It is my opinion that the British Energy Market is in dire need of a major national rethink. I strongly believe the privatisation of our vital energy and infrastructure services especially Gas, Electricity, Water and Coal, has not had the intended long term benefits that were implied when the essential services were sold off in the twentieth century
The fragmentation of the services has led to substantive dividends for the companies share holders, which can only have been generated by increasing prices to customers over and above that needed to maintain and develop the services. One company reckons its tax burden on profits represents an annual average cost of £138 per household! That means the actual cost to each household to fund taxation and shareholder dividends must be more more like £250 to £300. Whilst this may be the largest indicated value for one company, similar processes must apply to all these privatised service providers, so the excess we are all paying for the privilege of privatised essential services is likely to be close to an average £750 per household per year - for which we see nothing at all.
One of the biggest selling points that was given during the big sell off's was that privatisation would bring competition which would drive prices down, and keep them low. Well yes to some extent that did happen. Most of the operators achieved this by making economies elsewhere in their organisations, for example by selling off installation and maintenance divisions. But the down side is that we now have a multitude of smaller companies who individually are not big enough to be able to negotiate the lowest raw material costs, or they have reduced their bulk purchase volumes rendering them more exposed to short term price changes in raw materials.
The knock on effect is that as a nation we do not hold any significant reserves, and that customers are subject to more frequent price changes, and price differentials between suppliers can be quite marked.
Companies try to mask their price differentials by offering overly complex deals, which prevents most users form actually making fair comparisons between offers and getting at what real value they are getting for their money. We also know that some of the companies have employed unfair selling tactics, making verbal claims which are not substantiated when the deal is closed. This is another common occurrence when too many providers are fighting over the same customers. We have created a whole new industry - 'Switching' An economist I know has estimated the cost of running all these switching services (not just energy suppliers, but telecom and insurance etc) could easily be in excess £1B which is paid for by us. Do we need it?
Comments welcomed
The fragmentation of the services has led to substantive dividends for the companies share holders, which can only have been generated by increasing prices to customers over and above that needed to maintain and develop the services. One company reckons its tax burden on profits represents an annual average cost of £138 per household! That means the actual cost to each household to fund taxation and shareholder dividends must be more more like £250 to £300. Whilst this may be the largest indicated value for one company, similar processes must apply to all these privatised service providers, so the excess we are all paying for the privilege of privatised essential services is likely to be close to an average £750 per household per year - for which we see nothing at all.
One of the biggest selling points that was given during the big sell off's was that privatisation would bring competition which would drive prices down, and keep them low. Well yes to some extent that did happen. Most of the operators achieved this by making economies elsewhere in their organisations, for example by selling off installation and maintenance divisions. But the down side is that we now have a multitude of smaller companies who individually are not big enough to be able to negotiate the lowest raw material costs, or they have reduced their bulk purchase volumes rendering them more exposed to short term price changes in raw materials.
The knock on effect is that as a nation we do not hold any significant reserves, and that customers are subject to more frequent price changes, and price differentials between suppliers can be quite marked.
Companies try to mask their price differentials by offering overly complex deals, which prevents most users form actually making fair comparisons between offers and getting at what real value they are getting for their money. We also know that some of the companies have employed unfair selling tactics, making verbal claims which are not substantiated when the deal is closed. This is another common occurrence when too many providers are fighting over the same customers. We have created a whole new industry - 'Switching' An economist I know has estimated the cost of running all these switching services (not just energy suppliers, but telecom and insurance etc) could easily be in excess £1B which is paid for by us. Do we need it?
Comments welcomed
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