UK Gas Prices: The Rip-Off Continues

So, as the dust settles over the last gas price rise we can look back and see if the reasoning behind it was sound.

As I remember the last price rise  (of around 10%) was to....

  • Cope with rising wholesale prices,
  • Pay for some unspecified rise in costs associated with gas transport
  • Pay for renewal of capital equipment.

It was (I am told) absolutely nothing to do with raising huge and unreasonable profits.


Wholesale prices

Look at this graph.

(graph from Catalyst Energy Solutions. Here)

The graph looks a  bit of a dogs breakfast because it show several years of wholesale (or spot) gas prices. Each colour is for a different year. Notice that the wholesale price to when the graph ends (Oct 2012) is little changed since December 2010.

So even from this you have to ask: Why the price rise? But look back further. Notice the whole sale price COLLAPSED at the end of 2009, so the rise they keep droning on about actually arises from a large price decrease in 2009. Wholesale prices in Oct 2012 are not much different to Jan 2009.

So, has the gas price today in January 2013 massively risen since the end point on the graph (Oct 2012) ?

No. The wholesale price today  is much the same as the end of October which is much the same as January 2009. But it gets worse. If you go even further back, beyond this graphs resolution you find the wholesale gas price was similar or higher than today way back to March 2008. (see future post)

Of course, wholesale gas only accounts for about 55% of the retail price anyway. So if the wholesale price is flat, then to get a retail price rise of 10%  the price of gas transport and customer servicing must have risen by 22%. Wow!

Even though these companies then go on to whine about making large capital investments they still manage to produce an enormous, and rising year on year profit. Clearly the concept of using your profits to invest in the future is alien to the Utilities.

Why can they do this? Because rather than operating as competing companies, their operation looks more like that of a cartel. They pretend to compete yet actually protect their combined markets at the cost of the consumer, and the government lets them get away with it.

The words “arrogant rip-off” come to mind.

No comments: