British Gas: Looking after your world

British Gas 9.2% price hike is robbery admits Minister – but bills are easier to read!

Just one week after SSE hiked energy bills up by 8.2%, British Gas outdoes them with a hike of 9.2%. That’s not how privatization is supposed to work. Companies are supposed to compete by lowering prices, not by pushing them up!

So how do British Gas account for this? Have they added an extra 50% on top of increased costs, as SSE did last week?

On BBC News this lunchtime, the managing director of British Gas Residential Energy, Ian Peters, identified exactly the same three causes as SSE did last week:

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Firstly wholesale gas prices continue to go up. We’re buying in a global market and demand is booming. Secondly the cost of moving energy around the UK through pipes and wires is also going up as we replace Britain’s energy infrastructure. Those prices are actually set by the energy regulator. And thirdly, the cost of the governments social and environmental programme are also rising. Taken together that’s about £2 a week.

He doesn’t give us many numbers so we can’t check his adding up, but he does make a point of saying that social and environmental programmes cost about £2 a week – which is more than £100 a year – which is a lot!

To check the numbers we have to go to the British Gas website and look for Key facts about British Gas, where we find exactly the same graphic The Telegraph ran three weeks ago on the second day of what The Guardian called the Big Six‘s “powerful and multi-pronged lobbying operation” to prevent Labour freezing their profits and breaking up their cartel:

British Gas Average Duel Fuel Bill

We converted those costs to percentages when we compared them with the breakdown the chief executive of Energy UK, Angela Knight, gave Channel 4 News on Day 1 of their campaign:

BRITISH GAS: COST OF AVERAGE DUAL FUEL BILL
Cost %
Wholesale Energy £568.00 47.81%
Network Delivery £283.00 23.82%
Operating Costs £104.00 8.75%
Social & Environmental £112.00 9.43%
Profit £49.00 4.13%
Taxes £72.00 6.06%
Total £1,188.00 100%

 
So now we can compare them with the breakdown SSE gave us last week:

COST BREAKDOWN OF AVERAGE DUAL FUEL BILL (£ per £100)
Br. Gas SSE Ofgem Energy UK
Wholesale Energy 47.81 52.00 46.00 47.00
Network Delivery 23.82 24.00 23.00 20.00
Operating Costs 8.75 6.00 13.00
Social & Environmental 9.43 8.00 9.00
Investment 10.00
Profit 4.13 5.00 5.00
Taxes 6.06 5.00 5.00
Total 100.00 100.00 101.00 77.00

 
So far so good! British Gas split their costs into the same categories as SSE and they’re in roughly the same ballpark. So how much have their costs actually gone up?

Unfortunately British Gas don’t seem to be quite so transparent about these numbers and none of the mainstream media are bothering to ask. Eventually this appeared in the British Gas twitter stream:


 
Using those percentages to calculate the price rises in each of the categories gives us this:

BRITISH GAS: COST INCREASES PER £100 BILL
£ Current % Increase £ Increase
Total Announced £100.00 9.20% £9.20
Wholesale Energy £47.81 7% £3.35
Network Delivery £23.82 7% £1.67
Social & Environmental £9.43 38% £3.58
Total Extra Cost £8.60
Not Accounted For £0.60
Overcharged 6.52%

 
The good news is that a 6.5% discrepancy is more like you might expect, confirming that our calculation of SSE‘s outrageous 49% mark-up was essentially correct.

One thing we forgot to factor into the SSE calculation is the 5% VAT due on the price increases. Adding that in and comparing British Gas with SSE gives us this:

COST INCREASES NOT ACCOUNTED FOR PER £100 BILL
Br. Gas SSE
Total Announced £9.20 £8.20
Wholesale Energy £3.35 £2.08
Network Delivery £1.67 £2.40
Social & Environmental £3.58 £1.04
Total ex VAT £8.60 £5.52
VAT @ 5% £0.43 £0.28
Total inc VAT £9.03 £5.80
Not Accounted For £0.17 £2.40
Overcharged 2% 41%

 
So British Gas are looking like the good guys here. A 2% discrepancy isn’t unreasonable, but SSEs 41% mark-up AFTER tax is every bit as outrageous as it was before.

So how did British Gas manage to get the numbers to add up so neatly when SSE failed so completely?

Well, comparing British Gas cost increases with SSE looks like this:

PERCENTAGE INCREASES PER SECTOR
Br. Gas SSE
Wholesale Energy 7% 4%
Network Delivery 7% 10%
Social & Environmental 38% 13%

 
Now that’s even more outrageous still! A rise in social and environmental levies of nearly 40% compared to SSE’s 13%? Surely at least one of the experts they wheel into the TV studios to explain these things has got to notice something wrong with that?

