Independent campaign
The great energy rip-off (and how you can avoid it)
Consumers suffer as energy firms cash in on huge profits
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Independent Minds
Fuel bills have become a "scandal" as the biggest suppliers in the £25bn-a-year industry make vast profits supplying gas and electricity to Britain's 20 million families, independent experts say.
Today The Independent launches a campaign demanding that the "Big Six" power companies lower their prices, amid accusations that they failed to pass on cuts in fuel bills after the price of oil fell from last summer's record highs.
Utility companies put up power prices by about 42 per cent last year, or about £382 per household. Since then, the wholesale cost of gas and electricity has halved but bills have fallen by only 4 per cent.
Critics say there is too little competition between British Gas, E.ON, EDF Energy, Npower, Scottish & Southern and ScottishPower. The average domestic fuel bill paid by direct debit is £1,141 – but it varies by less than £20 between the six companies.
Over the past month, the mark-up charged by the established power suppliers has been exposed by two new operators who are taking advantage of rock-bottom wholesale gas and electricity prices to slash bills. First:Utility's typical tariff for bills paid online is £954, while Ovo Energy charges £978, a saving of £163 to £187 over the Big Six. Quarterly and pre-payment customers who switch to Ovo or First:Utility would save £287.
By contrast, millions of Big Six customers are languishing on standard deals far costlier than online tariffs offered to savvy customers who shop around.
Some of those expensive packages will hit home this winter when the two British-owned power companies reveal their profits to the City. Hundreds of thousands served by E.ON and ScottishPower will also find themselves paying up to £296 a year more for gas and electricity after their fixed tariffs ended last week.
Of the Big Six, four are owned by foreign corporations which have been accused of treating Britain like a "treasure island". They are expected to report vastly higher profits thanks to falling wholesale costs. While the firms were paying 85p per therm of gas last September, the price now is 35p. Electricity prices have fallen from £90 to £40 per megawatt hour.
According to a review by the Energy Contract Company, an independent energy forecaster, wholesale gas prices will stay low this winter and remain so for three years. "The fall in spot prices has meant the domestic market is now highly profitable," it said in its Gas Market Review, which put current profit margins at 20 to 30 per cent.
In August, the energy regulator Ofgem's request for price cuts was rejected by suppliers who warned that they might even raise bills. Using confidential commercial data, Ofgem – which has been accused of treating the Big Six too leniently – estimated that while they usually made £110 per year on "dual fuel" customers who obtained gas and electricity from one company, this year they would make £170 per customer – an increase of 55 per cent.
According to a "conservative" estimate by the campaign group Consumer Focus, bills are about £100 too high. But an independent energy expert, David Hunter, said that given Ofgem's "caution" he estimated that a figure of £120 a year was more accurate.
"The failure of the suppliers to pass on the massive reductions in energy prices... is approaching scandal proportions," said Mr Hunter, of Britain's biggest independent energy analyst McKinnon & Clarke. "Some suppliers have recently made small reductions to niche tariffs. However, these token discounts are only open to direct debit and online customers and do not change the overall trend."
Last year, Ofgem dismissed any suggestion that the power companies were colluding to fix prices. However, after initially insisting that the market was working, the regulator's Energy Supply Probe found that pre-payment and electricity-only customers were being overcharged by £500m. Energywatch, the disbanded consumer body, blamed a lack of competition.
As a result of takeovers since privatisation in the 1980s, the number of household power suppliers has fallen from 20 to six. EDF Energy, E.ON, ScottishPower and Npower have been taken over by overseas corporations, making them more resistant to national pressure to lower bills.
Confusing bills from the firms, which have a baffling array of 4,000 different tariffs, also make customers less likely to search for a better deal.
The Government urged firms to lower prices this spring, but since then ministers have been quiet and the Department for Energy and Climate Change has issued no press releases on household bills all year. The Big Six, which control 99 per cent of the domestic market, are likely to face new pressure later this year as they reveal bumper earnings. This month, Scottish & Southern is expected to announce interim profits of almost £600m – twice last year's figure.
