Smart meters again

[otherclive]

Thanks for the correction / reminder. Centrica is of course the conglomerate name for the company that extracts gas on a global scale (amongst other things) and British gas is the UK retail arm that sells to consumers and businesses. I am stunned that they still made £72m on retail - unless BGr also has some generation? Now I am guessing...

The Centrica CEO stated this morning that British Gas Energy invested £75m in supporting customers in 2022, which they state is greater than the £8 post tax profit per customer earned by British Gas Energy. Sort of puts the figures in perspective. But I guess the media will be baying for an increase in windfall tax, when since one was introduced recently several companies have stated their intention to reduce investment in our offshore oil and gas fields, particularly those that are marginal. Viz Harbour Energy :


harbour-energy-says-it-will-cut-jobs-due-uk-windfall-tax-2023-01-18

 

[Buckman]

It doesn't help ordinary customers that some energy retailers are just that, a retailer, who are all having a hard time with many going bust while others include an energy producer of gas or electricity who are making big profits from the increase in energy prices but also make big losses when the prices go the other way and spend their profits on investment in future energy supplies.

I don't know how (I'd be Prime Minister if I did) but we need to move away from the business model where all forms of energy are priced at the same level as the most expensive - each form of energy should be priced based on actual costs.

Many of the "smaller" energy retailers or suppliers bought from one of the Big Six that included Octopus at one time when Octopus first started off and it took a number of years. I don't think Octopus can buy from the pool, but their SSE arm that they took over 2- 3 years ago can buy from the pool?

To take over the smaller energy supplier business at some point ,all the Big Six supplier to the smaller supplier had to do was wait until the smaller supplier had sufficient customers and then increase the price of the kwh that they were selling to the smaller supplier who then went bust.

End result was that that Big Six supplier than took the smaller suppliers customers and added that to their catch. Energy supply is a cut throat business!

 

[Buckman]

The Centrica CEO stated this morning that British Gas Energy invested £75m in supporting customers in 2022, which they state is greater than the £8 post tax profit per customer earned by British Gas Energy. Sort of puts the figures in perspective. But I guess the media will be baying for an increase in windfall tax, when since one was introduced recently several companies have stated their intention to reduce investment in our offshore oil and gas fields, particularly those that are marginal. Viz Harbour Energy :


harbour-energy-says-it-will-cut-jobs-due-uk-windfall-tax-2023-01-18

I would think that £75m is drop in the ocean when talking billions? Windfall taxes have never worked in the long term as all the manufacturer does is increase prices to cover the windfall tax loss. Consumer loses again!

 

[Jcloughie]

As a slight aside. Guy Martin has just started a series of programmes on energy generation. Well worth a look at IMHO. And not overly technical.

Seen 'Guy Martin's Great British Power Trip'? Watch it here on All 4:

https://www.channel4.com/programmes/guy-martins-great-british-power-trip?cntsrc=social_share_ios_guy_martins_great_british_power_trip

In the first programme, one part shows the distribution and maintenance of lines. Evidently, it only costs £20 per household to cover cost of distribution.

John

 

[Tobes]

The Centrica CEO stated this morning that British Gas Energy invested £75m in supporting customers in 2022, which they state is greater than the £8 post tax profit per customer earned by British Gas Energy. Sort of puts the figures in perspective. But I guess the media will be baying for an increase in windfall tax, when since one was introduced recently several companies have stated their intention to reduce investment in our offshore oil and gas fields, particularly those that are marginal. Viz Harbour Energy :


harbour-energy-says-it-will-cut-jobs-due-uk-windfall-tax-2023-01-18

I just heard a piece on this on World at One. The £72m profit made by BG was just 2% of the profit made by Centrica.

 

[otherclive]

I just heard a piece on this on World at One. The £72m profit made by BG was just 2% of the profit made by Centrica.

Yes and I heard on BBC that Centrica cannot sell energy to British Gas at lower price than it sells to other customers. It’s law enforced via CMA.

 

[Jcloughie]

The news report I heard this lunchtime reported that Centrica made x billion. But this was not qualified in any way. So the inference was this was all generated from the UK.

John

 

[ProfJohnL]

All the previous post show how difficult it is to unravel the details of large businesses finances and the profits they may make. Each business will have their own budget plan which makes certain educated guesses about the costs of running the business, and based on those assumptions and the expected volume of business they set the price of their products which if it follows the predictions will generate a level of income to cover costs, and generate a surplus which funds dividends etc.

