for the government for two decades and the bureaucracy was a major reason why I left: I spent a lot of my day filling out paperwork to satisfy all the middle-manager-audits rather than getting any work done.

Also note that "the big six" are the ones having to carry the bulk of the cost of green levies and subsidies.

 

[FB.]

The minute you float a company on the stock market it becomes all about profit and seeing how hard you can push the customer before they break...

But a privately-owned business is not much different: it effectively just has one or two shareholders (its owner or joint owners).
Should we cap the allowed profit margin of all businesses? I think offering cheap solar to people is desirable, so why not have a zero profit margin applied on all installers so consumers can get a good deal to help with their energy costs?
As I said earlier: don't try impose on others' businesses what you wouldn't want imposed on your own company, because sooner or later the price-controls will come for you too.

 

[Ian-LS]

I'm assuming that was a rhetorical question about installers having zero profit margin?

 

[Darkwood]

But a privately-owned business is not much different: it effectively just has one or two shareholders (its owner or joint owners).
Should we cap the allowed profit margin of all businesses? I think offering cheap solar to people is desirable, so why not have a zero profit margin applied on all installers so consumers can get a good deal to help with their energy costs?
As I said earlier: don't try impose on others' businesses what you wouldn't want imposed on your own company, because sooner or later the price-controls will come for you too.

When the company is floated and becomes the domain of the shareholders it effectively becomes a profit driven empire as multiple shareholders are in it for one thing and one thing only and thats to make good returns on their investment.... this usually means any voted decision isn't based around the original ethics of the company but gets blind sided to put profit first then anything else second.... a business like my own and many others have a different kind of customer relation in that they come first and your profits usually are a consequence of your good business nature... i totally disagree with you regarding your comparison of the Energy market with a standard business model.... affordable energy is as essential to the consumer as water and food thus this put the energy market in a unique position where they must provide affordable energy .... you keep quoting 5% profit margin yet this is only because the big 6 say this is what they make but when you start to break down how they arrive at this then you see just how sneaky and colluding they are OVO have seen wholesale costs fall recently and provided the proof yet the big 6 say they are rising yet accessible evidence contradicts them.. strange how the big 6 are all singing the same song yet the smaller companies are been transparent and showing the cracks in the big 6 claims... also if they were so confident in their accounting and claims then why didn't 5 of the 6 bosses even turn up and instead send their monkeys in to take the heat. I understand your angle on the business issue but these giants and in a very unusual position of actually generating the Energy and selling it to themselves to pass on the customer... this can't be right in any market its too easy to manipulate figure - put smoke screens up and hide true profit, this is why we are seeing all these rises that totally contradict market trends and wholesale prices.

May i ask why your so defensive of the big 6 .. im starting to think your either brainwashed by all their claims or you have a vested interest i.e. a shareholder yourself?

 

[FB.]

May i ask why your so defensive of the big 6 .. im starting to think your either brainwashed by all their claims or you have a vested interest i.e. a shareholder yourself?

Yes, I hold shares in SSE and Centrica (and National Grid); I am a professional investor who gave up the bureaucracy and stuck-in-their-old-inefficient-ways government job to trade financial markets from home, which is why I pop up on here at various times of day.
But I also hold shares in a variety of other companies - at the moment my largest shareholding is Sainsbury's which I picked up in late 2011's market panic for a silly low price and am now awaiting my chance to cash-out at a good price, but my largest holding varies from time to time.
Pension funds and managed investment funds (of the sort which you might have in your ISA or endowment) also hold such investments - and you will have holdings of those companies if you have a FTSE tracker fund.

Actually my very largest holding - more than twice the size of my Sainsbury shareholding and four times my SSE/Centrica holding - is gold which I've been loading-up with in the recent gold-price slump because I think Quantitative Easing is causing all kinds of economic distortions (including rising commodity prices which are part of the gas/electric price rise) which will eventually snap back like a financial earthquake when governments and central banks can no longer hold things together. From dotcom boom-bust in 2000, to housing boom-bust in 2007, to QE boom and probably soon QE-bust.

 

[FB.]

