Unacceptable Corporate Blackmail

Imagine the following scenario:  The British government and other political leaders receive threats from a small group of wealthy men that unless they keep allowing them to squeeze money from the general population for the foreseeable future, these men will cut off the power supply to the UK.  It sounds like a plot from a spy novel of the 1970s, but is in fact the situation that the UK is in today.  It is not SPECTRE but the six main power companies who are making such threats.  Back in September leader of the Labour Party said at the party conference that if Labour won the next general election, which will not be held until 7th May 2015, they would impose a 20-month price freeze on the charges for gas and electricity supply to consumers.  Now, at the time it was still 19 months until the election and there is no guarantee that Labour will win.  However, just making this policy statement was sufficient for the leaders of the the 'Big Six' : British Gas, EDF, E.ON, npower, Scottish Power and SSE to say such a policy would lead to blackouts. 

Given that four of these companies are foreign owned; they said that they would withdraw from the UK market place. EDF belongs to the French government; Scottish Power is owned by Spanish company, Iberdrola; E.ON is German and npower is owned by RWE of Germany.  They blame the wholesale prices, even when these are falling; they blame the taxation raised to try to promote sustainable energy initiatives, they blame everything except their own greed.  These six companies have made made more than £2 billion (€2.4 billion; US$3.22 billion) every year for the past four years, rising to £3.74 billion in 2012.  This year prices to consumers on both gas and electricity are rising by an average of 9% whereas wholesale prices have risen between 1-2%, so it is likely that they will exceed last year's profits this year.  They claim they only make 5% profit on what they sell.  When this is generating billions of pounds of profit, year after year, you could fall to 1% profit and still be incredibly wealthy.

The complaint from the power companies, is that they lack capital for investment.  However, it is clear that if rather than paying their chief executives and their shareholders big sums they actually invested in the business this would be not an issue.  Phil Bentley, CEO of British Gas, led got a salary of £1.3 illionm in 2010, plus share options worth £2.7 million at the time.  Ian Marchant  of SSE got £1.2 million, plus £126,000 bonus in shares and 330,000 shares worth £4 million at the moment; his pension in 2011 was worth £6.1 million.  Johannes Teyssen, CEO of E.ON, has salary of £860,000 in 2010 but including bonuses and share options raised this to £3.6 million.  These are just the men at the very top, not the numerous executives and managers beneath them who all receive generous payments which could pay for all the power going into a small town for a year.

Once again, today, as reported on BBC Radio 2, npower has spoken out saying blackouts are inevitable unless Britain has a 'more stable' political context.  Now, this to me, sounds very like a company trying to dictate Britain's government, it can be taken as suggestion that democracy is too troublesome for the power companies and something like a dictatorship which panders to their greed and lets them keep ramping up prices for consumers, year after year, unchallenged would be better.  If a foreign politician said something similar you can imagine the outrage.  A few weeks ago the wife of an executive from an energy company said that there needed to be a 'serious conversation' about investment and more money coming to companies for it.  I said that her husband should simply be arrested for threatening the British state.  Why can someone tweet a joke about terrorism and be arrested and yet, these company executives can come on the television and radio week-after-week and continue to threaten damage to the UK economy without even being challenged let alone arrested?  It is clear that there is one rule for the hyper-rich and one for the rest of us.  The cockiness after the first assault following Miliband's speech in September is apparent that now the power companies feel they can begin to try to shape the political context too.

Yes, there are major problems with generating electricity in the UK.  There are two key sources of this.  Both the Labour governments 1997-2010 and the current coalition have failed to drive ahead with developing new power stations of any kind.  They vacilated because they are torn between making sure enough electricity is generated and their obligations to sustainable energy.  Surprisingly, unlike our European neighbours, especially in Germany and Denmark, Britons are largely hostile to sustainable energy approaches.  The campaigns against wind farms are far more extensive and successful than any campaigns against nuclear, gas or coal power stations being built.  Greed does have an impact as EDF held out for its set price for the electricity it will generate from the nuclear power station it is building.  The price will be £89.50 per megawatt hour once the station is complete, twice the current level.  Of course, this is blackmail.  The cost to the consumer can do nothing but rise, but there is nothing that government let alone the consumer can do to resist this.  We can switch suppliers, but it is a cartel.  Some smaller companies are appearing but as yet they cannot challenge the marketplace the way was possibly fantasised about when private companies were allowed this oligopoly. 

