Posted by Jake on Tuesday, October 18, 2011 with 7 comments | Labels: Article, Cameron, Comment, energy, Graphs, Liebrary, OFGEM, politicians, regulation
Another addition to our Liebrary: How is it that our leaders, including the well coiffed Cameron and the buff Huhne, are so poorly briefed about wholesale energy prices?
So poorly briefed that Cameron and Huhne went to a high profile showdown to 'get tough' with the Big Six energy companies and come away mesmerised by the idea that retail prices are driven up by wholesale prices? Coming away preaching that the solution is for us all to wrap up warmly and search the internet for a lower tariff:
Graphs from Consumer Focus, the soon to be axed "statutory consumer champion for England, Wales, Scotland and (for postal consumers) Northern Ireland", show the truth.
Wholesale prices have indeed risen in recent months. But that follows an even bigger fall in the months before that. Which all left wholesale prices well below their 2008 peak.
On the other hand, the average retail price rose with the peak in 2008, failed to fall as wholesale prices plummeted throughout 2009, and now starts rising even above the 2008 peak.
Electricity Prices - Wholesale vs Retail (graph from Consumer Focus)
Gas prices - Wholesale vs Retail (graph from Consumer Focus)
See the full Consumer Focus article - click here
Quite right!
ReplyDeleteApart from anything else:
a) Energy companies claim about half their cost is the wholesale cost of gas. i.e. a pass-through cost (the postman doesn't take a percentage of the value of a letter: 5p for a birthday card, £50 for a £1000 cheque from the premium bonds).
http://www.blog.rippedoffbritons.com/2011/10/liebrary-energy-companies-profit-margin.html
b) The big energy companies are vertically integrated. That means they buy most of their wholesale energy from themselves. Since 2005 they started shifting profit from retail to wholesale - i.e. they charge themselves a lot for the wholesale energy, and then claim their retail margins are tiny.
http://www.blog.rippedoffbritons.com/2011/09/electricity-and-gas-bills-how-energy.html
c) Energy companies claim our bills are lowest in Europe. When they say this, they include government taxes. Take out the taxes, and our bills are average for Europe.
http://www.blog.rippedoffbritons.com/2012/01/liebrary-are-britains-energy-companies.html
And this is inspite of the fact that IEA figures state Britain is largely self-sufficient on natural gas (which, together with coal, generates most of our electricity) - in contrast to other European countries who have to import their gas.
http://www.blog.rippedoffbritons.com/2011/07/electricity-and-gas-bill-ripoffs-to-see.html
Could you confirm if the gas prices are spot or for what period the purchase is for? As far as I know there is no single wholesale price which could be plot in such a way other than spot, which means very little. Neither Consumer Focus or you know what anyone paid for gas for what period? Ltd companies are obliged to make a profit. Your anger is not unwarranted but it is misguided.
ReplyDelete"there is no single wholesale price which could be plot in such a way". Isn't that the problem? Energy companies keep this hidden and OFGEM lets them get away with it.
DeleteAnyone tired of profit-hungry energy suppliers may want to consider joining a cooperative. Use this link and get £25 off your first bill. tjrh.eu/coopnrg
ReplyDeleteSurely, if the figures are true, and no other cost has come into play (subsidies for insulation for instance), they prove a cartel, otherwise energy companies would boost their sales by undercutting each other.
ReplyDeleteThe heating oil profit margins are astronomical - prices have risen x6fold in the last 15 years.Add to this the fact that country dwellers are deprived of the chance to combine gas and electricity providers and we are doubly disadvantaged.Strange how the price rises in winter and falls in the summer......
ReplyDeleteJust switch. If consumers switch on mass they'll become more competitive.
ReplyDelete