Monday, June 16, 2008

Got the power?

The cost of living is certainly soaring, not just in the UK but all over the world. But still, when Cambridge resident Alison Turner received her bill from NPower it wasn't just the fact that she was on a prepayment meter and shouldn't be getting bills at all that shocked her. It was also the way the bill was for £90,454,217. Come on NPower, that's no way to pay for the director's new Highland Mansion (read full story in the Cambridge Evening News).

NPower is part of the German owned RWE consortium and have hit the headlines earlier in the year for its sales team who were misleading those it hoped to win over to NPower.

This year NPower's profits are up 41%, and the bills are up by 17% - which all seems to be standard nowadays. The energy crisis seems to be a perfect excuse for those who own the corporations to put the screws on the rest of us. So they rake in the money whilst cutting off 69 homes per week last year. In cash that means last year's profits were £544 million, privatisation is just the gift that keeps on giving for some.

The cost of fuel is one of those things that hits the poorest, hardest - particularly the old. Scott wrote this piece a little while ago on how NPower approaches the poorest of its costumers and Peter Reydt wrote this interesting article on the kind of consequences that rising fuel prices have on the poor.

If the oil companies, gas companies, electricity companies et al are all making record profits, and they are, why do we seem to think that the price rises are out of their hands?

Note: John B disagrees with me - over at The Sharpener.


Lee Griffin said...

Totally agree, this has gone on for far too long now.

I wrote something recently for my blog, which is posted up also at Liberal Conspiracy trying to get people talking or thinking about alternative ways to deal with this situation.

Quite simply I think we're in a situation where competition isn't present and it's time for the government to step in with some modest restrictions on business practice.

John B said...

But the bills and the profits are over a completely different timeframe.

RWE nPower made money in the first part of 2007, when wholesale gas prices in the UK fell because new pipelines came onstream. If you check the RWE group results for Q1 2008 (unfortunately not broken down by segment) you'll see that operating profit actually fell because of higher energy prices.

Centrica (British Gas), which will report UK results comparable to RWE's, has warned shareholders that 2008 profits will fall well below 2007 precisely because it can't pass all the impact of energy price rises onto consumers.

Lee Griffin said...

Doesn't explain why profits for centrica have jumped from £95mil to £571 in two years though does it John? I mean we all know energy has increased in price in two years, so why the huge jump in profits? Or more to the point, how long can we go on being happy with these companies making huge profits while more and more people fall in to fuel poverty?

John B said...

I'm working on an article for the Sharpener on this at the moment - but in short, Centrica's profits rose in 2007 because gas prices were very low in the first three quarters of 2007 (see the BP Statistical Review - 2007 was the cheapest year on average since 2004 for UK gas prices.

In 2008, they will make less money than they did in 2007, because gas prices are much higher. Centrica's warning is one example, RWE's poor Q1 results are another, and the flat FY08 profit for S&SE (whose FY08 is measured from April 2007 to March 2008) are another still.

Yes, there is profiteering going on in this market - but it's being done by the Russians and the Saudis, so the only thing we can do about it is to build more barrages/nukes/coal mines, according to taste. Utilities, meanwhile, are raising prices to consumers by far less than their costs are rising.

John B said...

As promised.