Since taking over at the owner of British Gas nearly three years ago, Iain Conn has fiercely denied allegations that the energy supply industry has been profiteering. Yesterday the Centrica boss made his boldest bid yet to quieten a furore that shows no sign of abating. By pledging to scrap the standard variable tariffs blamed for so many of the industry’s troubles, he has gone further than before. But will it be enough to placate Theresa May and avert government threats to impose price caps on the industry? The abolition of standard variable tariffs, used by 60 per cent of Centrica’s 8.3 million customers, was the most eye-catching of more than a dozen voluntary measures proposed by the company to improve the domestic energy market. Mr Conn insisted that the proposals, some of which he said would be implemented at the end of March, were unrelated to the threat of price controls, but it was difficult not to see them in that context. After all, they came only two days before the budget and a month after the prime minister had pledged to fix Britain’s “broken energy market” with price caps lasting until 2023. The draft energy bill, published last month but not expected to come into force until 2019, has crushed Centrica’s share price amid fears that it could prune the operating profits of the big energy companies by at least a combined £1 billion.
Times 21st Nov 2017 read more »
The government is committed to renewables, so it should spell out the costs. The true cost of UK policies to support green energy is hotly contested. Centrica says environmental and social policies accounted for £135 of an average power bill of £1,112 in 2016. Independent analysts, and the government’s own advisers on climate change, have different forecasts suggesting the costs are much lower. A great deal depends on the timeframe selected, how one accounts for the carbon tax and whether one factors in renewable energy’s impact in lowering wholesale prices. A recent review of UK energy costs by the economist Dieter Helm suggests that UK households in fact pay less than the European average for energy – and less on taxes and levies. But green subsidies are significant and they have been higher than initially forecast: a “levy control framework” introduced in 2011 was supposed to cap the costs of three of the main schemes supporting low carbon investment, but costs are likely to exceed the cap in every year to 2021. The Helm review argues it would have been possible to achieve as much at lower cost. At a time when poorer households are struggling with stagnant wages, cuts to benefits and rising prices for food, transport and other essentials, it will not be surprising if they begrudge paying for decarbonisation policies. Nor is it surprising that energy suppliers resent being blamed for high prices when the government has failed to regularly quantify and explain the impact of its green policies on household bills. If the government is to win public support for the essential transition to cleaner energy, it must begin with greater transparency over the costs of its policies. Only then can it justify the costs and determine the fairest way to meet them.
FT 21st Nov 2017 read more »
The energy industry’s war of wars with the Government has escalated markedly after British Gas claimed ministers knew about its plans to end standard variable tariffs but pushed ahead with controversial plans for an energy price cap regardless. The Government’s tactics have raised concerns that the industry’s efforts to boost competition is being actively undermined by political posturing. Richard Neudegg, head of regulation at uSwitch.com, warned that Government interventions could undermine the industry as it works to overhaul the market. The death knell for the standard variable tariff was seen by many to be a reaction to the Government’s widely-criticised pledge to cap the price paid by almost 17 million homes in a bid to end what it called “rip-off” energy bills. However, the boss of the FTSE 100 energy giant has claimed that Prime Minister Theresa May made the announcement at the Conservative Party conference despite knowing the supplier was on the brink of scrapping SVTs for new customers and Ofgem, the industry regulator, was poised to defend vulnerable households. Iain Conn, the chief executive of British Gas parent company Centrica, told the Daily Telegraph that the Government knew the supplier was about to reveal “broad and definitive plans” to tackle the number of customers failing to engage with the energy market.
Telegraph 20th Nov 2017 read more »
British Gas owner Centrica is to scrap its widely criticised standard variable tariff (SVT) for new customers from April, and other energy companies are expected to follow suit. The company is the third of the big six suppliers to announce the end of its SVT following announcements from E.on and Scottish Power. Theresa May promised action last month to end “rip-off energy prices”, proposing a price cap on SVTs and other default tariffs – the expensive plans that customers are moved to when cheaper fixed deals end. Britain’s competition watchdog found that consumers were being overcharged by £1.4bn a year, a figure that Centrica contests. The company said it would stop offering the SVT on 31 March, offering new customers a choice of at least two three-year fixed tariffs instead. “This will result in a broader range of better deals with fewer people on default tariffs,” it said. “And if standard variable tariffs could be ended completely then the effects would be market-wide.”
Guardian 20th Nov 2017 read more »