You cannot blame the business if one of their major costs changes so dramatically due to external influences.

If a business makes greater surpluses, they will already pay more in tax, I'm not in favour of windfall taxes, as they distort the businesses financial planning, and which ultimately the customer ends up funding.

I'm left wondering what the answer is. Regardless of any political polarity, I actually believe it was wrong for the nationalised Gas, Electric and water ( and Telecoms) essential industries to have be privatised, becasue that changed their mission from only supplying services to the nation, to generating profit for shareholders.

I do concede that in their nationalised form, they were less efficient than they could be, but there is absolutely nothing stopping a nationalised industry from periodically revising their methods to be right up to date.

If as a result of external causes they produced a bumper profit then that would all go to the exchequer rather than via shareholders.

 

[RogerL]

All the previous post show how difficult it is to unravel the details of large businesses finances and the profits they may make. Each business will have their own budget plan which makes certain educated guesses about the costs of running the business, and based on those assumptions and the expected volume of business they set the price of their products which if it follows the predictions will generate a level of income to cover costs, and generate a surplus which funds dividends etc.

You cannot blame the business if one of their major costs changes so dramatically due to external influences.

If a business makes greater surpluses, they will already pay more in tax, I'm not in favour of windfall taxes, as they distort the businesses financial planning, and which ultimately the customer ends up funding.

I'm left wondering what the answer is. Regardless of any political polarity, I actually believe it was wrong for the nationalised Gas, Electric and water ( and Telecoms) essential industries to have be privatised, becasue that changed their mission from only supplying services to the nation, to generating profit for shareholders.

I do concede that in their nationalised form, they were less efficient than they could be, but there is absolutely nothing stopping a nationalised industry from periodically revising their methods to be right up to date.

If as a result of external causes they produced a bumper profit then that would all go to the exchequer rather than via shareholders.

IMO the main problem is tying the price of energy to the most expensive source, at present gas as this takes away all the competitiveness between energy generators.

 

[Tobes]

All the previous post show how difficult it is to unravel the details of large businesses finances and the profits they may make. Each business will have their own budget plan which makes certain educated guesses about the costs of running the business, and based on those assumptions and the expected volume of business they set the price of their products which if it follows the predictions will generate a level of income to cover costs, and generate a surplus which funds dividends etc.

You cannot blame the business if one of their major costs changes so dramatically due to external influences.

If a business makes greater surpluses, they will already pay more in tax, I'm not in favour of windfall taxes, as they distort the businesses financial planning, and which ultimately the customer ends up funding.

I'm left wondering what the answer is. Regardless of any political polarity, I actually believe it was wrong for the nationalised Gas, Electric and water ( and Telecoms) essential industries to have be privatised, becasue that changed their mission from only supplying services to the nation, to generating profit for shareholders.

I do concede that in their nationalised form, they were less efficient than they could be, but there is absolutely nothing stopping a nationalised industry from periodically revising their methods to be right up to date.

If as a result of external causes they produced a bumper profit then that would all go to the exchequer rather than via shareholders.

In this case though there was no cost increase for the energy suppliers, but a change in supply and cost complete out side of the control of any company or plan. And the windfall tax imposed has delivered the profits to the exchequer.

The problem with running an organisation like the old Gas board as a public entity is that it is exposed to competition (at the global level) whether you want it to be or not and as such you have to run it as as a profit focused organisation in order to drive efficiency. For an organisation like the National Grid, it’s a bit different as it is not a resale or generating entity.
Telecoms is unsustainable as a public service as the costs are large and the technology so rapidly changing, I am not sure a public body could keep pace, unless you blocked other private providers, essentially creating a stifled monopoly.
But regulation of the spaces is vital to ensure service remains high and competitive pressures healthy.