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Comments
But it chooses to behave like a personification of the three brass monkeys. But then, it always does behave like
that.
http://www.dailyexpress.co.uk/posts/vie
This is my letter that was published in the Daily Express letters page on Monday 03.08.09 in response to the announcement; I hope it is of interest:
Needy and Elderly shiver as British Gas profits soar
While I am sure Centrica/British Gas bosses will be rubbing their hands with glee at the news British Gas has increased its residential profits by 80 per cent in the first half of the year ( "Slash your prices, British Gas told as profits hit £299m", July 31), I wonder if they will give a thought for the millions of poor and old people who had to keep warm through the cold winter months; ordinary people who were just too frightened to turn their heating on.
This announcement is proof that British Gas and all the other utility suppliers are charging extortionate prices for gas and electricity and it also confirms there is no real competition among the utility companies as the Government regulator, Ofgem tries to claim.
This government stands by and does nothing to stop the greed of these companies. British Gas has the brazen audacity to admit that even though there was lower consumption per customer during this period, it was 'more than offset' by the effect of the increase in prices in 2008.
It is scandalous what these greedy utility companies are getting away with. Will the Government publish statistics on the number of deaths caused by hypothermia last winter or the number of people who are living in fuel poverty? The privatisation of gas and electricity should go down as one of the greatest national scandals of all time.
I wrote this at the end of August 2009, no one is listening: The great utility rip -off continues unabaited.
I personally don't mind how much these companies make.
We need to cut down on energy use full stop, it is a scare resource.......
For all those into economics, high prices = low demand, low prices = increased demand.
As resources decrease over time, demand will make the price much higher anyway and the government will have to implement green taxes because many seem to think energy should be virtually free and endless when it isn't.
This obsession with profits and the politics of envy, phooey.
Don't we want our planet to be safer. ?
Turn down the heat, shiver a little and we will start to get somewhere :-)
The poor and the old are the real victims of this nonsence and they have no one to protect their interst from this blatant extortion. Sadly before something is done to bring fairness and a public conscience in what domestic consumers are charged for electricity and gas usage, many people will have died of hyperthermia; as they were too frightened to use their heating during the cold winter months.
This is the scandal of the century and the trendy gren brigade are aiding and abetting this theft from ordinary people by tring to peddle the lie that its in our interest. I have never heard such rubbish in all my life.
Either that or they simply like it up the arse from their so called betters??
Or maybe when the ape genus Homo Sapiens gets too comfortable and without any real worries or threats they get mentally unwell and start imagining crisis that will end the world and wrongdoing by those who are to blame for "it"?
UK energy prices remain at around or below the EU average.
Markets and margins, are cyclical.
The French have had the right idea and left EDF well alone. The irony is, EDF is now a big player in Britain.
If we can nationalise the banks then surely we should consider taking energy supply back under public control. We all need access to heat light and power. The international energy cartel is ripping us off and needs to be brought to heel. Energy supply is a natural monopoly because you have the same pipes and wires to your house choose who your "supplier" may be. Close regulation by government is the only logical and fair way to proceed.
So good point, but from another world that isn't like the one we live in.
Perhaps Cameron or Osborne will rectify the situation? Doubt it.
UK retail energy prices remain at around or below the European average.
From privatisation to as recently as 3 years ago, UK retail prices were amongst the lowest in Europe.
We see now that the system is above the law and it is only served best when the politicians and Bankers regain control. The power of finance has ensured an agenda of distractions and now they simply switched the target, way from those caught with their hands in the til, to the ‘real’ fraudsters presumed guilty until elections are secured. Yes, the enemy within, can now be identified as the poor, the sick and the unemployed – are there no workhouses? Sponsored by Fuel companies!
