Posted by Jake on Sunday, January 12, 2014 with 4 comments | Labels: Article, energy, FSA, Graphs, OFCOM, OFGEM, OFT
In January 2014 the Labour Party issued another report, “Powering Britain: One Nation Labour’s plans to reset the energy market”. The report made various assertions relating to the period after 2010, conveniently overlooking Labour’s own lamentable record regulating the energy industry. It is quite extraordinary how much politicians care for us when out of power, and how little when in power. Wasn’t it Spiderman who said “With no responsibility comes great power”. Power to talk without having responsibility to deliver. Anyway, the report stated:
"Since 2010, household energy bills have gone up by over
£300 a year whilst small businesses are paying over £13,000 a year more
Lack of competition in the retail market has resulted in
consumers paying £3.6 billion more than they need to"
The
report includes graphs showing how energy companies’ blaming wholesale cost
(what the energy companies pay) for retail price (what you pay) rises since
2011 are phoney. Average annual increases between 2011 and 2013 have been:
- Electricity: wholesale up 0.5% per year; retail up 9.7% a year
- Gas: wholesale up 1.59% per year; retail up 11% per year
OFGEM, the energy regulator, denies that consumers are being
ripped off though OFGEM accepts the need to “break the stranglehold of the big 6 in the retail market” (so we're not being ripped off, just strangled?) and has repeatedly blamed energy companies for not being "transparent" (i.e. telling the simple truth) about their wholesale costs.
In 2012 OFGEM rejected
a series of regulatory changes that would have made profit margins between
wholesale and retail transparent. This failure to improve transparency was pounced on - perhaps more accurately tripped over - by Parliament's Energy and Climate Change committee (one of the less electrifying of Parliament's committees). The committee questioned OFGEM's decision not to take away the club the Big 6 were beating consumers with, urging OFGEM to make the recommended changes. OFGEM reluctantly stated:
"The Committee’s report
recommended that we adopt all of the BDO recommendations as a package. Our
decision not to take forward some of these recommendations was based on the
detailed advice provided by BDO and the feedback from extensive consultation.
There are costs to increasing transparency which will be born ultimately by
consumers in higher bills and it is important that any steps we take are
proportionate and do not damage competition. We are currently not persuaded
there is a case to adopt BDO’s recommendations in full. However, given the
Committee’s recommendations and continuing consumer concerns about profit levels we intend to revisit this issue.
We plan to consult later this month on how best to build confidence in the
market through greater transparency around revenues, costs and profits,
including looking again at all the BDO recommendations – both individually and
as a package."
OFGEM seem very easily persuaded by the energy companies that calculating their wholesale costs would be so expensive it would put up customers bills! The idea that energy companies don't already have this on a spreadsheet somewhere - that they don't already know the size of their largest cost - would only be believed by a complete ninny. Which OFGEM isn't - not completely. (Though the mealy-mouthed letter OFGEM wrote complaining about press coverage may suggest otherwise (we reproduce it at the bottom of this post)).
We at Ripped-Off Britons aren't just in the business of being critical of the inept, we want to make them better. In OFGEM's case it is not just inept regulation that needs improvement, it is also their inept excuses for their inept regulation. So here are some examples of better quality excuses from our nation's youth. To be precise, those among our nation's youth who fail to do their homework (with thanks to Mr.BooJangles, youtube user):
The letter by the OFGEM interim-CEO is reproduced below:
Letter to the Editors of The Sun, The Daily Record and The Daily Mirror on today's press coverage
- Publication date
- Friday, January 3, 2014 - 12:45
Dear Sirs,
Claims in The Sun, The Daily Record and The Daily Mirror today that
Ofgem does not know whether energy consumers are being ripped off or not
are completely untrue.
As we made clear in a statement yesterday, we continually check on the link between wholesale and retail prices, and our own analysis has found no evidence to support this allegation.
We have pushed for, and achieved, far greater transparency in the energy market. And this Spring we are aiming to have further reforms in place requiring suppliers to post the prices at which they will sell wholesale electricity two years in advance. This will make pricing even clearer.
When companies break the rules we also take strong action. Since 2010 we have imposed over £75 million of penalties and redress payments on the industry and we continue to work to ensure the energy market is simpler, clearer and fairer for consumers.
Yours sincerely,
Andrew Wright
Interim Chief Executive
-Ends-
As we made clear in a statement yesterday, we continually check on the link between wholesale and retail prices, and our own analysis has found no evidence to support this allegation.
We have pushed for, and achieved, far greater transparency in the energy market. And this Spring we are aiming to have further reforms in place requiring suppliers to post the prices at which they will sell wholesale electricity two years in advance. This will make pricing even clearer.
When companies break the rules we also take strong action. Since 2010 we have imposed over £75 million of penalties and redress payments on the industry and we continue to work to ensure the energy market is simpler, clearer and fairer for consumers.
Yours sincerely,
Andrew Wright
Interim Chief Executive
-Ends-
Notes to editors
- Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority’s functions are set out mainly in the Gas Act 1986, the Electricity Act 1989, the Competition Act 1998 and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.
Government should be sole purchaser and sole reseller of gas and electricity. No deals, no switching, no standing charges and a pricing policy decided upon openly with public debate. No costly nationalisation required.
ReplyDeleteThe Telegraph reports:
ReplyDelete"Ofgem ‘to blame’ for high energy prices
Investigator urged to look at energy regulator’s role, as experts say watchdog may have reduced competition."
http://www.telegraph.co.uk/finance/newsbysector/energy/11023105/Ofgem-to-blame-for-high-prices.html
Ofgem have serious competency deficits & old school ties. nffp.
ReplyDeleteYet again business and greed versus people and need. As long as you have shareholders making money off the backs of hardworkers you will neverhave needs met. Fingers in pies springs to mind too!!
ReplyDelete