Industry | 2010.02.24
Power firms accused of profiteering from cold winter
ScottishPower and British Gas among winners while charities warn of customers struggling to pay winter fuel bills
Power companies have been accused of profiteering from the coldest winter for 30 years after a surge in corporate profits.
ScottishPower, which has more than 5 million British customers, saw profits rise by 7.9% last year amid fears that many people could not afford to heat their homes during the bitter winter. Results tomorrow from British Gas, the country\'s biggest supplier of gas and electricity with 15.6 million customers, are expected to show that operating profits rose 46% to £554m, up from £379m in 2008.
The increases were condemned by unions, customer groups and charities representing the elderly, and follow warnings this week from the regulator Ofgem that companies boosted margins by £30 for each dual fuel customer in the last three months as wholesale costs fell.
Gary Smith, national officer at the GMB union, said: "Buying cheap and selling dear will always add up to high profits in a natural monopoly. No great managerial elan or skills are needed. It is long overdue that the government should step in and take control of the energy sector and put in place proper plans for secure supplies at reasonable prices as happens in the rest of Europe."
David Hunter of McKinnon & Clarke, which buys energy for businesses across Britain, said: "Despite wholesale prices going into freefall, ScottishPower hasn\'t cut domestic standard tariffs in almost a year. Failure of the big six suppliers [British Gas, EDF, npower, ScottishPower, Scottish and Southern, and E.ON] to pass on to customers the massive reductions in wholesale energy prices which they have been enjoying since 2008 is scandalous."
The National Energy Action lobby group said it was expecting prices to rise so fuel firms could cover the cost of new infrastructure and urged Ofgem to act. "Households on the lowest incomes … will now be wondering why the energy suppliers\' profits have increased so much this year, especially when the price of wholesale energy continues to fall," said a spokeswoman.
Help the Aged wants the government to introduce a mandatory social tariff to ensure vulnerable households are protected from soaring bills next winter.
Since summer 2008, wholesale gas prices have dropped from a peak of more than £1 a therm to about 38p, with electricity falling from £90 a MWh to about £37 – falls of some 60%. But costs to homes are up to 40% more for gas and 15% more for electricity than before the big price rises of 2008, according to McKinnon.
British Gas became the first of the main players to lower gas prices recently with a 7% cut for its eight million customers, but Scottish Power has not cut prices since last February, when it reduced average gas bills by 7.5% and electricity bills by 3%.
Michelle Mitchell, charity director of Age Concern and Help the Aged, said the increase in profits came at a time when many households with older people were worrying about how to pay heating bills. "MPs and energy companies should be working at full speed to introduce a new system of mandatory social tariffs to shield lower-income households from fluctuations in energy bills," she said.
ScottishPower, which is owned by the Spanish firm Iberdrola, denied that it was profiteering, saying the profit increase could be attributed largely to cost-cutting. "Profits were up by 8% but costs at the company were reduced by 8% due to a new unified IT system being introduced," said a spokesman.
But Hunter said: "Competition just isn\'t working for the consumer – they have a choice of high prices or high prices. The big six energy companies have a stranglehold on both energy generation and supply. The small and insufficient reductions they will probably make over the coming weeks are a case of \'follow my leader\' – the regulator Ofgem has already indicated that the others often wait for British Gas as first mover."
For more information, please visit
http://www.guardian.co.uk/business/2010/feb/24/energy-companies-profits-rise
Sesen Launches to Advance Life Sciences Globally With Specialized Language Translations views: 1544
Instagram is adding automatic in-app text translation - The Verge views: 1524