Business

UK Electricity & Energy Giants Want To Have Their Cake and Eat It

Claims by the major UK gas and electricity suppliers that they have been forced to increase their prices in order to claw back the huge deficit created by the unprecedented rises in wholesale prices would, on the face of it, appear to be a reasonable explanation for their action.

However, if this were an entirely accurate picture they would be expected to take a hit on their profit especially since they have passed on to their customers '...far less than the full extent of the increase in wholesale energy prices experienced...'

But profits are rising and rising big time and the explanation given is that these profits come from a different source - from upstream activities such as generation and exploration.

Now this might appear plausible except that it was they who persuaded the UK government against wide ranging protests at the time that they should be allowed to integrate both generation and supply businesses as they operated much more efficiently in tandem.

They can’t therefore have it both ways - either the vertically integrated companies should report as single entities and come clean about the overall level of profits they are making from activities that are ultimately paid for by the final customer or if they wish to divorce the business activities then the government must revisit the rationale for allowing such integrated giants in the first place.

If the former approach is the preferred one then the decision to raise tariffs to such unprecedented levels was completely unjustified and consumers have a right to new fair rates along with compensation for overcharging.

Furthermore, the original argument given for raising tariffs to these levels is itself now redundant.
Wholesale prices have seen a sustained retreat since the summer but this has failed to halt the drive towards even greater profitability.

Scottish and Southern Energy will be raising prices on 1st January 2007 despite an advance in pre-tax profits for the first half of the year to a staggering £484.5 million. Energy supply director, Alistair Phillips-Davies is recently quoted as saying 'If, as everyone hopes, falls in wholesale energy prices continue and are sustained, we will move as quickly as we can to reverse the price rises of recent years.'

But shouldn’t they be applying these price reductions now, or at the very least forego any further increase?

About Author

Graham Paul is the Sales & Marketing Director of Electricity4Business Limited. E4B is an independent business electricity supplier

Visit Electricity4Business.co.uk website.


Source: ArticleTrader.com