Energy suppliers are under pressure to prove that they don’t make big profits from our energy bills. With record levels of dividends distributed to shareholders, while fuel poverty is on the rise, we’d like to shed some light on the topic.
The Big Six energy suppliers use lots of tricks to hide profits, for example, including corporate tax in their profit calculation to get to a lower profit figure. Or blaming the cost of environmental compliance for lower profits. We all know about creative accounting and how profits can be manipulated by recording various compliance provisions.
The energy regulator, OFGEM, recently published their analysis of energy prices for an average dual fuel customer since 2007 showing that wholesale prices were about £580 per customer per year in 2006 and are slightly higher than £600 per customer per year today, while consumer bills skyrocketed from £800 to £1,400 per customer per year or almost double the dual fuel rate seven years ago.
To be fair, energy suppliers do incur costs associated with environmental compliance, for example, the cost of meeting Carbon Emission Reduction Target (CERT) and Community Energy Savings Programme (CESP) targets. But, the energy suppliers did not meet the CERT targets that was set in 2009 and ended last year. As of the last measurement date – June 2012 – energy companies had met only 31% of the target set by the Department of Energy and Climate Change (DECC). Clearly, the regulator will have its hands full reviewing the reports prepared by the Big Six. The question for the consumer is – how much of the costs that were included in our bills have actually been spent? How much of our energy bill is still sitting in their bank accounts? If a penalty is assessed, it might be counterproductive, since that money is coming directly from the consumer.
In their January 2012 report, OFGEM disclosed that energy suppliers had increased their profit margins by 2% from 2008 to 8%. Wholesale prices really haven’t moved much since, although average prices have increased by more than 8%. In addition, the Feed in tariff (another environmental obligation) has been reduced radically as well as the Renewables Obligation, instigating great uncertainty for the renewable energy investment community and putting a big stop on the renewable energy generation that more than doubled as a result of the policy.
So why are energy costs increasing year on year? The information supplied by the energy regulator contradicts the annual excuse that energy supplier give us for rising prices. Trust in the Big Six is at an all time low. This is understandable considering the lack of transparency in the charges that we pay.
That’s why we started BHESCo – to bring transparency and service back to the customer. Join us today www.bhesco.co.uk
09 May 2013
Amidst rising energy prices forcing more families to choose between heating or eating, British Gas announced an 11% surge in profits, after having increased its tariffs by 6%. With millions of people in fuel poverty, the Energy Bill Revolution Group comprised of Bernardos, old age and charity groups warned that an additional 160,000 children had been forced to live in fuel poverty over the last two years. British Gas’s Managing Director will leave the company with a golden handshake of £10 million. This is the equivalent of a £130 Warm Front Discount for 77,000 people. Spokesman for the campaign group Fuel Poverty Action, James Granger said “People are angry and want the alternative to the big six’s monopoly: cheaper, clean, renewable energy under the control of communities, not greedy energy tycoons.”
In Terry Macalister’s article on the front page of the Guardian this week there are wonderful insights imbedded between the lines. British Gas claims that it earns about £50 per customer. This £50 figure is meaningless, since there may be thousands of people who are living in the cold, struggling to pay their heating bills from whom they earn hundreds of pounds. The poorest in our society pay as you go on meters costing 15-20% more than customers on direct debit. Lower prices per unit are most likely to be secured by businesses and institutions for which the energy suppliers make little or no profit. This broad brush summary of profits illustrates the impersonal, indifferent attitude of the large corporation towards the individual. Any deal negotiated with an energy supplier lasts only as long as the contract, or about one year. Our contacts in the community have shown us the 80% increases in price quotes they have received from the Big Six when their contracts expire. Clearly negotiating a price for a year will not end fuel poverty or improve the quality of our lives over the long term.
British Gas reported operating efficiencies leading to profit improvements. The profit increase was in their residential business. Instead of investing in the energy infrastructure that is needed to secure our energy future, making a commitment to lowering energy bills sustainably, British Gas proposed a £1.2 billion dividend to be paid out to its 700,000 shareholders, the equivalent of about £1,700 per shareholder. We need to invest about £10 billion in the next 10 years in our energy infrastructure to meet our low carbon and energy security requirements. Centrica shirks its responsibility urging its customers to “take action” by installing more efficient boilers, improving insulation and using new technology such as smart meters. It is unacceptable that the large corporations operating the network and supplying electricity and gas continue to fleece the public, taking no responsibility for providing affordable electricity and gas.
This business practice of raising prices, taking profits to be funnelled back to shareholders, rewarding investors for their low risk investment and making large payouts to exiting management that have already earned high compensation for their labours is out of touch, short sighted and must change. How much longer are people going to be kept in the cold? Come out of the cold and join BHESCo.
09 May 2013
In his own admission, George Monbiot writes in the Guardian on 4 February, he has spent “the last two years defending the atomic industry”. Now Mr. Monbiot is promoting an energy generation opportunity that only two years ago was described as “one of the most embarrassing failures in British industrial history”.
He is reopening the case for reusing the UK stockpile of 112 tonnes of plutonium, 28 tonnes of which is foreign imported, the largestcivil stockpile in the world, as feedstock for a new MOX fuel processing plant.