Watching the story unfold on BBC News some interesting clues started to slip out. In a clip of MP’s questions in the Commons, Energy Minister, Ed Davey, said:

I would urge British Gas to be more transparent about the increased policy costs that it’s blaming for these bill rises. We’ve looked at their original figures and we really question whether the policy costs that they claim are putting up the bill are the root cause.

Well, fancy that! The Energy Minister doesn’t believe the 38% rise in social & environmental costs either! So what’s he going to do about it? “Urge” them to be more transparent. Is that all he can do? How about forcing? As in: “if you don’t show us where you’ve hidden the money we’re calling the police!”

But from what Davey says in this interview, it seem that, when it comes to preventing big business from deceiving the public, he’s as helpless as the rest of us:

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Interviewer: British Gas say that almost half of the increase is due to the amount they have to pay for these sustainable costs which you the government are putting on these businesses.

Davey: Well I’m really surprised what British Gas have said because I asked them to be more transparent about this and to publish. I keep asking them but they don’t tell us how they make up these costs. And British Gas have got form and history…

Got form“? Does he mean like Tony Soprano has “got form“. If so, why aren’t they in jail?

The Guardian gave us some clues to that three weeks ago:

Current government policy, developed by the Conservatives while in opposition, was heavily influenced by two of the big six, EDF and British Gas-owner Centrica, according to industry sources.

“They were terribly helpful in spending lots of time writing policy for them,” said one source. “EDF and Centrica are now just an offshoot of Decc – they are all so in bed with each other they are indistinguishable.”

After the election, Centrica’s chief executive, Sam Laidlaw, was appointed to David Cameron’s business advisory council, while the prime minister’s current energy advisor in No 10, Tara Singh, is a former Centrica employee.

But the BBC isn’t interested in reporting on things like that. They have their own agenda to push, which today seems to be to blame the public for being too lazy to shop around and urge them to lock into fixed-rate tariffs before it’s too late.

The most obvious person to push that point of view would be the founder of MoneySavingExpert.com and former BBC journalist, Martin Lewis. So he’s next in the studio to be interviewed by Emily Maitlis.

Lewis is hot under the collar about the government urging consumers to switch suppliers because they’re all raising prices. Consumers should be looking for fixed-rate tariffs, not changing suppliers. Emily Maitlis looks pleased. This is real journalism for you. This is the kind of conflict that pulls in the audiences and puts all those cynics who say the BBC is in the government or Labour’s pockets to shame. This is why we need the BBC: to inform and protect the people by speaking truth to power.

If only she’d left it there! But she carried on milking it, as 24-hour news has to do these days. So she asks Lewis who is to blame for the price hike. Lewis says it’s partly government policy, partly the energy companies’ drive for higher profits but mainly the public’s fault for not doing anything about it. You mean for not shopping around? asks Emily, milking it to death. Not just that replies Lewis, getting even hotter under the collar. Privatisation obviously hasn’t worked, what we need is re-nationalization.

You WHAAAT??!? Did he just use the “N” word? I nearly fell out of my chair, and so did Emily Maitlis. I’d like to quote what he said exactly or, better still, show a clip. But unfortunately that’s something the BBC didn’t think was “newsworthy” enough to show again.

You won’t find the Martin Lewis interview on the BBC web page covering the British Gas story but you will find an interview with Tom Lyon from uSwitch urging customers to lock into a fixed rate tariff now, before the energy companies close them down.

It’s not just a matter of doing it this month or even this week. Do it today. Do it this afternoon. Find that five minutes it takes and you could fix your energy bills for up to four years.

Lyons says the same thing as Lewis except he doesn’t mention the “N” word which, for some reason, the BBC seems to think makes it a better news story. Why would that be I wonder? Am I the only one who thinks there’s something very fishy going on here?

I searched Google for some reference to the Lewis interview but couldn’t find any. I was starting to think it never happened until I found this tweet:

The disappearance of the Lewis interview convinces me there’s more to this than meets the eye, but I can’t imagine what it might be. Surely the BBC must know that three weeks ago the New Statesman reported that 69% of the public now support energy renationalisation?

That’s big news, surely? So why did the BBC drop the Martin Lewis piece in favour of Tom Lyons? Why are they so determined not to mention the “N” word and so eager to persuade consumers to lock themselves into fixed rate tariffs? And why are energy companies offering fixed rate tariffs in the first place? If energy prices will keep on rising for the next decade then surely fixed-rate tariffs would be a licence to lose money? Unless they know something the rest of us don’t know and there’s some catch hidden in the small print.