We have to commend Miliband for his bravery in standing up to the companies.  It is certainly a vote winner.  However, with the corporations now making political points and in fact trying to threaten any future government both in terms of what policies they will permit it to adopt and indeed the entire 'political scene', we can argue that democracy is being eroded before our eyes.  I was concerned during the Blair regime especially with the attacks on human rights in the UK, that this process was happening or that it would be driven by the Murdoch empire.  However, I had overlooked that other big corporate players were happy to follow in the footsteps of News International and try to shift the political patterns more to their liking, and, indeed being pretty successful about it.

Utility Company Holding On To My Money

The behaviour of utility companies has been a perennial concern of mine, prompted when the deign to send me a bill: http://rooksmoor.blogspot.com/2007/05/uk-utility-companies-cash-vampires-of.html  The constantly rising prices are well known to everyone in the UK and cause real difficulty for millions of people, even when we are having an incredibly mild winter like we are at present.  It is ironic that global warming may be sparing the lives of thousands of British elderly people.  Utility prices rise whenever there is some crisis that increases the cost of gas and oil and that they do not decrease when these costs fall; our monthly combined gas and electricity is now equal to what our quarterly bill was in 2008.  In addition it is clear that the six power utility companies are running a cartel unchallenged by anyone.  All their prices rise by approximately the same amount at the same time of the year with an increase of around 20% in 2011, well above the increase in pay and even general inflation.

What I am focusing on today is not simply the rising prices, but in particular the way customers are treated.  There now seems to be an accepted way that service providers feel they can treat you.  They are not compelled any longer to even provide a service for what you pay them let alone one which is timely and efficient.  This applies to things like telecommunications and rental property as well as other utilities.  If you are disgruntled with them, you find it difficult to break a contract that they insisted was the only terms you could sign up for and they feel free to levy all kinds of charges to get away from them even if they are failing to provide the service.  I have also noted before how these days you pay in advance for so much and how this actually works against people being efficient in their usage of gas and electricity because with the fixed monthly rate you do not see any gain for yourself especially if on rental contracts of less than two years that are so common:  http://rooksmoor.blogspot.com/2010/06/annual-utility-bills-no-incentive-to-be.html

I live in a house in which we economise as much as we can in terms of utility usage not simply in an (often fruitless) effort to keep bills down but also because we are aware that humans are causing damage to the world through excess usage of finite resources.  We tried to have solar panels installed but out roof proved to be the wrong shape which suggests to me that people should be working on all kinds of shapes of panels if we are really going to make a break through for renewable energy.  The halving of the government incentive to have panels installed is damaging in so many ways, notably in raising unemployment in the private sector which is supposed to be soaking up job losses from the public sector and slowly down an improvement in our 'fuel security'.  Fuel security is something the British government has been obsessing about at least since the 1960s and focuses on how Britain can ensure it has enough fuel to power its industry and domestic sector.  As Britain moved steadily away from the consumption of domestically produced coal from the mid-1960s down to 1985 and the North Sea oil reserves were depleted there was a renewed awareness of a need to secure sources of oil in countries friendly to the UK.  This is nothing new and was on the agenda particularly 1967-73 where turbulence in the Middle East led to the cutting of oil supplies and then a substantial price rise which ended the post-1945 economic boom for good.  Fuel security has been what has motivated US and UK involvement in Iraq, probably in the Libyan revolution too; British involvement in Nigeria and US concerns in Venezuela.  The complicating factor compared to the 1960s that China too is securing fuel resources by heavy investment in any country which will accepts its money. 

