How tax collection becomes a profit centre for energy companies

Npower have been widely criticised for handing out three million low energy bulbs to customers, who never asked for them. Ofgem has “expressed concern” and the Green Party have described this as “inexcusable”. This is one of those stories that are a little complex to understand, but when you do understand it you will appreciate that there is something that stinks in the United Kingdom’s energy policy, which upon close, careful and cool examination, appears to have been devised by morons.

First you must understand the background. Energy companies apart from selling energy, collect special taxes on behalf on the government. These taxes are added to you domestic household bill, although you will not usually see them separately designated. These secret charges are significant – often as much as 12% of your energy bill over a year.

Now having collected these special taxes the government requires the energy companies to spend them on measures which will prevent households from using as much energy as they use. In other words the energy companies are required, under the watchful eye of that toothless watchdog, Ofgem, to spend this tax that they raise on “measures” to reduce energy consumption. It is like requiring Tesco to collect money from the public which must be spent on lowering the public’s purchases from Tesco, thereby reducing their profits and sales.

If the energy companies, like npower, do not spend the money on measures they face crippling fines – which can be as much as ten percent of their turnover.

However, the measures that they can spend the tax upon are many, but the cheapest least effective measures are the ones that find favour with the energy companies who have the duty to dispose of the tax that they collect but the ability to choose which measures they spend it on.

Obviously some measures genuinely save energy use and are not discretionary. If the energy companies installed solar water heating (apart from my company Genersys prospering) there would be a real reduction in energy use. However solar water heating is more expensive than insulation, so the companies spend some money on insulation which also saves energy. However, even cheaper than spending money on insulation is to spend it on low energy light bulbs.

This does not necessarily lead to lower energy bills because if you give away low energy light bulbs you do not know whether they are installed, even if you given them to people that ask for them.

If you send them out unsolicited then there is little chance of them being installed.

However, even sending them out unsolicited as npower has, qualifies as expenditure by the energy company on the tax that they have collected.

This is pretty bad, isn’t it? Forcing the energy companies to collect money from householders, in a quiet secret way, which they must spend on measures but allowing the energy companies to choose the cheapest least effective unaudited of all measures is pretty bad.

This practice of permitting low energy light bulbs to be counted as a measure was changed in June 2009, but npower managed to send out their three million bulbs just before the practice was changed.

It gets worse than this, though. The energy companies are obliged, not to spend all the tax they collect upon measures but in fact only to undertake a specified number of measures. Once that number is reached they do not have to carry out any more measures and if there is surplus cash left from the tax that the energy companies have collected they are allowed to keep it.

Thus a tax collecting mechanism design to reduce energy has become a profit centre for the energy companies and makes very little difference in the national consumption of energy.

You will now understand why I have written at the start that this policy has been devised by morons, and you will observe that I did not even have to mention the hundreds of millions of pounds of free money given to the energy companies to kick start the emissions trading scheme, which has so far failed to save a single emission.

3 Responses

  1. You are more alert than I thought you were Robert, the climate change scam has been well and truly caught out of late, now the people go back to sleep, but not those who really know what is a foof, and in throught the back door comes the same old policy in the form of carbon taxes under another agenda and name.

    From a friend, they are still at it here in France,

    If anyone wants the list of climategate e-mails please ask me,

    If you take a look around the world right now, the funding and private investors some backed by Gore are pulling out in their droves, so much so that their wicked plans are now going to completely destroy any hopes of a true green revolution to all but the dedicated and true enviornmentalist or existing companies.

    The green party have been failing their followers since being taken over by comunist thinking left wing tendancies with the original founder jumping ship when he spotted this taking place.

    A true green party must come from street level, not from any law schools or learned institutions for the true nature of the people from the effected classes taking real note of what such policies from the Gory level have tried to do to them, if that makes scense.

    Free light bulbs is just that, made for next to nothing by people getting nothing, that’s not what the advert says on the tin, the system we all work in today is designed to take not give back to nature, who works tirelessly for us every day while we all take, take, take, away,

    Again its never ever going to work, just like the treatly of late that I said would fail, I know what to do to make things better, but it would involve everybody having a lot less than they have today even at recession levels before it could get better.

    Our heady days are really going to cost us in 2010, but the real money will be going into the wrong places,I don’t want a holiday in the sun, I want to go to the new England.

    The least few words of this interview are very wise words to which we all should be doing.


  2. The IRS e-flie system is now open, most W-2s and 1099s will be in mail in the next couple of weeks. Is everybody ready for tax time?

  3. The information presented is top notch. I’ve been doing some research on the topic and this post answered several questions.

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