But one thing you can always be sure of is that, by the time any story reaches the News at Six, the corporate lobbyists working behind the scenes will have had it watered down and misdirected. The diversion competing for the headlines with British Gas this evening is George Osborne’s announcement that he “can see the Chinese becoming majority owners of a British nuclear power plant”.

In the short term that’s good because it means Chinese money and not British taxpayer’s money is being used to construct a plant like this. So we can use our money to construct schools and hospitals. And in the long term it will deliver stable and lower energy bills for families in Britain.

Against the background of threatened power cuts and the British Gas price hike that has to be good news, surely! Provided they don’t have any accidents like Fukushima and don’t have to evacuate the whole of Somerset, obviously.

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So when it comes to dealing with British Gas, instead of Lewis and the “N” word we have an unemployed man with a baby on the way telling us what we already know: that it will be harder to keep their heads above water and the energy companies don’t seem to care. That’s followed by a 10 second clip of Davey in the Commons saying people should shop around, but no mention of British Gas having “form”. It’s all done-and-dusted in 5 minutes and a third of that is the BBC‘s political editor, Nick Robinson, confusing the issue live from Palace Green saying that politicians have three crises to deal with: rising bills, climate change and the threat of power cuts.

By the time we get to Channel 4 News the British Gas bad news and nuclear good news have become fused into the same story:

So British Gas has become the second of the Big Six energy providers to announce massive price increases this winter, and it’s gone even further than SSE with an increase of a total of 10.4% in electricity charges and 8.4% in gas tariffs. The news came as the chancellor ended his visit to China with the announcement of Chinese investment in a planned new British nuclear plant. But it can’t come to soon to avert the threatened power shortages in the next few years.

The focus returns to British Gas later on when Jon Snow tells Energy Minister, Greg Barker, that customer are being “robbed” and Barker agrees “absolutely”. So what’s he going to do about it? Call in the Competition Commission to break up the monopoly of the Big Six? Unfortunately not. He wants to get rid of the regulations, not enforce the ones we’ve got. What the government has done he says is “made it easier to switch and bills easier to read” and they’re encouraging people to vote with their feet and go to another supplier.

Which is all well and good, but it raises one obvious question that no one in the mainstream media seems interested in addressing. Why would any company want to outdo its competitors by raising prices higher and driving more customers away? Only if they knew their customers really had no choice.

And Labour wouldn’t do much better. They might freeze prices for a while and move the Ofgem‘s office furniture around a bit, but Shadow Energy Secretary, Caroline Flint, steadfastly refused to answer Jon Snow’s question when he asked if Labour would call in the Competition Commission. And nobody mentioned the “N” word. That’s completely off the agenda.

Any hope that it might sneak back on the agenda was firmly dismissed a couple of hours later by David Dimbleby and the panel on BBC Question Time.

The first question, “is the government too weak to stand up to the energy companies?” was a good start, but things quickly went downhill from there when David Dimbleby gave the first word to the Daily Telegraph’s chief political commentator, Peter Oborne, who pooh-poohed the idea of “illicit skulduggery” and “an energy company cartel”, in a way that only Cambridge history graduates can, as:

“a return to the illiterate economic arguments we used to get in the 1970s and 80s.”

“The fact is we have a capitalist system in this country. It depends on supply and demand and the reason energy prices are going up is nothing to do, as far as I can see, unless somebody can prove it, with the greed of the energy companies. It’s to do with movements in global energy prices, which we’re stuck with.”

Which is strange. Not least because we’ve known for at least a week now that global energy prices have gone down, not up. What more proof does Oborne need? Eliminate the impossible, as Sherlock Holmes said, and whatever remains, however improbable, must be the truth.

But it’s stranger still because, as a good-old Sherborne public school boy, Oborne should know better than anyone how cartels work. Because in 2005 Sherborne was one of 50 top public schools found guilty of running an illegal price-fixing cartel!

Labour Shadow Education Secretary, Tristram Hunt, coincidentally a Cambridge history graduate himself, was able to put Oborne straight:

“The thing about capitalism is it consolidates power and wealth. And if you want it to work for the majority of people then you have to have a hand on the tiller. Which is why we have competition law and regulation law. And what we’re saying, in the Labour party, is that we want to break up the control that the Big Six have, which is racking up energy prices.”