May i ask why your so defensive of the big 6 .. im starting to think your either brainwashed by all their claims or you have a vested interest i.e. a shareholder yourself?

I am defensive of them because I vigorously defend everyone's right to make a fair profit from their business. If this conversation was about the profit margin charged by a solar panel manufacturer I would be equally defensive of their right to make a fair profit.

Without a fair profit, there is no incentive to increase efficiency (which would increase profits and/or bring costs down for consumers). Without a fair profit there is no incentive to invest (which maintains or increases the supply of what we want).

Capitalism works because the profit it allows encourages businesses to compete, to become lean-and-mean and to innovate - and if something is too profitable it encourages newcomers to enter the market (as was the case with solar PV companies springing up in 2011).
Without a profit reward the pharmaceutical companies would not bother to develop new medicines (disclaimer: I hold shares in AstraZeneca and GlaxoSmithKline) and without new medicines healthcare would not advance. Similarly: without a profit a solar panel manufacturer would not be encouraged to advance solar technology to the next level.

If we take away free market pricing, we end up with communism - and we all know where that ends.

But I expect Miliband will get into power at the next election and spank the utility companies so hard that they never forget it. But also the investors this nation needs - including those who lend to the much-needed deficit money to the government - will also not forget, and very likely there would be a rapid and severe slump in the British Pound (and soaring import prices which encourage Red Ed to "fix" even more prices) as investors' money hurries to other nations.
Even Tony Blair criticised Red Ed's price-capping; Blair knows how "anti-business" it would sound.

 

[Darkwood]

Explains alot; you were talking about the big six s though you had blinkers on even with all the recent drama where they now seem to be sitting on shakey ground and not a fracking in sight to blame, but yes i see now that its in your interest to counter any negative talk or speculation as this will have a direct effect on the share value of your shares in SSE .....

I very much doubt then that i could get you into any kind of agreement with me as you kinda have vested interests to protect your money so on that note we will just have to agree to disagree...

OVO has done the country a good deed as i said earlier they are a small independent company and still believe their customers come before profit hence they challenged and even explained how the big six are hiding the truth... No comment was given in response which says alot!

Im no expert on the stocks and shares but i can see consumer pressure and all the generated attention been the downfall of the big six if they don't change their ways and the consequence of been open and transparent will affect profit massively hence shares will plummet --- its a one way road now they have let the shareholders push big profits ahead of consumers needs now they are been exposed... clever accounting and smokescreens are been exposed and they have no answers...


When people die to protect and push shares up then morality of the shareholders needs questioning ... corporate manslaughter wouldn't be far off in my mind... ill agree with you regarding other floated companies - yes business is business but when lives depend on fair play then yes the industry needs over hauling when it goes wrong as it clearly has.

Im not against shareholders and business practices as such just some markets should be under strict control and yes even if it means the government stepping in and stripping it all apart - they may not be the best people to run it but the big 6 has shown greed is worth more than life.

 

[FB.]

"....Without a fair profit there is no incentive to invest (which maintains or increases the supply of what we want)...."

The low margins and political instability is a deterrent to building new power and gas infrastructure. Do you see many investors queueing up, begging to build new power stations or grid?

"..... if something is too profitable it encourages newcomers to enter the market (as was the case with solar PV companies springing up in 2011).

So with apparently such vast profits available why isn't everyone muscling-in for a piece of the action in the energy market, like they did with solar? Apparently the small energy supplier "Ovo" who were present along with the "big six" was originally started from someone's home kitchen.
If it's that easy and that lucrative, why isn't everyone doing it? Why don't Tesco and Sainsbury's get a piece of the action like they do with high-margin banking, insurance and mobile phones?

 

[FB.]

Explains alot.

But I didn't come here as a troll or shill for the "big six". I came here because I have an interest in renewables. I would also consider myself to be one of the best recyclers. I also spend a great deal of time studying and experimenting with chemical-free fruit and veg growing; any "fertiliser" is in the form of compost and manure obtained from a local recycling site.
Go ahead: test my commitment to "green where practical" by asking me questions about chemical-free "grow-your-own". I particularly specialise in ancient, rare fruit trees.
I'll make a plea for the Milton Wonder apple tree which is in imminent danger from property developers:
http://www.miltonwonder.org.uk/

Just "an old apple tree"? Absolutely not. It is one of the oldest three known apple trees in the world - a real survivor which has outstanding natural disease resistance (no need for sprays) and produces good quality fruit. Unlike the modern varieties which are inbred, sickly, short-lived and disease-prone.

