Sunday 28 October 2012

Sunday, October 28, 2012 Posted by Jake 11 comments Labels: , , ,
Posted by Jake on Sunday, October 28, 2012 with 11 comments | Labels: , , ,

We notice that energy company spokesmen defend price hikes on television, radio and in print by claiming to buy all their energy on the wholesale market. (You can also read our more detailed post on this from 2011).

The fact is the retail energy companies, who bill domestic consumers, buy their wholesale gas and electricity guessed it...themselves. The generating companies, who take the coal and gas from the Earth and generate the wholesale electricity, are the retailers’ own conjoined twins. Each of the ‘big six’ are now able to supply virtually all their own needs. The graph below from OFGEM shows above the zero line how much energy the retail companies' generation twin can generate, and below the zero line how much energy the companies sell to the likes of you and me and the businesses that employ us. All six are more or less in balance – they can supply their own demands. [In the graph, RWE is the owner of nPower, SP is Scottish Power]

Since 2004 the energy industry has simply moved its profits from the retail side of the business to the wholesale generation business. This can be seen from the soaring OFGEM graph below showing the Value Chain Profitability. Profits from generation were small until 2004, after which they boomed as did overall profits:

Energy companies' wholesale arms sell at a high price generating profits. Their  retail arms buy wholesale energy at a high price, allowing their retail arms to blame wholesale prices for them hiking our bills. This applies whether they buy from themselves, or they buy (i.e. swap) wholesale energy at a high price with one another. This allows them to state with a straight face that they are making tiny margins on their retail business. It keeps their wholesale profits hidden - even from the spineless regulator OFGEM.

Do you think no civilised executive would condemn fellow Britons to fuel poverty, with many thousands dying in the cold? The Tory MP, Colonel Bob Stewart, said in parliament in 2011:

"I am shocked that between 20,000 and 25,000 pensioners a year in this country are said to die from hypothermia. In my constituency, I am told, an average of 30 old people die of cold each winter, which is shocking."

Could anybody be so nasty? Remember how many decades tobacco companies sent out executives who looked you straight in the eye and said smoking did not cause cancer. Having convinced lobbyists, lawyers and untold millions to believe and even support their fibs, the tobacco industry eventually came clean. Energy companies, for now, are sticking to their guns.


  1. There is (soon to be ended) a very good scheme called the Warm-front Grant Scheme to help reduce fuel poverty and cold weather related deaths. It proved to be very successful and helped around 5 million households. The scheme was not perfect but instead of investing and improving this scheme, the previous govt decided to cut funding for it and this govt are about to scrap it altogether when the Green Deal is launched. We can only expect to see a rise in these preventable deaths unless something is done to prevent them.

  2. You can ask these companies for the "assist tarrif" if you have low income .. you have to ask. They do not promote it but is much less. ... just ask if you can have the assist tarrif and they will let you know if you can asking the usual questions..

    1. This is missing the point somewhat. We shouldn't have to ask for an assist tariff. They should charge a fair price for all users instead of profiteering from something that is a necessity.

  3. There is no 'assist tariff', the labour party had built in subsidies to help those in fuel poverty. The Con-dems scrapped that with the result that people who were receiving that subsidy have had their fuel bills increased by roughly 60%.
    In case you feel like refuting this, it has happened to my family. Bills of £1400 will rise to over £2100 this year.

    No newspapers or TV stations have mentioned this fact while the ConDems talk absolute guff about forcing suppliers to quote their 4 lowest tariffs. Their direct actions have increased the tariffs to those who most need cheap fuel by 60%. It amazes me that no-one has reported this or made any effort to reveal this governments absolute hypocrisy.

  4. Need to split the wholesale companies from the retail companies. This could be legislated for in the Energy Bill.

  5. Just re-nationalise energy provision. Privatisation and the promise of low prices through competition have been proven to be a fallacy, a wet dream of the free-marketeers who believe, with the fervour of the dogmatically devout (or the cynicism of the manipulator), that the market can take care of everything, no matter how many times they are proven wrong: 'Privatise the trains, they will get cheaper and services will improve'... 'deregulate finance and the banks, they can regulate themselves'... 'create a market in energy, it will result in lower prices'.... Each of these has been fairly conclusively proven to be a lie, and yet our elected officials suggest more of the same to cure our economic ills. Are they dangerous idiots, or dangerously callous?

  6. ...and I'm fairly sure if OFGEM had teeth, balls or a backbone they would likely uncover evidence of extensive price fixing between the firms.

  7. Time for our nation to take back what is rightfully our's. We don't want to be ordered around by, ripped off by, patronized by, brainwashed by, kept in our place by the ruling, privately educated, bred for power toffs ANYMORE rise up Britain and show them the door.

  8. Anybody who is unfortunate to find themselves out of work and claiming benefits (obviously scroungers & their own fault) and happen to be on pre pay
    meters are paying about 50% of their income on energy bills, this 10% fuel poverty limit is a joke it's way more for people on low incomes. .

  9. It's not a fib, it's a blatant lie. Someone once told me: remember this number 874. Where 8% percent of the population own 74% of the wealth and the rest of us the 92% are just here to make sure it stays this way.


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