Which sounds promising, except if Labour really did want to enforce competition law then why wouldn’t Labour’s Shadow Energy Secretary, Caroline Flint, have said that when Jon Snow asked her if Labour would bring in the Competition Commission only a couple of hours ago?

Any hope that Labour would break up the monopoly of the Big Six was quickly put to rest by Conservative Immigration Minister, Mark Harper, a former employee of one of the Big Four global accountancy conglomerates, KPMG, who reminded us who gave us the cartel in the first place:

What Tristram says would be more compelling if, when Labour was in power [and Ed Miliband was Energy Minister] we hadn’t started with fourteen energy companies and ended with six.

Tristram sets his jaw squarely against the onslaught, looking like Prince Harry in Afghanistan, and holds his fire until Harper’s ammunition runs out:

The second biggest buyer of gas in the UK is Deutsche Bank. Now I don’t know how much gas Deutsche Bank uses but I imagine it’s very very little. So what you have there is a market where they are racking up prices.”

Now that’s something I haven’t heard on the mainstream media before and would like to hear a lot more about. How the banks are leveraging our bailout money and paying us essentially zero interest to corner the energy market and cream off a large profit for themselves by pushing prices up.

But just when it’s starting to interesting Dimbleby decides to change the subject:

“Alright,” says Dimbleby, “let’s just hear from some of the members of our audience.” But, unfortunately for Dimbleby, the first lady he comes to brings up the “N” word:

Is it fair to say that privatization of the energy companies hasn’t worked and that the only way to bring down prices is to … erm to … re-nationalize them?

Well, you could hear a pin drop. “Is that your view?” asks Dimbleby. The lady nods a firm yes. “Let’s just hold onto that,” says Dimbleby, meaning lets forget it as quickly as we can.

The lady three rows from the back wonders how many of the CEOs of these big energy companies worry about paying their fuel bills when they come through the door. The audience applauds.

The man in the blue shirt doesn’t ask a question, he rambles at length about how Peter Oborne was probably right and Labour is to blame. Instead of cutting him off and asking if he has a question, Dimbleby starts interviewing him instead.

“But do you think the government can stand up to the energy companies?” asks Dimbleby.

“I don’t think they should stand up to energy companies they should get out of the way of energy companies and start putting it on taxes.”

Convenient, don’t you think, that the last question ends on exactly the same message Energy Minister, Greg Barker, was pushing on Channel 4 News just a couple of hours ago?

Dimbleby goes next to Diane James from UKIP who, surprise surprise!, doesn’t answer any of the audience’s questions but pushes her own party line instead:

“This blame culture worries me a little bit. You know, we’ve had bash the bankers, now we’re bashing the next sector in the economy.”

Having not had an answer to two of the audience’s questions so far Dimbleby decides to ask for more. The woman in the front in green asks if the price rises mean we’re going to have to see “winter coats, blankets and candles as well as food at the food banks.”

“OK,” says Dimbleby, turning to playwright Bonny Greer. “Don’t dwell too heavily on the food bank side because we might come to that later.”

Although Bonny Greer says she doesn’t have a “strong, long, comprehensive answer to fracking and all this” she hits the original question “is this government too weak to face up to the energy companies” right on the head:

“No, it’s not weakness, it’s a matter of priorities. This government is interested in Britain PLC. It wants to shrink the state and it wants to make us actually stand up and be grown up and handle it while they reshape the country. So I think it’s frankly a matter to see how long we can take it and if we can take it. So I don’t think we’re going to see them stand up to these companies because they don’t attack the financial sector. They’re much more interested in doing it to us.”

“See how long we can take what?” ask Dimbleby.

“Well, see how long we can, as this lady was saying, be cold to be honest with you,” replies Greer. “This government is more interested in big business, in helping business and appearing to be the friend of business and not necessarily on the side of the consumer or the population.”

“OK,” says Dimbleby moving swiftly on to get more audience questions.

The discussion ranged far and wide for more than a quarter of the programme, covering everything from bringing back coal to fracking and nuclear power. And throughout it all nobody mentioned the “N” word ever again! Was that an accident do you think?

In the end, Peter Oborne said the problem was democracy:

“We have got to understand there are certain issues where democracy is an absolute impediment. So, instead of listening to winging from left wing politicians about cartels which don’t actually exist, let’s have a bit of long term thought please Mr Hunt.”

So Oborne doesn’t believe cartels exist, and rather than using democratic powers to break up the cartel’s totalitarian monopoly he’d rather break up democracy instead. Coming from a public school boy who’s alma mater was found guilty of running a price-fixing cartel that’s just a bit rich, don’t you think?

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