When Low Risk Means Very High Returns

The Energy Minister of the United Kingdom has complained about the excessive profits that two of the United Kingdom’s energy companies are making. Mr Edward Davey has focused his complaints (which he has made to the energy regulator) upon higher than expected profit margins that British Gas and SSE are making. These margins are in excess of 11% for the year 2012. He is right to complain. In theory utility companies should operate at very low

British Gas Profits – Old Habits Die Hard

The latest announcement of profits, up by 23%, of British Gas will come as cold comfort to those that do not hold shares in Centrica, who owns British Gas. The days of Sid and ordinary folk owning their own utilities have gone, and the profits which will pay increased dividends will vanish into the wallets of those completely disconnected from those who generate those profits, the long suffering customer.

Tax On UK Gas Production

Centrica is a multinational energy company that produces and sells more natural gas in the United Kingdom than any other energy company. Like all multinational companies it does not like paying tax, a feature that it shares with almost everyone on this planet. Most of us dislike paying tax, not because we feel that we should not contribute to the greater good of our society or pay for services that we and others use, but because we have a feeling, frequently supported by evidence, that governments waste much of the money that taxpayers provide. I suspect Centrica shares none of these feelings; for them tax is simply an expense that limits profits. 

Record Profits for British Gas in 2009

British Gas, (a part of Centrica) made record profits in 2009 of nearly £600 million. British Gas has more than half the United Kingdom residential natural gas market with 15 million customers. Executives and spin merchants at British Gas have been looking for ways to justify this level of profits over a year when the whole cost to British Gas of what they resell fell by significantly greater amounts than the price that the customer’s have to pay.

British Gas reduce their prices by 10% for gas but for the poor it will make no difference

Gas prices have risen and risen and risen again, and in the past few months the natural gas whole price has fallen and the United Kingdom’s six energy suppliers (I know there are a few more than six but six have 98% of the market) have come under pressure to reduce consumer gas prices. British Gas, one of the big six, has announced that it will cut its standard tariff gas prices by 10%, which is much less than the increases in 2008. British Gas put their standard prices up by 35% in 2008. Being aware of the commercial position, British Gas will introduce the price cut from 19^th February.

For those of you on quarterly billing you may want to check your meter at this date and provide the gas company with a reading, otherwise you might lose out when they apportion the price decrease over a single billing period.

Corporate Climate Change leaders provide poor advice

The United Kingdom Corporate Leaders Group on Climate Change is a body sponsored by the Price of Wales and they are concerned with climate change.  They believe that there is an urgent need to establish new and long term strategies for dealing with climate change. They are right. There is such a need. These “leaders” agree that incremental change is not going to work, and that action would benefit business by creating new opportunities so they think we need a cross party consensus on policies to cut emissions.

UK’s nuclear energy will cease to be under government control

The UK’s nuclear energy will shortly cease to come under government control.

Centrica (the energy company which owns British Gas) is buying 25% of British Energy, the nuclear generating plant, from EDF. The UK Government owns 35% of British Energy, which is worth according to the price that Centrica paid for its shares, around £4.3 billion. Having sold 25% to Centrica, EDF will now buy the UK Government’s 35%, giving EDF (which stands for Electricté de France) control of the UK‘s nuclear generating industry which is expected to be expanded greatly if the unimaginative Secretary of State John Hutton has his way.

The astonishing thing about this is that the Government is so willing to dispose of an industry which it thinks critical to our energy future, and see it disposed of into foreign hands.

The energy companies are softening people up for large gas price increases

 

We have had a gradual softening up of UK natural gas consumers over the past week in order to prepare them for a hardening in gas prices. Centrica (formerly British Gas) have warned through their managing director Jake Ulrich that gas prices could rise by 60% by 2010 and everyone in power and business has finally seen the blindingly obvious light; the era of cheap energy is over. We are now well into the energy age. Not everyone has thought through the consequences of expensive energy and those in power who have been thinking about it, have not really come up with any solutions.