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

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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.

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)

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.

They're back again (17:00)

Was that all words, or any real information?

FB. said:

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.

Click to expand...

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.. ?

darkwood said:

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...

Click to expand...

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. said:

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.

Click to expand...

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.

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.

-
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%)

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

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%)

FB. said:

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.

Click to expand...

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.

darkwood said:

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.

Click to expand...

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.

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