British Gas has responded to the proposals from the energy supply regulator, Ofgem, saying that they welcome the ideas, saying that any plan to boost competition and reassure customers was a good thing.

British Gas was one of a number of energy supply companies that will be effected by Ofgem’s proposals which were contained in six key areas.

Firstly, Ofgem said that complex and unfair practices should be swept away. Secondly, the big six energy companies should be required to auction up to 20% of the output of electricity. Thirdly, if the companies continue to resist reform, they face a Competition Commission referral this year. Fourthly, an investigation is about to be launched into the standard credit prices from Scottish Power. Fifthly, independent accountants will be tasked by Ofgem to look at accounting disclosures; and, finally, the regulator will also review if energy companies are frustrating switching (when an industrial customer wants to change to another supplier) in the non-domestic market.

Managing Director of British Gas, Phil Bentley, said:
“We welcome any proposals that further boost competition in the UK energy market and provide reassurance for consumers. In particular, we welcome Ofgem’s proposals to improve electricity market liquidity and transparency in the reporting of company returns.

“This review by Ofgem has been full and wide-ranging, and we believe a line can now be drawn under the issues addressed, and the need for a Competition Commission Inquiry. We will now digest the detail of Ofgem’s plans and work with the regulator to make the necessary changes that will continue to build trust in the UK energy market.”

Commentators noted the mild response from effectively a damning list of proposals from the industry regulator and surmised that this is because little will change over the year, despite the best intentions of the gate keepers.

The energy companies, including British Gas, are powerful companies who believe they act in a commercially responsible way and might possibly see the Ofgem as an example of grand standing; almost trying to appease consumers who are being continually hit by rising energy bills.

Guest Article by Neil Camp 

The horrific events in Japan have had one unfortunate side effect for the Government in the UK: it proves yet again that nuclear power is not without risk.

The Government had warmed to the idea that nuclear power, which currently accounts for around 10% of energy provision in the UK, should play a greater role over the coming years.

Centrica, which owns British Gas, has taken a large stake in the UK’s major provider of nuclear power and French energy giant, EDF, now mostly controls the country’s nuclear energy production.

The nuclear option is extremely tempting for the UK because it allows the country to meet its carbon emission levels (if all goes well, it is one of the cleanest fuels in the world) and also helps mitigate the fact that no longer does the country have large stocks of its own fossil fuels.

The UK has almost exhausted both its own oil and gas reserves, and has now even become a net importer of gas. This is coming from Norway and increasingly, via shipped liquid gas from the Middle East.

The obvious implications for the UK Government on relying on being a net importer of your energy is very clear. It’s population will have to pay more for their energy; individual nations can hold the country to hostage as regards the energy flow (take what happened to the Ukraine when they fell out with Russia) and should a natural disaster interrupt supplies from overseas (or a war situation), then the country will struggle to meet its own energy needs.

So the attractions of a clean fuel such as nuclear fission is obvious to see, but the industry doesn’t have a long term PR clean sheet. Just mentioning names of Chernobyl and Three Mile Island are enough to send environmentalists mad with anger.

There are two big problems with nuclear power. The waste product is extremely dangerous and can have a shelf life of hundreds of years and, if something should go wrong with the actual process – as just witnessed in Japan – then it becomes very quickly an unstable energy generating process. And far from the problem being contained within a stone’s throw of the energy plant, the implications of having radioactive waste in the atmosphere and able to travel thousands of miles, is not worth thinking about for most people.

Ironically, the nuclear power solution has had a superb track record of late. The industry is far more aware of the power it has to harness and the modern stations are light years away from the flawed design in Chernobyl.

Yet even so, if Japan cannot eventually contain it, which country can. When a nuclear reaction cannot be cooled, it enters meltdown which can have catastrophic effects.

Now the UK does not sit in a earthquake zone, but there are worries that the same problem now faced by the Japanese could also occur through another natural disaster scenario (say a major storm), or indeed, perhaps more frighteningly, a major terrorist attack.

Whatever happens in Japan, the ugly side of nuclear power has again raised its head and that will once again give the nuclear doomsayers a chance to say nay to what is the Government’s great white hope for future energy sustainability.

Guest Article by Neil Camp

Energy prices are never far from the headlines and now a new story has emerged which puts the subject right back at the top of the political agenda.

An Ofgem Energy Enquiry is being launched into the UK’s power prices. The mega-regulator is concerned that some of the energy companies are acting anti-competitively when increasing domestic heating bills. They are concerned that three companies have raised their prices within days of each other and all have chosen a hike between seven to nine per cent.

The three energy companies are Centrica (British Gas), ScottishPower and Scottish & Southern.

Ofgem’s worries focus on a lack of transparency when it comes to the financial figures reported by the energy companies. This alledged lack of transparency is leading some commentators to fear that the energy companies are disguising the fact that they might be profiteering, because many customer prices appear to be rising at a faster rate than the wholesale prices.