Softer targets than the MPs and Bankers, the investers, fuel companies and owners of huge media cooperations. The poor are simply labelled, categorised and dismissed. “NO Ifs, NO BUTs…It’s FRAUD! I think by now most of us are suffering from acid reflex to the unbridled greed that was revealed during the summer.
The cost is still rising – but blame it on the sick, the unemployed person, after all they are living off the hog?. The Jobseeker's allowance is calculated annually using the Rossi-index, which makes sure it stays in line with prices, but this is based on a Thatcherite base-rate. What was your last Gas Bill? And just how far would £64.30p a week get you?
The British Chamber of Commerce predicts that things will only get worse, with unemployment rising to 3.2 million by the end of 2010. Last month was one of the worst for job losses in more than a decade, with maybe 100,000 people losing their jobs. – but the argument from the government and rightwing newspapers is that idleness has to be to disincentivised.. A Classic case of the disengaged preaching at the Trapped, and the softminded. The leader writers of rightwing tabloids would undoubtedly work themselves into paroxysms of outrage if a raise was approved for those on Benefits. Yet how quickly the change the agenda from Fraud, expenses, and Greedy Bankers to the poorest in our nation. The vulnerable do not want a handout or a bailout, they want their dignity. Only the disengaged fail to grasp the obscenity of using the vulnerable has political footballs, or opportunities to gain obscene profits. How do we Keep warm this winter - "wear an extra Jumper?" Or burn the 'Final Demands?'
Four questions: (to mull over between now and the election).
Have you forgotten the astronimical figures handed over to Banks?
Have you fordotten the fuel rises?
Have You forgotten the Fraudulent scandal of MPs Expenses?
Could You, Your MP, or Bankers exist on £64 a week? Or would there be sincere complaints that it is like living on “rations” There are no jobs. Kicking the poor, sick and vulnerable for political points isn't going to change that fact. But, as we all know its the poor that gets the blame.
It seems we can afford gigantic bailouts to banks, a new Trident programme, ID Cards / NIR and foreign wars, but we cannot afford the poor and sick any more. Both Labour and Conservative are gulity. How can creating 60,000 jobs (assuming they can) solve the problem of millions out of work, never mind the extra 500,000 shifted over from DLA?
And since we had no trouble swalling the idea of nationalising teh banks then the idea to re-nationalise of energy supply won't be too hard to swallow either.
So DC and Crew - what about undoing some of the mess your predecessor did - it might actually win you some votes!!
The separation of electicity and gas companies was a sham, as it was always intended to be. Tory and Labour Governments have shafted the British people. so that now we have six corporations (mostly foreign-owned) running a cartel with no-one having power to force them to lower their prices.
I would only ask The Independent and other newspapers to keep on publicizing these energy rip-offs.
All the rationales for not regulating the banks, corporations, and energy companies are clearly a sham. We're not asking for 'socialism', we're just insisting that reasonable limits be put on the profits companies can make, and on the salaries that can be earned.
Can someone please explain how a government can allow energy companies (even when they're foreign companies) to raise prices so significantly, even as the cost of fuel has dropped so much? If it's the case that foreign companies can do as they please in Britain, isn't it time that it occurred to someone in government that this should be changed?
Does it require months of campaigning by a newspaper before the penny will drop, and the government begins to realize that our energy companies are legally allowed to steal from the entire population? And WHAT WOULD IT TAKE for them to actually do something about it?
Simply type "energy prices" into the e-petitions search box to find it
It is no use bleating about the regulator - other industries do not have regulators -
not with the same remit and power. But the fact we have regulators ( I think they are there but not much evidnce so far ) on utilities shows that we realise this is a key area of our lives.
De-regualtion was simply a way of letting people make profit from the basic elemnts needed to
live your life. Rather than recitfy the errors with the nationalied utiltiies - they were sold off.
I cannot undestand why we accpeted that - but now have the brass neck to complain.
Either you accept people can make profit from such thinsg - or you don't !
Either you accept the market is the all power leveler and will always make sure peak efficiency is achieved inside a company and the lowest price is acheived for the consumer - or not !
