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.

Hmmmmm

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.

Wind and the Myth of Fossil Fuel Subsidies.

One of the latest little scams our wind turbines aficionado's are trying to pull is to justify their obscenely expensive and ineffective Wind Turbine generators (WTG's) by inventing fictional subsidies to fossil fuels and nuclear. The latest and greatest of these has the carpet baggers claiming that that the massive ROC subsidy received by wind is on par with or even less than that received by gas, oil and coal.

Of course, this is a load of tosh. Just as it is a load tosh that wind is cheaper than nuclear (See this Post).

Here is a fine example of this bufoonery at The Guardian - Here  (where does the Guardian get their reporters from?). You have to ask: Do Guardian journalists ever read the documents they supposedly quote from? Or do they just do as they are told? 

According to our Guardian scribbler, poor hard done-by wind (which at best produces 1% total energy supply) "only" got £700M subsidy in 2010. Whereas (shock horror probe) the demon spawn of Satan (aka fossil fuels) received a whopping £3.63 Billion. 

He supposedly derives this from an OECD document available Here. Pity the journalist didn't read it first. I have to ask if Guardian journalist are just naturally lazy or so dedicated to spewing out propaganda they willingly subvert the truth to aid their carpet bagging friends in the wind industry.

At the end of this document from the OECD are three tables that summarize the subsidies received by coal oil and gas (produced at the end of this post)

Each of these tables itemise the folowing:
A "Producer subsidy" i.e. the subsidy received by the energy producer.
A "Consumer" subsidy which relates to the reduced VAT rate charged on all electricity and heating (however generated) 
Finally, a subsidy for inherited liabilities. (£8.5M - coal only)

These are the producer subsidies:
Coal: Nil (Coal provides approx 14% total energy)
Gas: £233M (Gas provides approx 40% total energy)
Oil: £301M (Oil provides approx 38% total energy)

These subsidies though are acknowledged by the OECD as for specific purposes, not like the ROC which simply lines the pockets of the shysters running the WTG scam.

What this ridiculous article includes in to order to get to £3.63 Billion is the Consumer subsidy. This of course, applies to all energy providers including wind and relates to consumers NOT providers. Wind (whose energy is also subject  to the same consumer VAT reduction from 20% to 5%) still gets an another £700M. All for their measly 1% annual contribution to the UK energy mix.

I can only see this as a fundamentally dishonest and decietful misuse of data in order to promote a mistruth. The fact that this appears in a supposedly  upstanding newpaper is absolutely unforgivable.

 You can guarantee ther wind industry and their pals will try and pull this trick again.

Just remember, even if you consider the consumer VAT tax reduction a subsidy, then it is a subsidy to consumers. It is a subsidy to people who use the energy NOT the producers. The reduced VAT tax on energy makes no difference to the wholesale sell-out price for that energy whatever it is derived from. It relates to fossil, nuclear, wind, hydro,  and any other energy generation technique.

This non existent fossil fuel subsidy just comes down to another self promotional myth from the wind industry and their sycophants.

One day they may start telling the truth. Just don't hold your breath waiting.

(tables follow)

British Gas: Fair Profit Or Exploitation?

Since the peak gas price in 2008 British gas has reduced its prices by 17%. But Since the peak gas price the wholesale price of gas has fallen 40%. See Here

British Gas' profit this year has soared by 98%. In the first half (i.e. 6 months) of 2010 British Gas' profit was £585 million. So it would suggest that their profit this year is going to be in excess of £1 Billion.

All utility companies are in a steady business (and trusted position) of providing our industry and people with a regular vital resource.

So how the hell can one of them suddenly double its profits?

I don't expect any of the other utility companies will go bust any time soon. So there is only source for that huge profit. That source is you, my grubby derided little English consumer.

The whole basis of the privatisation of the utilities was to get rid of a self serving "jobs-worth" monopolistic culture and replace it with a set of responsible and efficient companies.
Their rivalry would guarantee that costs to the consumer were kept down. These new private companies were trusted with providing a strategic national resource. In exchange they were virtually guaranteed a profit.

But today these companies now act as if they are just a multiple set of heads on a monstrous Hydra monopoly. Essentially the Gas and Electric utility industry has all the hallmarks of being an ugly and viciously exploitative hidden cartel.

British Gas and its buddies faff around, pretending there is competition between them. They swap a few hundred thousand consumers to make it look good but they all indulge in conning the public with discounts as summer approaches. Then they hit them with massive rises as winter (and the need for gas) rises. Now Britsh Gas is leading the pack with a shameful 7% rise. The others will follow soon no doubt.

They may be an improvement on the old nationalised cash haemorrhaging relic they replaced. But they are still very far from offering the public a real competitive choice.

Of course, there is nothing wrong with making a profit, even a healthy profit. Especially if you company provides what the customer wants.

But British Gas like the other utility companies do not provide what the customer wants. It provides what the customer needs. They have been given this business on a plate in exchange for acting responsibly.

Double profits in a dynamic cutting edge producer of goods that people queue up to buy is really good.

Double profits in a utility company is a disgusting exploitation of a trusted position.