 

[otherclive]

We have now had the smart meter since early January and today I logged on to my BG energy account. I was somewhat surprised to see we are £571.4 in credit but with a debit predicted for the end of the contract. The recommendation being to increase the direct debit from £80pm to £88.62 pm. Totally puzzled as the contract ends at the end of April and thus far in February the total energy cost is £63.36 and that includes our grandson WFH in our dining room 2-3 days a week. I just wonder who on earth develops BG’s usage prediction software. Needless to say I cannot draw down a few quid from the
£571. 4 credit as the algorithm estimates that we will be in debit by end April. 🙁

 

[Buckman]

We have now had the smart meter since early January and today I logged on to my BG energy account. I was somewhat surprised to see we are £571.4 in credit but with a debit predicted for the end of the contract. The recommendation being to increase the direct debit from £80pm to £88.62 pm. Totally puzzled as the contract ends at the end of April and thus far in February the total energy cost is £63.36 and that includes our grandson WFH in our dining room 2-3 days a week. I just wonder who on earth develops BG’s usage prediction software. Needless to say I cannot draw down a few quid from the
£571. 4 credit as the algorithm estimates that we will be in debit by end April. 🙁

They use historical data on consumption which can go back 5 years to take into account different weather patterns to estimate future usage.

BGAS underestimated our consumption and we ended up with a debit of over £200 this month despite BGAS telling us that our DD in Nov 2022 was spot on for the future. This is after being over £500 in credit in Aug! BGAS then wanted to increase the DD by £125.

We changed supplier!

 

[otherclive]

I still cannot really understand their prediction based on historical data as we have paid £80 pm on our last two fixed price contracts that span four years back. I’d find it virtually impossible to use £541 credit plus DD in March and April totalling £160 to our contract end on 30 April 2023 when historically £80 pm has been more than enough to keep us in credit over the last four years. I think it’s a way to maximise their cash input whilst hanging on to the credit.

 

[JTQ]

This is after being over £500 in credit in Aug! BGAS then wanted to increase the DD by £125.

We changed supplier!

Our supplier, gives us the option to accept any change to the DD or not, even to elect our own figure.
With any of the suppliers, one way or other "most" consumers end up paying for what they actually use.

 

[Beachball]

We are with Octopus energy and our payment has gone up to £185 .63 DD from £167 DD but we are still in credit

 

[Buckman]

I still cannot really understand their prediction based on historical data as we have paid £80 pm on our last two fixed price contracts that span four years back. I’d find it virtually impossible to use £541 credit plus DD in March and April totalling £160 to our contract end on 30 April 2023 when historically £80 pm has been more than enough to keep us in credit over the last four years. I think it’s a way to maximise their cash input whilst hanging on to the credit.

BGAS probably make yp their own historical data as we found out recently. You have it spot on as your credit makes thier banl balance look healthy for share holders. Annoyingly you do not get any interest on the credit. Legally I don't think BGAS cannot keep the credit if you chose to get a refund.

 

[Raywood]

ProfJohnL, post: 568521, member: 1217"]
All the previous post show how difficult it is to unravel the details of large businesses finances and the profits they may make. Each business will have their own budget plan which makes certain educated guesses about the costs of running the business, and based on those assumptions and the expected volume of business they set the price of their products which if it follows the predictions will generate a level of income to cover costs, and generate a surplus which funds dividends etc.

You cannot blame the business if one of their major costs changes so dramatically due to external influences.

If a business makes greater surpluses, they will already pay more in tax, I'm not in favour of windfall taxes, as they distort the businesses financial planning, and which ultimately the customer ends up funding.

I'm left wondering what the answer is. Regardless of any political polarity, I actually believe it was wrong for the nationalised Gas, Electric and water ( and Telecoms) essential industries to have be privatised, becasue that changed their mission from only supplying services to the nation, to generating profit for shareholders.

I do concede that in their nationalised form, they were less efficient than they could be, but there is absolutely nothing stopping a nationalised industry from periodically revising their methods to be right up to date.

If as a result of external causes they produced a bumper profit then that would all go to the exchequer rather than via shareholders.
[/QUOTE]
Not sure it matters what Centrica sells to B Gas as it simply all ends up as profit for the group.
Possibly the real problem was best explained by Greg Jackson the CEO of Octopus on the Martin Lewis show. Basically they all get charged the same for electricity coming out of the grid no matter what they paid for it before it went in. On that basis there is no room for serious competition on Price.

 

[Buckman]

Basically all a supplier is doing is buying the kwh from a central pool and then generating bills for the consumption used by the consumer. A supplier doesn't even read meters not even Smart meters. Meter reads are done by the Data Controller and passed to the supplier.

