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Bostik Bailey

An example of a fair and open market

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So British Gas have announced a 9% price rise and few weeks after SSE, and just before winter sets in.  If there was a more eloquent example of a cartel operating a rigged market I’d like to see it.

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Nothing to do with David Milliband on Watchdog announcing a price freeze when Labour win the next election then

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They're the 2nd firm to do so, the rest will be along soon.  Cameron's waffle today about "just switch suppliers" is useless as there are no other suppliers big enough to keep prices down.

 

Since 2005, the overall UK consumer price index (CPI) has gone up 26%.  Domestic gas has gone up by 137.3%, domestic electricity by 87.3%.  In the same time, average earnings have gone up by 18.1%.

 

For extra perspective about fuel prices, motor fuel has gone up 55.2% in those times inclusive of the extra fuel duties that were added in those 8 years.  I know they're not really the same thing but If motor fuel has gone up by 55% then why has gas and electricity gone up by far more despite having far lower government duties attached?

 

(all figures from ONS and other Government sources)

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Nothing to do with David Milliband on Watchdog announcing a price freeze when Labour win the next election then

I don't think Labour will win the next election. The power companies just put up prices when they like and much they like.

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British Gas has come in for more flak after it was revealed that service engineers were putting people under pressure to pay as much as £500 to have certain things done to their boilers. Of course, it's nothing to do with the fact that the engineers were on an incentive bonus. 

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I await Archibald's response defending them

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This is a bit left field, I know, but maybe the price of gas has gone up.

Problem is lack of transparency in the figs plus the failure of successive govt to have an energy provision and security strategy.Nuclear and shall gas could secure our independence fro m the international gas market. Might even be able to export it.

One thing is patently clear: energy prices will continue to rise and there is nothing Cameron, Militant or CAN can do about it.

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British Gas's response to the fuel rise: "Use less fuel".  Yep, that'll go down well in the run-up to winter.  Maybe they should reward loyal customers with a lump of coal for Christmas.

 

There's something I've never understood about capitalism as understood and implemented by many in the UK today, surely there's a limit to how much profit you can take out of a system before you break it completely.  I can guarantee you that British Gas won't be reducing the profits they're making this year.  If British Gas were to say, "yes, we understand that there's yet another year of excessive price rises so we'll endeavour to make our profit the same as last year plus inflation to keep your costs as low as possible" then I'd be less likely to complain about price rises.  Instead, Centrica made a 9% increase on profit in 2012-13, quite coincidentally close to how much they've increased prices by this year.

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Check out #AskBG on Twitter. :D 

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This is a bit left field, I know, but maybe the price of gas has gone up.

Problem is lack of transparency in the figs plus the failure of successive govt to have an energy provision and security strategy.Nuclear and shall gas could secure our independence fro m the international gas market. Might even be able to export it.

One thing is patently clear: energy prices will continue to rise and there is nothing Cameron, Militant or CAN can do about it.

 

John, it's year-on-year that prices rise in excess. Where do they pluck the cost of increases from, because no one knows? Is it always going to be 8%,9% or 10%?

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I await Archibald's response defending them

You'll have to wait a bit longer, got a couple of others to get back to first.

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For one thing the basic commodity price has not risen by 9%.

How can a market where all the big players announce an equal price rise just before the demand for their products increases, not be operating as a cartel.

If I had a few million and want to enter the gas market, this is how it works.....

I buy a few million quids worth of gas off a primary supplier.

I start to sell this to joe public at a price undercutting the big six, I want to grow my business so I go in with a very competivite price, with the idea to plough all the profit back into buying more gas and expanding my domestic customer base.

Everyone who switches to me, (for arguement a sake lets say 500,000. Households) gets approached by one of the big six, normally their previous supplier and get offered a price undercutting me, so they leave me and go back to the big six.

Enventually after a few rounds of this I'm squeezed out of the domestic market, by a cartel abusing their dominant position. And 500,000 households are back on the normal tariff.

I suggest that the solutions are

1: fix the gas price centrally for a short period. This will enable smaller companies to get a foothold in the market.

2: control how any tariffs a company can offer. Lets face it its the same gas so it should be the same price to all customers.

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The thing is right...vote the present lot out and a new lot in. ..one which will magically put it all right.

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Check out #AskBG on Twitter. :D

Naturally, someone asked if they regretted walking out on that Clive Anderson interview. :P 

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For one thing the basic commodity price has not risen by 9%.

How can a market where all the big players announce an equal price rise just before the demand for their products increases, not be operating as a cartel.

If I had a few million and want to enter the gas market, this is how it works.....

I buy a few million quids worth of gas off a primary supplier.

I start to sell this to joe public at a price undercutting the big six, I want to grow my business so I go in with a very competivite price, with the idea to plough all the profit back into buying more gas and expanding my domestic customer base.

Everyone who switches to me, (for arguement a sake lets say 500,000. Households) gets approached by one of the big six, normally their previous supplier and get offered a price undercutting me, so they leave me and go back to the big six.

Enventually after a few rounds of this I'm squeezed out of the domestic market, by a cartel abusing their dominant position. And 500,000 households are back on the normal tariff.

I suggest that the solutions are

1: fix the gas price centrally for a short period. This will enable smaller companies to get a foothold in the market.

2: control how any tariffs a company can offer. Lets face it its the same gas so it should be the same price to all customers.

 

For one thing the basic commodity price has not risen by 9%.

 

 

That's a big issue. As far as I can see, we don't actually know how much these companies pay for their gas.  Do you? 

 

Of course the real answer is to cut our reliance on imported energy, which is why we have to go nuclear, shale gas, wind, hydro, tidal etc. Unless of course that nice Mr Miliband is able to reverse the effects of say gravity. He has as much chance of doing that as he has in trying to freeze gas prices.