 

[Darkwood]

Again you compare to other non-related markets ..check my edit to last post!

Please realise people are dying because they can't afford to cook or heat their homes .... really hope you can sleep a peaceful night as your money rolls in again this is a moral issue the Energy companies provide an essential service of which without this service lives are at risk... as for all your other investments then fair people play then consumers don't die when shareholders push for more or the accounting is smoke screened to hide profit margins ... sorry but i can't seriously belief that the shareholders of the big 6 have no knowledge of the deceptions that are occurring to ensure shareholders are kept smiling, buying shares is about risk taking and this should be fair play but its all sounding like another big scandal is about to be blown open ..and id like to see your replies when that happens because rumours are a couple of ex employees in the know are ready to talk the truth! - watch this space

PS this is not about your other investments or interests i see no issue at all that way its regarding the nature of this thread and a market that needs a complete overhaul.

 

[FB.]

Please realise people are dying because they can't afford to cook or heat their homes ....

And please realise that even if the companies operated with no profit, or under inefficient middle-managers of government, it would only cut bills by £75 per year.
Far greater savings could be achieved by addressing other costs of living.

So we'll start with capping the power companies.
Then move on to the food retailers.
Then move on to the food manufacturers.
Then move on to the farmers.
Then move on to the oil/gas exploration and production companies.
Then move on to house builders.
Then move on to the pharmaceutical companies.
Then the furniture and household appliance manufacturers.
Then the car manufacturers.
Then......the economy is suffering Soviet-style shortages because nobody can sell anything for a fair price so they don't bother offering it for sale at all.


Where does it stop?
Does it stop when there's nobody left to speak out in defence of the rights of others to make a fair profit?
Does it stop when they come for the profits of your business because it's alright until it directly affects your earning power?
I do not consider the 5-6% profit margin of utilities to be extortionate. Even at almost double that rate it would only be in-line with the typical profit margins of the average company.

 

[Darkwood]

And please realise that even if the companies operated with no profit, or under inefficient middle-managers of government, it would only cut bills by £75 per year.
Far greater savings could be achieved by addressing other costs of living.

So we'll start with capping the power companies.
Then move on to the food retailers.
Then move on to the food manufacturers.
Then move on to the farmers.
Then move on to the oil/gas exploration and production companies.
Then move on to house builders.
Then move on to the pharmaceutical companies.
Then the furniture and household appliance manufacturers.
Then the car manufacturers.
Then......the economy is suffering Soviet-style shortages because nobody can sell anything for a fair price so they don't bother offering it for sale at all.


Where does it stop?
Does it stop when there's nobody left to speak out in defence of the rights of others to make a fair profit?
Does it stop when they come for the profits of your business because it's alright until it directly affects your earning power?
I do not consider the 5-6% profit margin of utilities to be extortionate. Even at almost double that rate it would only be in-line with the typical profit margins of the average company.

This is my point im trying to get across - this is a smokescreen figure with clever use of presentation and wording, the maths don't work here their claims are been questioned and they can't or are unwilling to be transparent to explain them, their has been speculation of collusion between the big 6 and profit manipulation, now under investigation cracks are showing in their claims and stories and very big ones so all this post im in agreement with if the last sentence were true hence i said numerous times the figures are been conjured for the public eye when in reality profits could be 30-40% as has been claimed already but when they refuse to be open and transparent its can only be because they are hiding something big ... they are in control of both the generation and selling this gives them an easy playing field to manipulate any figures and never be found out but fate has stepped in i.e. the little man who is exposing the lies they are claiming.

 

[FB.]

"...this is a smokescreen figure with clever use of presentation and wording, the maths don't work here their claims are been questioned and they can't or are unwilling to be transparent to explain them...."