The "market" is aplace to sell things and is ONLY about making profit.
It was a disaster to sell off the utilities. How can we have competition - when "nothing changes"
when you switch supplier ? The same stuff ( electric or gas ) - comes through the same wire/pipe.
It's smoke and mirrors.
Who the hell wants to have to compare all their utilties bills all the time to see if they can get a better deal ? I would like an opportunity to live my life - just a tiny little bit of it - for a change.
Nothing will change - we have had proof positive in the last year that we are getting screwed
- right royally - and it's all blown over " let's move on " . The British have lost all semblance of
fight or protest.
Two and half million people unemployed - and millions more in fear of their jobs and their future -
what a way to treat a dog !!
I also like the way there are no 'introductory offers' so I'm not subsidising new customers. And I like the lack of a contract minimum term (just 30 days notice) and that I can pay exactly what I use each month by giving monthly meter readings if I choose to do so. That means I don't risk a frightening bill when the meter gets read after a year and I'm not lending them money without getting interest (British Gas said they would reduce my monthly payments then after 12 months said I owed them £857 on gas and £350 on electricity! Of course then I couldn't leave because I couldn't buy back my freedom so I had to keeep paying their extortionate prices!)
I don't like credit cards and so was pleased to hear about the UWDC 'Cashback' card which is a Mastercard but not a credit card, it's just a payment card which I use for a lot of my shopping including my fuel ( I get over £0.05p a litre off all the time now and when Sainsbury's does a special offer I can get over £0.10p a litre off. I actually paid under a pound a litre the other day! (£0.94p) How good is that?
It means I get a significant further discount off my bill (52% one month!) which makes me feel like I am really beating the system. Getting just one bill and one monthly direct debit also simplifies my life and make budgetting easier. I really like it!
I agree with the comments about how the government has a responsibility to control the prices down but on the other hand am glad that the industry is deregulated as they were charging outrageous prices when they had a monopoly. I agree that the 'big 6' still run a cartel with their almost equal high prices. They are like a group of bullies playing ball and just pass it around to each other in turn switching who will be highest and who will be lowest for a while but all still ripping off the consumers. If there was any real competition then someone would be offering realistic price reductions in response to lower raw energy prices and would significantly stand out from the rest, but that would spoil the game for the others as they would have to follow suit or lose floods of customers.
I'm sticking with The Utility Warehouse Discount Club, it's a bit different but the overall package means I get great savings right across a wide range of services and products that you wouldn;t normally associate with a utility supplier.
UK medium size household gas prices comparison to Europe, 2000 to 2008
http://epp.eurostat.ec.europa.eu/tgm/ta
Facts? Schmacts!
Andrew moved in 2004 to become the head of media relations at EDF, the French utility company. He is now the director of corporate communications.
When he took the job, Andrew admitted that “the energy industry is not something I knew much about before”.
Nevertheless, he has been at the forefront of EDF’s expansion in Britain after it bought London Electricity, Sweb and Seeboard. (this from the Telegraph I think) anyway... - Marvellous... !
Everyone should re post about Andre Brown endlessly, and this should be picked up>> we are about to begin an election drive etc., - whether this person is dubious or not the prices charged are absolutely disgraceful. It is possible that they have allowed them to be this high so that they can now be cut but I think the control is just too loose
Then again, the British government would have fallen years ago if it had been anywhere but in Britain.
It has been pitiful to watch Britons over the years keeping their apolitical heads down, whilst being excited by the ability to posses personal shares in essential utilities, which they already owned.
Your beans have been stolen by the market stall-holders and now you must pay more for your goods.
The truth is the Brits have lost their brains and their ba--courage. Laughing at the volatility of the French to defend their people's interest, the Brits now find themselves dissolute and disunited--so much for smug non-committal to the common weal.
Those "watchdogs" who were supposed to regulate the profits and conditions of essential service providers, have reneged on their offices--and in this slick world--may profit from their "blindness".
