A waste of energy as Labour throws away its election advantage
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Thursday 22 May 2014
Outlook Such is Labour's incompetence ahead of today's polls that Ed Miliband's coup on energy price caps is long forgotten by most voters.
That's pretty remarkable, given that yesterday, on the last day of electioneering, one of our biggest energy companies, SSE, admitted it made profits of nearly £3,000 a minute over the past year. An earnings increase of 10 per cent.
Its chief executive Alistair Phillips-Davies was at pains to point out that this had nothing to do with household bills. Revenues from what it calls its "retail" arm were actually down, he pointed out, because of all the competition out there.
In other words: the market is working. Move along, nothing to see here.
But we should look closer. It's true that customers switched 370,000 gas and electricity accounts from SSE due to its high prices. But in a company with more than 9 million accounts on its books, that's hardly terminal.
The truth is, profits also fell because we had a mild winter and prices are so high that customers were scared to turn up the thermostat. SSE's consumption numbers show electricity usage per customer fell 7 per cent and gas fell 15 per cent. That's a lot of money out of SSE's door.
To be fair, profit margins did also fall during the year on the retail business due to the costs of getting the energy into people's homes. But, of course, the beauty of the giants like SSE is that, increasingly, they make money doing that bit too.
So it's all the more important that, when looking at SSE's impact on our household wealth, we consider those other profits which come out of our energy bills – the ones it makes from its growing business running the monopoly electricity and gas networks. Here, profits leaped more than 9 per cent, including a huge 48 per cent in electricity transmission.
While we're at it, wholesale profits – generating electricity, producing and storing gas, which also comes out of our bills – also jumped by a quarter. Annoyingly, but understandably from SSE's lobbyists' perspective, the company does not reveal what its profit margins are on those two cashcows. Anyway, all that revenue from British homes and businesses means SSE will be paying dividends out to shareholders this year totalling £819.6m – £40m more than a year ago.
Will voters be happy? A survey by Energyhelpline.com last month asked people, if they were campaigning to be Prime Minister, what would be their top policies. Cutting bankers' bonuses was at the top, cited by 50 per cent. Hear hear.
But, in close second place, with 42 per cent support, were those who would campaign on Mr Miliband's energy price freeze. Now here's the thing: 2014 is shaping up to be an El Nino year, which some say suggests we're in for a cold winter. If they're right, the freezes on price per therm and kilowatt-hour from SSE and British Gas will be all-but forgotten as bills rise anyway and companies' profits leap.
Consumers will be furious as their quarterly statements arrive within weeks of the general election. The only question is this: will Labour be able to turn it to their advantage this time?
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