Quote from Centrica's latest results (for year-ending 2012):
"....The preliminary results of the year ended 31 December 2012 have been extracted from audited accounts...." (my emphasis on audited)

Accounts available here: http://www.centrica.com/files/results/prelim12/2012_preliminary_results.pdf
Auditor comments here: http://www.centrica.com/files/reports/2011ar/index.asp?pageid=70

So you're claiming that not only Centrica are engaged in outright fraud, but their auditors are facilitating a cover-up?

Be careful with your response, because it may have legal implications if you cannot back up what you say.

 

[Darkwood]

Quote from Centrica's latest results (for year-ending 2012):
"....The preliminary results of the year ended 31 December 2012 have been extracted from audited accounts...." (my emphasis on audited)

Accounts available here: http://www.centrica.com/files/results/prelim12/2012_preliminary_results.pdf
Auditor comments here: Centrica plc - Annual Report and Accounts 2011 - Financials - Financial Statements - Independent Auditors' Report to the Members of Centrica plc

So you're claiming that not only Centrica are engaged in outright fraud, but their auditors are facilitating a cover-up?

Be careful with your response, because it may have legal implications if you cannot back up what you say.

I make no claims it speculation for the purposes of debate ... i give opinions take them how u want.
I will not make a open accusation but the auditors can only use the info given if the info of any company is in its foundation manipulated at source and figures and sums cleverly expressed then how would they suspect anything, when you generate the very product you sell to yourself then its simple to create a fantasy profit margin tailored to whoever is interested....

Your either in denial here or very gullable .... how can 2 small players in the market show the big 6 up to the extent that they cant reply .... ill tell you why because they walked in all invincible and left with tails between their legs ......

 

[FB.]

.... how can 2 small players in the market show the big 6 up to the extent that they cant reply .... ill tell you why because they walked in all invincible and left with tails between their legs ......

If it is so profitable, why are there only two small players? When solar PV offered high rates of return it didn't take long for new installation companies to spring up all over the place and it didn't take long for homeowners and rent-a-roofers to catch on.
So why the slow take-up of companies competing with the big six? If the big six under-state their profits then surely there's a bonanza waiting for smaller players as they could both report higher profit margins and offer lower prices to consumers: a win-win situation.

 

[Darkwood]

If it is so profitable, why are there only two small players? When solar PV offered high rates of return it didn't take long for new installation companies to spring up all over the place and it didn't take long for homeowners and rent-a-roofers to catch on.
So why the slow take-up of companies competing with the big six? If the big six under-state their profits then surely there's a bonanza waiting for smaller players as they could both report higher profit margins and offer lower prices to consumers: a win-win situation.

There are many more than 2 small players it was just the fact they were the bigger ones out there that they were called to the committee meeting i never said there was only 2, and no matter how you cross examine my posts the very point is im trying to make is that the big 6 has been delivered a blow by the little man ...ive not made this up it was televised live and is available to view on catch-up ... anything ive speculated or said has already been in the public domain by media coverage, political programs and the rest so accusational wise its already out there by bigger fish, if you watch the debate it was even suggested that collusion is a factor, OVO's rep' accused the big 6 and explained how they did it on live TV so i doubt me repeating any of this is going to be a legal issue to me.

Ive enjoyed the debate between us i hope i may have opened your eyes to who exactly you decide to invest in but if morals come after profit then ill never change your mind.

You as you have admitted have a vested interest to defend my opinion and your right to but think on this on we have to agree to disagree, i study politics and economy and im expressing opinion from a neutral front where as you hold biased from the start .... i have agreed with many things your have pointed out except the relevance to the big 6 so ill end on that note - the pillow is calling

 

[yorkshiremike]

If it's believed that the big 6 are ripping us off, then rather than just repeat this as a mantra as most politicians and the press (including the BBC) seem to be doing, it should be being demonstrated how. Since most of the big 6 are vertically integrated it may be that they shifting profits upstream, but it doesn't seem very likely based on the current evidence:
1) There's visibility on the rest of the company's profits and they don't appear excessive - so where are they hiding this excess profit?
2) Energy prices paid in the UK are in line with the rest of Europe (unless of course it's a European conspiracy!), this is particularly the case for gas, which (before local 'taxes') appears to track the 'production price'. Electricity prices seem to be explained by the country's production method, e.g. cheaper in France (Nuclear) and some of the Nordics (Hydro), getting more expensive in UK as coal is switch out, fairly expensive in Germany (Green subsidies/taxes)
3) They are regulated and there is no evidence for conspiracy/cartel operation.

