Profits, prices and cold calling

The latest profit announcements by the Big Six energy companies puts a renewed focus on energy prices and the failures of market reform.

Research published by Labour reveals that that the total profits made by the Big Six energy companies increased from £2.219bn in 2010 to £3.737bn in 2012 a 74% rise.
In the same period, the typical domestic dual fuel bill increased from £1,420 a year compared to £1,105 in May 2010, an average of 29%.

Caroline Flint MP, Labour’s Shadow Energy and Climate Change Secretary, said: “The public have been left with a £3.3 billion price tag for David Cameron’s failure to act on rip-off energy bills. He’s totally out of touch with millions of people and small businesses who are struggling with soaring energy bills. His failure to reform Britain’s broken energy market is leaving hard-pressed bill-payers massively out of pocket.”

There was a dismissive reaction from the industry. Angela Knight, of Energy UK, said: “This is a disappointing and inaccurate bashing of an industry which brings heat and light to 27 million homes and business, pays billions each year to the Exchequer and creates employment for over 600,000 people. If a company is to stay in business it has to make a profit. And the more a company has to invest then it has to make more profit to do so. Petty point scoring has no place in the adult discussion and decision making required.”

The Prime Minister has also been embarrassed by SSE’s reaction to his simplified tariff plan. They are scrapping a cheap tariff leaving customers with an increase of about £100. Tom Greatrex, Labour’s Shadow Energy Minister said Cameron’s reforms to energy tariffs have backfired, “What he needed to do was force energy companies to put the prices down when wholesale prices go down and have a regulator to force them to do that. Everyone being on the cheapest tariff makes no sense if the cheapest is also the most expensive.”

SSE has also decided to end cold calling as a sales technique following their record fine for misselling. Some 100 jobs are at risk as a result. Will Morris, SSE’s group managing director for retail, said: “Nobody likes receiving a sales call out of the blue and so we are stopping it.”

This is an approach shared by Eon, but not the other four companies who have confirmed they will continue the practice. Adam Scorer, director of policy and external affairs at Consumer Futures, said: “We need to see other suppliers follow suit. It could be one small step toward a better relationship between consumers and their energy suppliers”. The Scottish Government has published a paper on consumer regulation that promises stronger action on nuisance calls if Scotland votes for independence next year.

Energy companies do need to rebuild trust. A dismissive reaction to the Labour report and continuing cold calling is not the right approach.

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