If for example a supplier buys kwh from the pool at the same price as everyone else and when selling to the consumer whether domestic or commercial only adds on 1p when selling, if they have a large customer base that could be a good amount if they process several million kwh per month. This is just an example.

 

[otherclive]

ProfJohnL, post: 568521, member: 1217"]
All the previous post show how difficult it is to unravel the details of large businesses finances and the profits they may make. Each business will have their own budget plan which makes certain educated guesses about the costs of running the business, and based on those assumptions and the expected volume of business they set the price of their products which if it follows the predictions will generate a level of income to cover costs, and generate a surplus which funds dividends etc.

You cannot blame the business if one of their major costs changes so dramatically due to external influences.

If a business makes greater surpluses, they will already pay more in tax, I'm not in favour of windfall taxes, as they distort the businesses financial planning, and which ultimately the customer ends up funding.

I'm left wondering what the answer is. Regardless of any political polarity, I actually believe it was wrong for the nationalised Gas, Electric and water ( and Telecoms) essential industries to have be privatised, becasue that changed their mission from only supplying services to the nation, to generating profit for shareholders.

I do concede that in their nationalised form, they were less efficient than they could be, but there is absolutely nothing stopping a nationalised industry from periodically revising their methods to be right up to date.

If as a result of external causes they produced a bumper profit then that would all go to the exchequer rather than via shareholders.

Not sure it matters what Centrica sells to B Gas as it simply all ends up as profit for the group.
Possibly the real problem was best explained by Greg Jackson the CEO of Octopus on the Martin Lewis show. Basically they all get charged the same for electricity coming out of the grid no matter what they paid for it before it went in. On that basis there is no room for serious competition on Price.
[/QUOTE]

I would agree with you re windfall taxes especially those that hit companies that are involved in trying to extract more gas and oil from our offshore reserves, which are marginal to say the least. With an effective tax rate of 75% three North Sea operators have already revised downwards their plans for investment in UK waters. So it would not surprise me if the windfall taxes raises less revenue than if the operators had been allowed follow their production and investment plans. but at least the media will be happy.....for now.

 

[ProfJohnL]

...The problem with running an organisation like the old Gas board as a public entity is that it is exposed to competition (at the global level) whether you want it to be or not and as such you have to run it as as a profit focused organisation in order to drive efficiency. ...

There is nothing that legally prevents a nationalised industry from being lean and mean, employing effective management and producing enough income to fund future modernisation, except the Gov't of the day dipping their fiscal fingers in the pie and pulling out the plums, leaving the business with no funding for the future.

Ringfence the business and let it operate. If there is any excess income after all legitimate costs and future strategies it should be used to reduce the price of their product to benefit those that use it.

 

[Raywood]

Prof I am afraid that efficiency and government control do not go hand in hand. I have two daughters working for different government organisations and the waste and sheer stupidity involved is mind boggling.

 

[Buckman]

Prof I am afraid that efficiency and government control do not go hand in hand. I have two daughters working for different government organisations and the waste and sheer stupidity involved is mind boggling.

Having worked in a government department for a short while just befor I retired, I have to agree.

 

[ProfJohnL]

Looking at government departments is not a fair comparison to a specific type of business. Departments are riven with too many traditions, and political intrigue, and changes of overlord. A provider of an essential service such as gas or electricity, can and should have a far more refined focus and purpose, and as such implementation of effective management does not have to be have to compromised in the way govt departments seem to be.

 

[Hutch]

Have had Smart meter for some time now and not switched on to read , however in the last couple of months have been reading it and am confused by my readings and the monthly staetment . For instance my average reading each day is £7 and yet my statement shows £284 for the month. Also looking at their usage page I used £10 a day on electric only. I am with Bulb/Octupus. So the daily figures shown on the Smart , are they the actual amount to pay or is another amount added to it ?.

As a follow up, I have just been changed over earlier last month, from Bulb to Octopus and one of the things they mentioned was that with Bulb, prices were stated without VAT, but Octopus include VAT. My daily usage is even more frightening. 😨😨😨

 

[JTQ]

As a follow up, I have just been changed over earlier last month, from Bulb to Octopus and one of the things they mentioned was that with Bulb, prices were stated without VAT, but Octopus include VAT. My daily usage is even more frightening. 😨😨😨

That element though here should be 5%, agreed its more but fades in significance when compared to the hike in the retail price of "energy".