Friday, 5 September 2008

Utility Companies Lie and Drain Us Dry

I suppose it does not need me to draw attention to this fact, as anyone living in the UK, unless you are a multi-millionaire, will be aware of how expensive gas and electricity is becoming for consumers. This is very much a posting on the basis of anger management to tap off a bit of my fury at the incredible greed of utility companies in the UK.

The bills for the average house (usually reckoned to be a 3-bedroomed house with two adults and two children) has risen from around £900 (€1098; US$1584 using current exchange rates as the pounds has fallen a lot since then) at the start of 2008 to £1200 (€1464; US$2112). As we have a cartel in the UK, all of the suppliers have raised their prices to the same level, though British Gas (despite the name, it used to be a state-run company, it also supplies electricity) with 11 million customers, the biggest company, charging the highest and giving a 35% increase in one go last month. There is no competition in the UK for energy supplies. You can shift from one to the other, but there is in fact very little difference between them. Like other utility companies, they also now lock you into a contract. Despite it being summer and us using less gas and electricity (and us going to great efforts in this house to reduce consumption, our electricity consumption is 1000 KwH (kilowatt hours - literally 1 kilowatt being used for an hour, that is 16 x 60-watt bulbs being left on for 1 hour) per quarter than the previous people who lived in this house) I am still paying exactly the same as I did in January. If I have over-paid, which I am doing each month, I may get it back at the end of the year, by which time the company has been earning interest on it.

No wonder companies from outside the UK are interested in buying into the British market. EDF Energy has appeared as a leading player, EDF actually stands for Electricite de France. This is 85% owned by the French Government; it used to be their largest nationalised industry. The Spanish company, Iberdrola took over Scottish Power in 2006 and of the other 'Big 6' energy suppliers in the UK, only Centrica (which owns British Gas) and Scottish & Southern Energy are in British hands, the remaining two, E.ON and RWE are owned by German companies. This means they have refused to comply with government steps to provide fuel vouchers for poor customers or to pay windfall taxes. The British owned companies have said they will comply, probably because the government can exert more moral pressure on them, but as yet, no provisions for helping those in fuel poverty (spending more than 10% of their income on heating and lighting) have been announced. The jump of a third in bills this year, has shoved many more millions of people into this category and it will not only the elderly but young families and single working people who also will not be able to heat or light their houses. What is the point of trying to get the UK the most internet-connected country in Europe when people cannot afford to pay for the electricity to run their computers? How many more people dead from the cold are going to be found this winter?

Of course the energy companies have said it is because of increased oil and gas prices. These did rise sharply but have fallen back by 25% from their peak, though of course we have seen no impact on domestic energy prices and only a saving of about 10% of petrol prices, less on diesel. The companies whine about their profits being squeezed, but announcements today of dividends paid to shareholders shows the complete opposite has happened, their profits have just kept growing. This comes from the BBC website but I am sure it is all over the internet. Of the Big 6 all have raised dividends. The figures compare 2006 and 2007. Centrica dividend payouts went from £408 million to £478 million (€583 million; US$841 million at current exchange rates); Scottish & Southern from £400 million to £474 million; RWE (which owns NPower) went from £37 million to £250 million, EDF (bearing in mind that only 15% of it is not owned by the French government) went from £105 million to £110 million (€134 million; US$194 million, out of a total profit of €5.61 billion for 2007. The British public are actually subsidising the French Government! In France the government only let it raise prices by 1.5% for French consumers) and E.ON went from £0 dividends in 2006 to £250 million. So where is the poverty among energy companies. Scottish Power which kept its rise in bills back until the last moment this year cut dividends from £427 million to £83 million, but that probably reflects the takeover in 2006 and the need for it to re-invest a great deal at that stage. I predict their dividends will be back up this year.

So, all this stuff about price rises cutting profits is a lie. It does not matter if their margins are squeezed for a few months in 2008, they have made more than enough money in the past 2 years to tide them over for another five years, not just one blip. This is incredibly insulting. We are being compelled not to keep these companies from bankruptcy, but to keep up the earnings of their shareholders. People are going to be suffering ill health and people are going to be dying so that the shareholders and the directors of these companies see no dip in their vast earnings.

If I was Gordon Brown, I would do the following. An immediate windfall tax, taking equivalent to 25% of the dividends paid out to shareholders. I would threaten any company that did not comply with nationalisation, with no compensation. I would compell all companies to slash prices back to the level at the start of 2008, end fixed contracts and move to billing which took account of the income of the consumers. There is no point the Bank of England tweaking the interest rates at all, when basics like heat and light (and of course food as well, but that is for another posting) are rising. You cannot reduce the inflationary pressure just by raising interest rates, when what is boosting prices are things that people pay for out of their basic income, not usually from loans (if they are are at the stage when they have to borrow money just to pay for heating and lighting, they are beyond worrying about interest rates). Of course this will not happen. Yet again, we are shown that actually the government has no power to contest the will of big business. Ironically Sakozy's government in Paris could make a greater impact on energy prices in the UK that Brown's in London can.

How immoral a society have we become when companies are in a position to kill people (and this is what they are doing to elderly people, look at the mortality rates this Christmas) for the sake of not just profit but super-profits. We are nothing more than the scum on the feet of the fat cats of the utility companies. Their cartel was handed a monopoly power because we cannot get energy from other sources. The much vaunted competition that was supposed to keep prices down has proven to be a farce (as anyone could have told you, in a monopoly position, you get cartels and unlike the USA, the UK has no anti-trust (i.e. cartel) legislation to prevent this). Greed, massive greed in the UK is killing ordinary people and yet those who challenge this or call for something else are condemned as the ones who are 'wrong' in trying to restrict 'free' enterprise. This is an immoral country when that is seen as the 'correct' approach. We have no choice but to suffer it and in 2008 you will see many people dying for it. Later this year when you look out on your street and see the coffin of the old woman from the house at the end of the road or the flat downstairs from you, know what killed her: fat men enjoying a hearty lunch in front of a roaring fire in some exclusive restaurant, no-one else.

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