Tag Archives: Energy bills

Britain, Energy, Environment, Government, Politics, Society

Concern over energy firms refusing to pass on price cuts…

ENERGY BILLS

Intro: Millions of energy consumers on fixed deals will lose out

Millions of energy consumers with fixed price energy tariffs will not get a £50 reduction in utility bills as promised by David Cameron and George Osborne. A pledge was given this week in the Autumn Statement that electricity bills would be cut following the decision by the government to roll back some green levies.

The energy giant E.ON has announced that more than one million of its customers will get a reduction of only £12 – or 23p a week.

EDF is taking the same line with its one million fixed rate customers, who include many pensioners and families. Npower, SSE and Scottish Power may follow suit.

The Prime Minister, Chancellor George Osborne and Energy Secretary Ed Davey have made repeated pledges in their efforts to protect customers by rolling back environmental charges.

Mr Osborne said this week: ‘There’s going to be an average of £50 off people’s bills … We are absolutely insistent that this is going to be brought in.’

The smaller reduction of £12 covers the Government’s decision to switch funding of the Warm Homes Discount – a subsidy for poorer families – from energy bills to general taxation. The rest of the decrease was expected to come from changes to the Energy Companies’ Obligation Scheme, a levy applied to all bills to raise money for energy-saving measures for poorer households.

However, the element of the reduction is not being passed on to customers on fixed tariff deals by some companies.

In contrast, British Gas, the largest of the ‘big six’ suppliers, announced that all tariffs and payment methods will get a reduction of £53 from January 1.

A spokesperson for Consumer Futures, a campaign group, said: ‘The message has been that people were going to save £50 on their energy bill, but it seems a fair chunk of people will not get that. This sort of behaviour is not going to do anything to reassure customers … People feel confused and angry about their energy bills. This latest development just adds insult to injury.’

The spokesperson added: ‘I think in the current climate, bearing in mind how people are struggling, the right thing to do would be to apply the full reduction across the board. That is the expectation that the Government has created.’

Following the Autumn Statement, E.ON immediately announced a price rise of almost £60 a year for customers on standard tariffs. The changes will take effect from January 18.

The provider says that cutting the bills of fixed price customers by only £12 was justified because many of these people were already on relatively good price deals and tariffs.

EDF took a similar line and said its short-term fixed deal is some £90 a year cheaper than its new standard prices.

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Britain, Consumer Affairs, Economic, Energy, Government, Politics, Society

Addressing the massive public concern over rising energy bills…

ENERGY SUPPLY FIRMS

The Government has made known its intention to make it a lot easier for energy consumers to switch their supplier. Ed Davey, the Energy and climate change secretary, wants consumers to be able to do it within a day instead of the present arrangements which can take up to five weeks. Mr Davey’s suggestion certainly sounds like a positive move and one which will be embraced by all energy customers seeking better deals elsewhere in the market.

But is the real issue not more to do with consumer inertia and one that is caused by the belief that banal paperwork is tedious and that some cost may be involved, rather than the time taken to complete such a move? If so, then the additional competition which the Government is craving for – which should drive down prices – may not occur at all.

Of more significance, though, is Mr Davey’s plan to make the probing of the accounts of the ‘Big Six’ energy supply firms a lot easier. They have been accused and arraigned of utilising networks of subsidiary companies to purchase and sell fuel and services – effectively from and to themselves. This has allowed them to inflate prices and to boost profits while claiming that they are faced with soaring costs.

Whilst more transparent accounting practices could put a stop to this, a cautionary note would also be required to be issued. Based on recent experience of other big corporates’ activities, however clever state legislators and the tax authorities think they are, big company lawyers and accountants will always be one step ahead of them. That is pretty much a given.

But in a politically astute move, Mr Davey is also considering increasing the size and weight of the political baton he can wave at energy companies. This could lead to their executives being liable to face criminal prosecution if the evidence proves that they have been engaged in unfair and illegal price-fixing, as well as bill-inflating practices.

Most of the action that can be taken against companies to punish such activities is currently undertaken by regulators. This is done for the very good reason that regulators have a sophisticated understanding of the very complex methods that companies use. Because of that, the financial penalties and fines that OFGEM and other public regulators impose are rarely challenged.

Some commentators may argue that putting that material in front of a lay jury and expecting them to understand it, and following it through a trial which may last for several months, might be a sanction too far. Complex fraud trials are few and far between because of this very problem. However, if executives know that some underhand and deceitful practice might lead to such a trial with all the public ramifications and consequences that could follow – including imprisonment – it could also be a powerful deterrent.

In a game of fast moving politics, politicians are attempting to outbid each other in seeking to address the energy crisis problem. But action which brings results in the form of lower bills for consumers as opposed to instant popularity and votes should be the guiding principle.

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Britain, Business, Energy, Government, Politics, Society

Energy firms and the responsibilities they have…

UK ENERGY FIRMS

The decision by Britain’s biggest energy firms to send junior executives to face a grilling by MPs at this week’s select committee inquiry into soaring utility bills beggars belief.

The distinct absence of energy bosses, who are paid mega-buck salaries, goes to the heart of important issues of power, responsibility and accountability in this country. The nonappearance of chief executives also suggests that energy firms have learned little from recent history about the relationship between large consumer businesses and the customers they profess to serve.

It is not inconceivable to think that the absent bosses had in mind the cross-examinations endured by bank chiefs (including Fred Goodwin of RBS) by MPs in the wake of the government bailout of two of Britain’s major banks. Mr Goodwin – formerly Sir Fred, who has since been stripped of his knighthood – and his colleagues had to make humbling apologies for their actions as MPs held them to account.

If energy bosses had hoped to body-swerve a similar scenario as they are being held to account for inflation-busting price hikes, then they have fundamentally misunderstood their privileged position in British society, and their responsibilities in relation to regulations set out by Parliament.

Energy firms cannot take the view that their business is a private matter between them, their shareholders and their consumers. If that ever was the case – and the apparent powerlessness of the OFGEM regulator has often made it seem so – it is certainly not the case now.

Energy bills and the way they are being calculated now stand at the nexus between industry, politics and austerity. The ‘cost of living’ factor is a key voter concern and has become a major political issue in the run-up to the 2015 General Election. The main topic of political discourse was thrown open ever since Ed Miliband threw down the gauntlet at the Labour party conference, promising a price freeze and cutting electricity and gas bills if he made it into Downing Street. For the Conservatives, former prime minister Sir John Major floated the notion of a windfall tax on the energy firms, should a particularly harsh winter produce bumper profits. In Scotland, the Scottish Nationalist Party produced its own riposte, with a pledge that energy bills would be reduced by 5 per cent in an independent Scotland. The political battle over energy is heating up.

With the cost of living set to continue to be the most pressing political concern, Britain’s energy bosses need to accept they can run, but they cannot hide. They need to engage with this process – by listening, explaining and being open to market reform – or they will end up on the receiving end of both political and public indignation.

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