Who supplies energy to the United Kingdom

Who supplies the energy of the United Kingdom? Energy is so important, and a bit like money, not for its own sake but because of the uses to which we put it. Households, organisations and businesses need energy to heat their premises and water, to power their appliances and machinery, to cook food and to make their lives clean, healthy and comfortable. The energy companies supply the current or the gas that does these things, so they play an essential part in our lives.

We all buy the energy that they produce, which is of equal good quality and reliability. They all have annoying call centres that are equally unhelpful and they all have equally complex tariffs which seem to be designed as a deliberate maze to obscure pricing.

This equality of product (high quality) and of service (poor quality) means that for users the only way to buy your energy is on price; we all aim to buy it as cheaply as we can and that is not an easy task to fulfil.

Most of the United Kingdom’s energy is sold by six companies. The tiny amount of self owned renewable energy, such as solar systems and small wind turbines and “green” energy is so small that it has no impact on the six energy companies. I have excluded from these statistics heating oil and heating gas made from oil, which affects around 14% of UK homes, and concnetrated on centrally distributed electricty and natural gas.

These six companies have grown since energy was denationalised as part of an inevitable trend.

You might have been confused about the various names that have appeared on your energy bills over the past few years. This is how the energy companies have formed themselves and I have also set out their market shares, according to Ofgem, the electricity and gas regulator.

EDF Energy has acquired London Electricity, Seeboard and SWEB. It is in effect owned by the French Government and supplies 14% of the nation’s electricity and 7% of its gas.

 E.on/Powergen includes East Midlands and Eastern and supplies 19% of our electricity and 13% of our gas. It is German owned.

RWE/Npower includes Midlands, Yorkshire and Northern. It supplies16% of our electricity and 12% of our gas. It is also German owned.

Iberdola includes Scottish Power, Manweb and South of Scotland and supplies 12% of our electricity and 9% of our gas. It is Spanish owned.

Scottish and Southern Energy includes North of Scotland Hydro, Southern and SWALEC and gives the nation 18% of its electricity and 13% of its gas. It is still UK owned.

Centrica is also UK owned. It comprises British Gas and Scottish Gas is the largest giant amongst these giants, supplying 21% of our electricity and 46% of our gas.

All of these companies are linked to electricity generation and fuel in that they have their own power stations and fuel sources. EDF, for example, has just bought British Energy’s nuclear electricity generating business with all its nuclear power stations. E.on/Powergen proposes to build a new coal fuelled generating plant at Kingsnorth.

It can be hard to discover the prices that the energy companies buy wholesale, because they often either buy from themselves or from fuel supplies and the prices at which they buy are not published. We have to try to guess the pricing at which they buy from prices in the wholesale markets and by the bottom line profits of the energy companies, again not an easy task.

They all seem to be running their businesses well, by ensuring constant supplies and by making good profits. As you would expect most of the price comprises the cost of generating and distributing the energy, although it is very hard to isolate how much of your energy bill is actually profit margin, because of the lack of transparency in the energy companies’ fuel costs.

Part of your bill, probably around £38 on average, goes towards the Government’s Carbon Emissions Reduction Target (home insulation and the odd low energy light bulbs to you and me) and this money, added to our bills, is given to the energy companies to spend, in the expectation that they will wisely use the money to reduce energy demand. They do their best to do this, of course, but it is somewhat like asking turkeys to vote for Christmas.

In addition there is the Renewables Obligation – another in effect charge on the poor consumer which add around £11 a year to the bill, which the energy companies have to spend on the generation of renewable electricity. The energy companies spend this money on the large wind farms, mainly, so when you see one remeber that we have paid for it.

Finally, there is the value added tax of 5% on energy; the higher the energy prices go the greater amount that each household has to spend on value added tax, on its energy bill. If you have experienced a price rise of £200 in total energy cost this year about £10 would have been a windfall for the Treasury who get the extra tax simply because prices rise.

That is the broad statistical picture of energy in the United Kingdom. Since energy was denationalised, there have been savings in efficiency, but many of those savings – call centres, do it yourself accounting by the customer and so forth, might well have happened in any event.

One effect of denationalisation is that these six energy companies are competing for a limited market against a legislative requirement to reduce energy use where each companies supplies exactly the same product with exactly the same service.

What happens is that in these circumstances the energy companies compete for a limited market in the only way that they can – by trying to increase their share of the market. The only way to do this is by advertising. They do introduce special and new tariffs as a hook for the advertising but it is very hard for a consumer to make an informed choice on what price is best because prices rise all the time and what is a good price today may well be a bad price next month or next year.

The advertising costs are of course an expense of the energy companies and this expense adds to the overall cost of energy, like CERT, the Renewables Obligation and VAT.

Is this the best way for a developed nation of 60 million souls to organise it energy? I doubt it. We are moving in turbulent times and, as in banking which supplies money, that other great item that you need not for its own sake but for what it does, turbulence will sort out whether the system works well in the national interest.

2 Responses

  1. Why do we allow German Companies and The French Government to supply our energy needs when probably UK companies would be barred from supplying theirs !? Also, who are the ‘ Wholesalers ‘ that keep putting up their prices to the energy companies who supply us the consumer ?

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