The technology has an abysmal track record – Sellafield’s existing MOX plant had a target of 560 mt, but has produced only about 15 mt in nine years of operation. The plant has cost the taxpayer about £1.3bn so far, representing about the amount of money that is invested in our electricity grid every year. When one includes the full cost of nuclear power, it is not an efficient, low carbon energy solution. To demonstrate the folly of including nuclear power in our energy strategy, we are going to devote the next two articles to the topic of installed cost of electricity generation by type and the running costs, as well as an infrastructural analysis to demonstrate, along with the plethora of other studies (listed below for your reference) the alternatives to nuclear power that will keep the lights on and secure our safe and affordable energy future.
Exposure to certain levels of radioactive materials causes cancer, so it is important that the existing contaminated material is disposed of properly. Why we would create more of this material when we don’t know what we are going to do with current stockpiles? Disposal costs, whether they involve a means of reducing the waste, as My Monbiot supports, still means that there is waste to safely store,albeit less even more highly concentrated radioactive materials that eventually. No civilian waste may be distributed by the military in depleted uranium weapons. We read recently that the US Department of Energyproposed that low level radioactive materials be released as recycled metals in everyday products like belt buckles or surgical implants. The examples are put forth in terms of long haul flights or exposure to granite rock or an x ray, which does expose the body to radiation. There is no answer to does this radiation accumulate or is it expelled? How much exposure is harmful exposure, the medical opinions are diverse and difficult to measure.
The Department of Energy and Climate Change (DECC) recognises that in order to accommodate the future of electricity supply, where homes, businesses and communities become power generators, we will need to establish a smarter electricity network, where electricity generation from multiple, smaller sources, combined with the two way flow of electricity, being consumption and generation, may be managed by the grid operator without damage to equipment or disruption to supply. And yet, there is no provision in the new energy plan to stimulate a direct investment in this grid, requiring the breakup of the system operator monopoly, the National Grid. National Grid has other responsibilities, as its liabilities resulting from Hurricane Sandy have mounted into the millions. Their plans for investment in the UK grid are clearly inadequate, at £4.7 Billion to 2020, when OFGEM estimates the amount of investment required is £100 Billion. The industry is growing internationally, where commercial incentives have been put in place to invite infrastructural investment and to create jobs.
The National Grid is not a “natural monopoly”, as DECC refers to it, but a legislated monopoly. The lack of liberalisation on the systems operator conflicts with the free market principles that the government proposes to uphold. In fact, the transmission infrastructure can be broken up into sections like any other asset and the rights to use sold off in bits to investors. Investment in our transmission infrastructure will create jobs and kick start the economy. We need to focus on economically sound investment, not the creation of more waste.
- 100% renewables by 2050 in Europe – WWF, Ecofys and OMA
- 100% renewable electricity – A roadmap to 2050 – PriceWaterhouseCooper, Potsdam Institute for Climate Impact Research, International Institute for Applied System Analysis and the European Climate Forum
- 100% Renewable Energy for European – European Renewable Energy Council, EREC
- 80% carbon reductions in Europe – European Climate Foundation
- Roadmap to a low carbon economy – European Commission
- Zero Carbon Britain – Centre for Alternative Technology
- Zero Carbon Denmark – Danish Commission on Climate Change Policy
- Towards 100% renewable electricity in Germany – Advisory Council on the Environment (SRU)
- A look at some cutting-edge low carbon tech – Boston Consulting Group
- Zero Carbon Australia – Energy Research Institute of the University of Melbourne and Beyond Zero Emissions.
 Now there is an international moratorium on trade in nuclear materials, it is unclear if this amount will ever be returned.
01 Feb 2013
Cumbria County Council has taken the pivotal decision to reject the placement of a nuclear spent fuel storage site in the Lake District, an area of outstanding national beauty and importance. In a report prepared in March 2011 by Sir David King, the storage facility would cost about £14 billion and create about 500 jobs in construction and about 300 jobs to operate. Ed Davey, the Energy and Climate Secretary, said “there will be a substantial community benefits package, worth hundreds of millions of pounds. That is in addition to the hundreds of jobs and major investment that such a huge infrastructure project could bring.” We congratulate the Council for their courage and sensibility in rejecting a proposal that would only bring more hazardous waste to the region.
Sellafield is already the unfortunate repository of 6,000 tonnes of heavy metal (radioactive materials) being stored in ponds. This storage is estimated to be viable until 2075 when this material will have to be stored again safely in some kind of newly constructed deep geological storage facility – costing billions – all financed by the taxpayer.
Nuclear power produced 19% of our electricity production in 2011. This was the total portion of generation, although 67% of that electricity is lost in transmission and distribution across high voltage wires that traverse the land. The government insists that nuclear power is an important part of our energy mix. One must question the logic of building new nuclear power plants when there are so many alternatives available that do not poison our environment and cost the taxpayer absurd sums of money to maintain. The nuclear power legacy will cost the taxpayer billions to ensure that the toxic waste is safely decommissioned and stored. None of this money contributed to the generation of electricity. The renewables contribution increased 3% in one year. This is attributed to the success of the Feed in Tariff for Solar electricity.
At Brighton & Hove Energy Services, we are dedicated to providing the people with low cost energy now and in the future. By joining BHESCo, you can participate in the creation of a new energy future, one that is powered by the sun, wind and biomass. We are starting now, so that you can rest assured that as nuclear power plants are shut down, the lights will stay on and you will stay warm in winter without paying a fortune for the privilege. Go on, join us.