The Big Deal co-founder Will Hodson writes in The Sun (26 April 2017):
The energy market serves the Big Six power companies and the men that run them.
Their millions in profits and millions in salaries attest to that. The market does not work for their customers, who are estimated to have been overcharged by as much as £4 billion every year.
This has a real human impact. Without energy, people can’t heat their homes. And in cold homes, people die.
The energy market is different to all others. If someone can’t afford the latest iPhone they aren’t at risk of death.
That’s why the government is right to promise a price cap. And it is why the greedy firms need to get their snouts out of the trough – and make a bit less money.
Turkey’s don’t vote for Christmas so it’s no surprise that Iain Conn, head of British Gas-owners Centrica, yesterday criticised the plans, saying the “energy market is highly competitive.”
In a competitive market, consumers move swiftly to the best deals. And yet in the energy market, over 70 per cent of us languish on our supplier’s worst tariff. The Big Six have made little effort to help consumers move to cheaper offers, baffling us with bills that appear designed to confuse. Then they charge us as much as they can before we realise the wheeze. This is not competition. It is exploitation.
The Big Six even have the audacity to call their worst deal their “standard variable tariff” – a misleading name that makes you think you’re getting a good deal. You are not. These deals can cost hundreds of pounds more than that supplier’s cheapest available offer. That’s why papers like The Sun have branded them “rip-off” tariffs.
Mr Conn had plenty more to say, too, as he took to the airwaves to plead the case of British Gas, whose parent company Centrica made a cool £1.5 billion profit last year.
He complained that if plans to cut bills by £100 came into force, British Gas “would absolutely be losing money”.
However just last year, The Sun exposed a secret report from the Big Six’s own trade body that suggested a profit margin of £250 from customers on standard variable tariffs, which cost around £1,100 a year.
It is also worth noting that for much of last year the difference between Big Six firms’ standard tariffs and their cheapest ones was hundreds of pounds. At times it was almost £400. That suggests they could easily have cut the price of their rip-off tariffs without going out of business.
The Big Six simply have no interest in competition as we know it, because competitive deals are not where the profits are. Instead the Big Six aim to get as much money as possible from people on their worst deals. They milk those consumers who won’t switch.
As if to prove the point, EDF recently announced two price rises in less than six months. Their standard variable tariff is now hundreds of pounds more expensive than the best deals on the market.
Inevitably, the men in charge of these companies have howled in protest against the price cap. This is to be expected, because the energy market works very well for them as it is. Iain Conn, who runs the parent company of British Gas, earns £4 million a year, despite his company losing 400,000 customers last year. Dwindling numbers are no problem for British Gas as long as they remain free to overcharge the customers who remain. And that is why a price cap would be a disaster for them.
Iain Conn also cried a good deal of crocodile tears. “I think there are some at the heart of the government who just don’t believe in free markets” he sobbed. What nonsense. Free markets are being used as an excuse to maintain the status quo. This status quo works for the few – like Iain Conn – and not the many.
The government has refused to be cowed by free market dogma. With an essential good like energy, what matters is what works. And the energy market is broken. Firms like British Gas have had years and years – in fact, decades – to treat families fairly and charge them a reasonable price.
The founding fathers of free market capitalism must be turning in their grave to hear these fat cats’ self-serving tripe. When the legendary economist Adam Smith wrote of an “invisible hand” leading us all to a better society, he was not describing the British energy market. Here the “invisible hand” is being driven repeatedly into the face of consumers too tired or too confused to move. And that is why the government must step in.
Free markets are based on rational consumers making informed choices. Does Mr Conn believe that millions of hard-strapped Britons are actually choosing to pay £300 more for their energy than their neighbour? Does he think that, every year, 10,000 elderly people choose to die because of cold homes?
These are not the rational consumers of the fatcats’ free market fairytale. Many of these people grew up without any choice in their energy supplier and will never adjust to this “free market”. Many are vulnerable consumers who cannot quite fathom the energy industry. Many are just ordinary people with countless worries in their daily life, who simply don’t have time to find the right energy deal.
These people are like you and me. People like our parents and grandparents. And after years of exploitation in the energy market, these people deserve the protection of a price cap.
HOW THE BIG SIX ARE CASHING IN
|Supplier||No of residential accounts (No of households)||Profit (parent company profit in brackets)||Percentage of customers on priciest “standard” tariff|
|E.on||7.3m (4.6m)||£267m (£5.4bn)||75%|
|EDF||5.3m (3.4m)||£664m (£900m)||58%|
|British Gas||14.1m (8m)||£574m (£1.46bn)||70%|
|nPower||5.1m (3m)||£67m** (£3.4bn)||65%|
|Scottish Power||5.2m (3.2m)||£583m
** Profits for first half of year