Are there likely to be mass demonstrations outside Westminster? No sir, that might be unlawful--and crimes must be authenticated by contractual forms, before being committed.
They may be tiny now, but if enough people switch to them then not only can their prices for gas and electricity fall but we can rid ourselves of the robber-barons currently controlling the home energy market.
One thing: why is the Indie campaigning for only a 10% reduction in energy bills if wholesale prices have dropped by 50%, yet prices risen by 42%?
@freedommonger:
Thanks for highlighting the fact that our continential neighbours are also being ripped off by these crooks. Which company of the 6 do you own shares in?
I am reminded of Blackadders wise woman.
"Kill everyone in the entire world!!"
We do not really need this old hat energy production we have renewables in the pipe line if only the government would back them instead of polluting gas and nuclear power.
Green energy is the cheap new way to go! jobs are just waiting to be snapped up in this new and clean industry.
Numbysim will only work for so long and then the government will just go ahead and build wind farms where ever they want to. It's just, common sense that is needed here on behalf of the the individual, so isn't it sensible to allow some to be built and not just dismissed out of hand. Yes I would be happy to have a wind turbine or more next to me, I think they are far less of a blot on the landscape than a nuclear power station.
my idea would be to reignite community and have just enough turbines, photvoltaic (electricity) and solar power for hot water for them, this would work much better and each community would be in charge of thier own generation plans and set up. Having your own houses converted would be a good idea too and proper insutalion extremely important. You could make your own system my husband at this time is building our own hot water system and planning to build a photovoltaic system. We estimate we will have free energy up and running by next year and not a penny to the greedy fat cat companies. It is expensive in the first instance but within one to two years we will have recovered our expenditure and be completely self sufficient. It can be done if people could see beyond thier own selfish greed.
On top of this we are growing our own food and living in a simple and less stressful way, there are so many benefits to downsizing, mending things instead of throwing them away, making your own clothes, and bringing back old crafts, there are many courses on how to do this and it makes such a difference to the carbon footprint some of us create.
Depends what you mean by green energy. Nuclear; yes, hydro; yes, windfarms; don't work, solar; big outlay, small return. Jobs are mainly overseas where the turbines are made, profits taken overseas b=y large corporations such as GE.
"Numbysim will only work for so long and then the government will just go ahead and build wind farms where ever they want to."
They already do, drive around Wales and see the appalling destruction of the natural environment with these monsters and their accompanying extra pylons. Local opposition is steam-rollered.
As with banking, find a scapegoat and hide the real cause of the problem.
I phoned the competition commission, months ago, about this. It's a national disgrace.
Quite how indepedent companies were able to bribe house builders to install pipelines that not only attract higher charges from all suppliers but restrict customer choice mystifies me. That's another scandal which stands against the current government's record on energy policy.
Prices in Germany are far less than here and so to I believe are energy prices in France.
The utilities should have remained in public ownership just as national newspapers and radio and TV stations should not be owned by foreign nationals. This too is the law in France.
The Independent's message is confusing, either we have a global warming problem or we do not. High energy prices are necessary if we are to change our energy usage. High profits are necessary if we are to invest in state of the art infrastructure for energy generation or conservation.
It is where the profits go that is the issue, funneled into insulation systems or better delivery for the poorest, hign profits could be seen as positive. Going to shareholders who are by definition already amongst the wealthest of the population is not positive.
This is where the government should step in, using profit to build new plant or hyperefficent transmission systems is vital. It can't be left to the consumer to drive these policies, "Choice" possibily delivers short term reductions in cost (in theory, it hasn't here). this failure exposes the "choice" agenda as weak government trying to avoid confrontation and failing in the real leadership needed to lead us into necessary change. Neither Labour or Tory governments have perfomed in that respect.
I fully expect that nothing will be done until the MP's dining facilities are flooded by an exceptionally high tide intiated by the first effects of global warming.