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How can a market where all the big players announce an equal price rise just before the demand for their products increases, not be operating as a cartel.

 

The various companies are supplying the same product, operating in the same markets, obtaining their product from the same sources and using the same transmission networks. And they are subject to the same regulatory, tax and environmental demands from the government. Wouldn't you expect their prices to be similar and fluctuate in a similar manner? There may be/probaly are imperfections in the way that the retail energy markets operate but that doesn't point to the existence of a cartel.

 

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For one thing the basic commodity price has not risen by 9%.

 

 

That's a big issue. As far as I can see, we don't actually know how much these companies pay for their gas.  Do you? 

 

Of course the real answer is to cut our reliance on imported energy, which is why we have to go nuclear, shale gas, wind, hydro, tidal etc. Unless of course that nice Mr Miliband is able to reverse the effects of say gravity. He has as much chance of doing that as he has in trying to freeze gas prices.

There was a conveniently timed Parliamentary paper released last week (link to PDF) that showed that the wholesale price of gas is the same as a year ago and has been all year but for a one month blip.

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Thank for that. Makes interesting reading.

 

 the wholesale price of gas is the same as a year ago and has been all year but for a one month blip.  Have a look at the chart again. It seems to be 20% more expensive than a year ago. Is there a table?

 

 

Selective quotes

In the first half of 2013 domestic prices for gas were lower in the UK than in the majority of other EU member states. The UK has long had among the cheapest domestic gas in the EU.

 

(September 2013) broadly confirms the relative picture shown above. Based on simple exchange rates London had the twelfth most expensive electricity (out of 23) and the seventh cheapest gas (out of 22). London prices become relatively cheaper if real exchange rates are used as these make prices in Central and Eastern Europe relatively more expensive and London moves to seventh cheapest for electricity and second cheapest for gas

 

Broadly speaking there are five elements that make up a customer’s energy bill; the wholesale cost of fuel, the costs of supply –transmission, distribution and metering, costs of Government/EU policy, VAT and supplier margins. Ofgem estimates that wholesale fuel costs are the largest single element; 44% of typical dual fuel bills in October 2013.20 The costs of supply are thought to be next most important; around 25% of a typical electricity and 22% of a typical gas bill in December 2012.21 Costs of policy are higher for electricity than gas, 11% compared to 6% according to Ofgem, but estimates vary depending on which policies are included. VAT has remained at 5% since 1997. Ofgem’s October 2013 estimate of supplier margins for a dual fuel customer was 5% of their bill and company operating costs around 10%.

 

...Statistical analysis of this strategy showed a very close match with retail prices. The broad trends in wholesale costs they estimate are similar to the spot prices given above, but they are much less volatile. The report concluded that there was no evidence that price rises were passes on more quickly than price cuts and no evidence that the big six suppliers were acting as a cartel.

 

This also shows that wholesale costs were the main driver of price rises; however the range of policy-related costs pressures is estimated to have been responsible for 7% of the gas price rise and 28% of the electricity price rise during this period

 

The gas interconnector with Europe means that the UK is part of the European gas market. Continental gas prices are contractually linked to oil prices so the sharp increase in oil prices have fed through to wholesale gas prices in Europe and the UK.

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It's either a load of companies acting similarly in he face of the same additional costs being imposed on their barely profitable companies or a cartel.

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For one thing the basic commodity price has not risen by 9%.

That's a big issue. As far as I can see, we don't actually know how much these companies pay for their gas. Do you?

Of course the real answer is to cut our reliance on imported energy, which is why we have to go nuclear, shale gas, wind, hydro, tidal etc. Unless of course that nice Mr Miliband is able to reverse the effects of say gravity. He has as much chance of doing that as he has in trying to freeze gas prices.

Actually I do know a lot about the gas supply industry, I work for a large gas consumer and the gas price is linked heavily to our production costs. the commodity price has not increased considerably over the last year certainly nowhere near 9%. (Now you can believe that I'm taking Internet ###### if you want but don't even think I'm going to give out our gas prices on this forum)

Of course we will use the 'increase in gas prices to justify out lack of profits etc'.

There is another player in this game that is stealing money and that is the compleat private monopoly of National Grid, creaming a cut off every MJ i of gas whilst not maintaining an ageing supply network.

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I await Archibald's response defending them

Defending them for putting their prices up? They don't need defending. I suppose in an ideal world I'd like them to collapse their prices to zero, but that isn't gonna happen anytime soon. As soon as someone gives me a full breakdown of prices paid last year for their business compared to this year, then I'll save my moral outrage for something else. My price is fixed for the next couple of years, my bills have increased over the years, but then my mortgage payments have fallen through the floor so it's swings and roundabouts.

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Just as an aside, I have a BG Homecare agreement. Around half 5 on Sunday evening my boiler *popped* and the heating went off, a quick call, on a Sunday evening, and by 10am Monday it was fixed.

 

In the good old days of nationalisation, how long would I have had to wait?

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Forever, as they did not offer such a service.

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Just as an aside, I have a BG Homecare agreement. Around half 5 on Sunday evening my boiler *popped* and the heating went off, a quick call, on a Sunday evening, and by 10am Monday it was fixed.

In the good old days of nationalisation, how long would I have had to wait?

You mean you pay £15 a month or whatever and they come out and fix it? What is unusual about them keeping their part of the deal?

Those deals are mainly a con because when it comes to fixing it they can come up with excuses like 'ah well we can't actually fix that unless you upgrade to our super duper package'

Tell you what I have done. Rather than put money into an endless pot, I have put some money to one side for such an emergency. Yes there may be trouble getting a plumber at busy times but when I did have cover and the heat exchanger went on my boiler, I had to wait for a week as they were prioritising the calls. Fair enough but it didn't help me out.

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