Government subsidies to install solar panels right across the country would secure and increase jobs as well as help reduce the UK's fuel insecurity through reducing dependence on fossil fuels from countries which might not like us.  As I have noted before: http://rooksmoor.blogspot.com/2010/01/what-if-uk-had-handled-oil-shock-of.html  Britain gave away its lead in sustainable energy.  However, in Derby recently I saw a line of small scale turbines on the roof of an office building that were providing electricity to the building.  Britain lags behind building wind turbines along motorways the way the Germans do and can be achieved without even having to upset the powerful pretty-England lobbyists.

Anyway, solar power is currently out for our house.  This means we remain dependent on one of the six companies and their authoritarian approach to pricing and charges.  For the last twelve months we have paid £140 (€167; US$217) each month.  Our consumption of gas has risen probably due to the cold period in January compared to 2010 but our consumption of electricity has fallen.  In 2010 we ended the year with £277 in credit, i.e. we had paid them £277 more than was due for the amount of gas and electricity we had used.  I contacted the company, Scottish Power, to ask for a refund but was told that was not possible as our consumption might rise.  So, they were saying that they were holding this money to hedge against us suddenly consuming more.  This makes their statements that readings are important so that we 'only pay for the fuel you use' utterly ridiculous.  Instead we are simply giving them a set amount of money and they take out what they feel they need. 

The invidious nature of this has been revealed this year.  For 2011 we ended the year £582 (€692; US$902) in credit to the company, so they now have an additional £305 of mine for fuel of theirs I have not bought.  On this basis the more fuel I save this year the larger that sum will rise.  I have enough credit with them to pay for all our gas and electricity until mid-April 2012.  However, if I stop paying penalty charges will be levied on me.  You might think that on this basis they might reduce my standard monthly charge, but no, it has been set again at £140 per month.  I guess I should be grateful that the monthly charge has not risen but I am resentful that the company is holding on to my money gaining interest on it in their account when that is money which could feed my household for more than two months.  At the rate we are going within two years I will be paying a whole year in advance for my fuel.  I can see that is in the utility company's interest but it is certainly not what the majority of us would consider good customer service. 

You have to step outside the world of utility companies and their warped mindset to see how greedy and twisted their approach is.  Imagine I went into a supermarket and when I arrived there they took £140 from me.  I then proceed to spend £100 on food.  When I reach the till, rather than be refunded the £40 that I have not spent, the shop holds on telling me that they need it just in case more than two years from now I might suddenly spend some extra on one of my trips.  Surely if I do then they can charge me more.  The amount of cash that utility companies must be holding for resources they have not provided to the customer must be in the millions.  They do not seem to be investing it in improving their provision and they are certainly not reducing prices to customers.  Fuel poverty now affects 5.5 million people in Britain up from 3.8 million at the end of 2010.  Partly this is due to the fact that household incomes fall as all costs rise, pay in many cases is actually falling and unemployment continues to rise.  To me it seems that the only way I can get my money back is to say that I am leaving Scottish Power and moving to another company, presumably, though I have not put this to the test, they would be compelled to pay me back the excess money they have taken from me.  Much of the focus is on the price that we are charged for the utilities we use, but pressure also has to be brought to bear on companies for how they charge us especially for fuel we have yet to use.

P.P. 09/01/2012
Well, I am pleased to say that by threatening Scottish Power with moving my account to another provider they have agreed to refund me £440 in two stages.  I received the £40 last week and should get the £400 by 17th January.  They have also reduced my monthly payments from £140 down to £90, thus by the end of the year I will be £1040 better off.  Now, that is a reward for using less gas and resources and has come at just the perfect time to deal with all the New Year bills.  What is irritating is that it has taken pressure spread over two years plus a threat to move my account to get my money back when, in my view, they should be attentive to these things and do them unprompted.