And despite the smaller companies like OVO not being subject to some of the same costs (e.g. ECO), then for me at least they are still not the cheapest and this even after the announced price rises.

More of a problem for the poor/low energy user is the impact of standing charges, and reducing their usage has less of a reduction on their bills. It might be more benefit to mandate no standing charge, so that high energy users subsidize the low.

 

[Worcester]

If it's believed that the big 6 are ripping us off, then rather than just repeat this as a mantra as most politicians and the press (including the BBC) seem to be doing, it should be being demonstrated how. Since most of the big 6 are vertically integrated it may be that they shifting profits upstream, but it doesn't seem very likely based on the current evidence:

You obviously closed your ears when BG answered these exact question at the Parliamentary Questions, and they made it clear that there SERVICES division was the one that made the big profits mmm... guess who they cross charge a lot of business to .....

More of a problem for the poor/low energy user is the impact of standing charges, and reducing their usage has less of a reduction on their bills. It might be more benefit to mandate no standing charge, so that high energy users subsidize the low.

Often the 'poor' user ISN'T a 'low' energy user because of the the type of property they live in - do you have any facts to substantiate this claim that the standing charge is causing any such problem?

More likely their ignorance and and 'laziness' when it comes to shopping around and switching - I was with one customer today who just filled his oil up last week at 67.56 p/litre, I filled mine up, same volume, same postcode 55.2p / litre..... I pointed out they could cut their bills by 20% just by shopping around, however they've been with their current supplier for 10 years now, and he always calls just when they need it filling, so they tell him to without asking the price....


I've stayed out until now, and I'm not coming back in......

 

[yorkshiremike]

Hi Worcester,
Not sure if you'll read this, but it is a non sequitur, to think the high (18%+) profit margin in residential services explains much:
- It isn't a 'secret that was revealed to parliament', but has always been declared in their annual accounts (Centrica plc - Annual Report and Accounts 2012 - Business Review - Operating Review - British Gas)
- Services are quite a bit smaller than the energy supply side, so its 'big profits' contribute about 28% of British Gas's total profits.
- The vast majority of the residential services revenues, have nothing to do (no chance of offset/transfer pricing etc) with the energy supply side. Most revenue is from service and installation of central heating systems. Residential services do some insulation work, so it's possible some of this is cross charged from the supply side (e.g. as part of ECO). However, this part of the business is some proportion of the 100k 'other' contracts they had in 2012, versus the 8 million+ contracts they had for gas/electrical/plumbing installation and services, so not much opportunity to transfer 'excess profits' across.
You're right, that a large part of the problem is that some people can't for what ever reason 'be bothered' . Most of the big 6 have fixed deals at a discount to their standard tariff that few apply for. You'd hope that the poor in badly insulated homes would apply for the 'grants' available, so that we have fewer poor high users of energy. But although (as you say) there is an overlap between 'poor households' and 'poor quality housing' (e.g. see 'Hills report' on fuel poverty https://www.gov.uk/government/publications/final-report-of-the-fuel-poverty-review) it is still the case that poor households spend less on energy and ('high') standing charges are regressive (low users charged relatively more). For example, our energy use is 50% of average (mainly due to insulation, but I'm a tight-wad Yorkshire man who keeps the heating below 17 deg C) , and the standing charge with the big 6 means our effective unit rate is over double in the summer and about 30% higher overall, which reduces any incentive to economise more (next move would be to disconnect from gas altogether).

 

[Gavin A]

IMO standing charges should be banned, as should charging more for the first x amount of units used.

These charges are completely regressive, as well as working against the principles of energy efficiency / using pricing mechanisms to nudge people into reducing their energy usage etc.

 

[FB.]

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