Centrica’s profits and Ofgem’s whitewash

While pensioners across the UK are having to choose between heating and eating Centrica’s obscene profits up six times on 2006!, cry out for a windfall tax.

Here’s a press release from The Campaign for Public Ownership, which

condemns British Gas’ announcement of annual profits of £571m, a six times rise in its profits over the last twelve months. The massive profits, which translate to £1,200 a minute, is due to windfall profits in the first rise of last year, when British Gas was slow to cut charges to customers to reflect the big fall in world gas prices. British Gas put prices up by 36% (£299) in 2006. After that, the wholesale price of gas has dropped by 56%. However, British Gas only reduced its prices by 18%.

Despite its huge profits, last month British Gas said it would raise the amount it charges for gas and electricity by 15%.

British Gas’ primary concern is not the millions of hard-pressed Britons struggling to pay their bills, but to its shareholders. Roger Carr, Chairman of British Gas’ parent company Centrica, which has announced profits of £2.1 billion, has said shareholder value was “top of the agenda”.

It’s time for the government to put an end to this blatant profiteering by bringing British Gas back into public ownership.

Thirty years ago, utility bills were a very minor item in the household budget, now millions of Britons are struggling to afford them.

It’s clear that while proving a bonanza for the banks and wealthy shareholders, privatisation of the utilities has been a disaster for the majority of the British public.

The Morning Star editorialises on Ofgem’s inquiry:

An Ofgem whitewash
(Thursday 21 February 2008)

THE hastily announced inquiry by energy regulator Ofgem into operation of the markets in electricity and gas fulfils the role that royal inquiries used to play for under-pressure governments.

They were designed to take the heat off and to report in due course that, apart from one or two cosmetic changes, everything that had happened had been for the best or, failing that, that no-one had really been to blame, so business as normal.

Who can have any real measure of confidence in a “regulator” whose brief is more to act as a PR consultant for the energy privateers than to expose their cosy, lucrative cabal?

Government and Ofgem claim that, with six major suppliers of energy, there is an adequate level of competition and consumers have real choice.

Such a picture is simplistically beguiling but far from convincing.

The main drive by the energy companies is to secure direct-debit, dual-fuel customers and the annual charges for this across all six companies vary by only £13. Some competition.

In addition, the level of concentration, in terms of vertical integration, in the energy provision market is such as to prohibit any realistic possibility of new providers entering the field.

Whenever these telephone-number profits draw criticism, British Gas and its major competitors/collaborators explain that they are dictated by wholesale markets over which they have no control.

But these companies themselves are key players in the wholesale market and pass on every price increase fully along the supply chain of their own subsidiaries to the consumer.

However, it is a different story when it comes to decreases in the wholesale price, the benefits of which are kept by the companies.

British Gas asserts that it needs higher profits to fund research into new natural gas reserves, but it has still seen its profits leap to £571 million from £95 million last year.

That cannot be justified by any stretch of the imagination, any more than its 17 per cent rise in shareholder dividends can at a time when the government going rate for public-service workers is 1.9 per cent.

The government has a responsibility to act in situations where an oligopoly is out of control. In effect, the energy market is a natural monopoly that is administered by six participants.

If competition is the key to good services and lower prices, as all the privateers declared when they were licking their lips at the prospect of getting their hands on our publicly owned utilities, why are 4 million people in Britain living in fuel poverty – paying over 10 per cent of their net income on energy?

Allowing Ofgem to go through the motions of another inquiry is useless.

As Centrica, the parent company of British Gas and proud beneficiary of its own record £2,100 million profits pointed out, there have been 15 inquiries into the energy market in the last seven years and each has given the industry a clean bill of health.

That’s because the operating guidelines laid down by the government favour profit maximisation rather than social justice or even fair play.

This profits glut for a relative handful must be reversed by taking the energy companies back into public ownership.


2 Responses to “Centrica’s profits and Ofgem’s whitewash”

  1. Nick Says:

    I know that 571 million is lots of money but if you split it evenly amoungst all their customers would it make a difference on the customers yearly gas and electricity bill. I don’t think it would, maybe it be best spent on grants to insulate homes from energy loss.

  2. charliemarks Says:

    Maybe – but first of all the energy utilities would have to be brought back into public ownership.

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