Because of its fears, Ofgem has asked for increased powers from the Energy Secretary to be able to properly assess the situation. Currently, it can only order a referral to the Competition Commission.

But the energy companies have hit back, saying that they have done nothing wrong. A spokesman for Energy UK, which represents the UK’s major suppliers, told the media that:
“We have nothing to hide and believe in transparency in this complex marketplace. The review is the latest in a long line of investigations into the energy market in recent years and no previous investigation has found anything to concern the competition authorities.”

They went on to add that:
“It is a complex market, made more so in recent years by the growing number of environmental obligations on the energy sector. Customers bills today are made up far more than just the cost of the gas and electricity they use, but an array of costs associated with the need to decarbonise our power supplies.”

In other words, the case for the defense from the energy companies is that it’s the Government’s plentiful green taxes, imposed over recent years, which are actually causing the price increases.

But for many the energy companies stand accused of making too much money when wholesale prices are fluctuating. Some of the company’s profit margins have risen by a staggering 38% which underlines the fact that money is being made somewhere.

But the energy companies insist that wholesale gas prices have risen over 25%, a statement which ignores the fact that although fuel bills are now the same as they were roughly in the middle of 2008, then the wholesale price of gas was 50% higher than now. The argument is set to continue and power prices will remain in the headlines for some months to come.

Guest Article by Neil Camp 

British Gas bills are set to rise by 7% on 10 December, 2010.

The news was not unexpected and the British Gas bills for both gas and electricity are affected. It effectively means an extra £1.50 a week for a typical dual-fuel deal.

The energy giant has over eight million customers and has stated that, initially, its most vulnerable 300,000 customers will not see any increases until at least 1 April, 2011.

The company, which is the second one to announce major increases, blames the rises on the dramatic rise in wholesale prices. They state that these have risen by 25% since spring of this year. The first company out of the starting gate to announce winter fuel rises was Scottish and Southern Electricity, which also blamed wholesale price increases for its hike by nearly 10% of its domestic gas tariffs.

The managing director of British Gas Phil Bentley said: "We know that rising energy prices come at a difficult time for many.”

Another UK energy giant threw a small spanner in to the works by stating that it would actually freeze residential gas and electricity prices until at least March 2011.

Comments came thick and fast from consumer groups including Uswitch, whose spokesperson told the BBC:
“After a two year lull, household energy prices are about to resume their steady climb upwards again. Unfortunately for consumers, the 8% or £99 reduction seen over the last two years failed miserably to reverse the impact of the 42% or £381 increase seen in 2008. And now, whatever small benefit was seen is about to be wiped back out again.”

Adam Scorer, from Consumer Focus, said:
“British Gas and other suppliers respond to forward energy prices, and that will be their argument that price rises are needed," said Adam Scorer, from Consumer Focus. However, wholesale prices are around half of their peak in 2008 and yet in the same period customers prices were cut by less than 10%. Consumers will feel that suppliers did not make cuts when conditions allowed it, but are covering their profit margins as wholesale prices nudge up. At a time when there are reports of a gas glut it seems that consumers take on all the risk in this market.”

However, the Bank of England did predict, in its recent Inflation Report, that domestic gas prices would rise on average 10% by the end of 2010. This was one of the main reasons for the bank’s higher than expected inflation forecast for 2011.

Guest Article by Neil Camp

As winter approaches, energy suppliers UK are set to make dramatic increases to their tariffs. Energy watchdogs are urging consumers to take action now to avoid the worst effects of the rises.

First of the energy suppliers UK out of the blocks is Scottish & Southern Energy which has just announced a near 10% rise in gas prices effective from 1 December, 2010.

Energy experts reckon that the rest of the big six will follow with similar rises over the coming weeks.

And they are warning that consumers have to act now, with the best advice recommending that those on the common standard tariffs pay on average some £1,200 a year, whilst those small number which have opted for online billed deals, pay on average only £900 a year. The reason for the hurry is that its takes on average a couple of months to change a supplier, so action now, they say, will deliver the best savings over the coldest winter months.

A further reason for speed is that many of the really cheap deals – not surprisingly given the coming price hikes – are currently being withdrawn from the market.

Weather forecasters are predicting that this winter will be similar to the last, when exceptionally cold fronts kept the country shivering for a couple of months. So with poor weather again forecast (and mild winters a distant memory), getting the energy price right is crucial to those doing their best to keep warm.

The rises, when they come from the energy suppliers UK, will no doubt make the companies ever more unpopular, but consumers would do well to consider that energy is virtually like many traded commodities, vulnerable to supply and demand, and therefore, vulnerable to price fluctuations on the general market. And with so much energy now being bought on the world market (gas coming from Norway, the Gulf and Russia), the UK can no longer use its North Sea reserves to protect itself against the worst of a nervous world market.

Guest Article by Neil Camp