The Government and Opposition are competing to appear the toughest on energy prices but it’s empty talk. Isn’t this the inevitable consequence of our rush to privatise every essential service in the UK in recent years, so as to get the assets off the national balance-sheet? Private-sector companies (whether based in the UK or France or China) exist primarily to maximise profits for shareholders. End of story.
So I liked this piece from Simon Lambert, Editor of This is Money, last Thursday (31.10.13)
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The star of the energy boss roasting show was Stephen Fitzpatrick of small supplier Ovo Energy.
He sent more stinging blows the way of the Big Six than the MPs supposedly delivering the grilling
Shortly afterwards, I joined Mr Fitzpatrick on Sky News, where presenter Kay Burley put me on the spot as to what I thought of his firm.
My reply was that I didn’t doubt that if we had more competition the fuel bills situation would be better.
The chunky rewards should mean a host of smaller energy firms vying against the big guns – instead the few that try say the system is stacked against them.
So I’ve decided to do my bit for the cause. I will ditch npower for a smaller challenger – even if it costs a bit more each month – and I’m erring towards Ovo or Ecotricity. What would you do?
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Well said, Mr Lambert. I’ll be looking at the alternatives too.
But clearly, not enough of us do look at alternatives.“98% of domestic consumers in the UK are supplied by the Big Six,” according to Channel 4’s Dispatches programme on 4 Nov 2013.
It’s another example of the good old inertia factor, which explains how Barclaycard remained the leading credit card company for years, despite having the least competitive rates.
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Some more useful facts about the energy market appeared on the Channel 4 programme I mentioned above.
They claimed that “The average profit margin on domestic (electricity?) supply is 3.4%.”
This figure came apparently from the programme’s forensic analysis of Big Six company accounts. However, I found myself asking: “what’s their ROI (return on investment)? It wasn’t stated but this surely is an even more important ratio.
Transparency of energy company finances.
I’ve heard from another source that while the average of the price increases already announced in this round (by members of the dreaded “Big Six”) is 9%, while wholesale gas prices have only gone up 0.5% in the last year.
If there is any truth in this, then there is surely a case for more transparency in the finances of the energy generating and distributing companies.
At the risk of repetition, why don’t the media publish return on capital employed or ROI? Then their profit figures would be in context. I used to work in Scandinavia many moons ago and I recall that one of the major Swedish dailies never announced a company’s profits without relating it to capital employed.
As Saint Jeremy Clarkson would say: “how hard can that be?” The answer: it’s not hard, but a lazy journalist knows it’s more fun to print a large headline figure in isolation, because that can feed outrage along the lines of “£2bn profit! That’s outrageous! They must be overcharging hard-working families.”
I rest my case.