Energy: profit talks

By Richard North - February 17, 2023

Centrica’s profits are “built on the backs of young families, older people and the disabled living in cold damp homes”, Simon Francis, co-ordinator of the End Fuel Poverty Coalition.

That was one response to the “huge profits” posted by British Gas’s owner, running to £3.3 billion for 2022, more than triple the £948 million it made in 2021.

Yet, the hype is one thing, and the reality is something else. Most of Centrica’s bumper profits, we are reliably informed, came from its nuclear and oil and gas business.

The impoverished British Gas only contributed a pitiful £72 million to the total. The supply business profits actually decreased by 39 percent on 2021 levels, largely – says Centrica – because of “voluntary donations made to support customers” and the repayment of furlough funds from the pandemic.

Nothing, of course, is said of the generous support to Mrs Mohn’s Arvato dregs and her loss-making business. But multi-millionaire Centrica boss, Chris O’Shea, is keen to accentuate the positive. He says the company last year invested £75 million in supporting customers of British Gas, providing “much needed stability and support”.

Eighty-two-year-old pensioner Barry Seckerson might not agree. Making the front page of the Mirror, he tells of how he is faced with a winter bill of £1,171, over £900 more than the £266 for the previous three months, and well over the £400-500 he was expecting.

Being an upstanding British citizen, he has done the decent thing and raided his funeral fund. After all, what are his pitiful needs compared with the desperate poverty of Chris O’Shea? Even to this day, this poor man is unable to tell whether his meagre annual salary of £794,375 will be supplemented by a £1.6 million bonus or whether political pressure will force him to ramp up his overdraft.

Helpfully, though, Laurie Havelock of iNews explains how O’Shea’s hands are tied when it comes to helping his fellow man. He would not be allowed by competition rules to give a special deal to his own subsidiary in order to reduce Mr Seckerson’s burden.

Havelock uses Tom Gilbey, a equity research analyst at Quilter Cheviot, to tell us that British Gas “does not have the headroom to bring down customers’ bills”. So-called “upstream” firms such as Centrica, BP and Shell – which find the fossil fuels that suppliers use – have all enjoyed bumper profits in 2022.

This bonanza has extended to overseas firms Exxon, Chevron and TotalEnergies who, along with BP and Shell, make up the global “big five” fossil fuel producers. Their combined profits exceeded $400 billion (£332 billion) last year.

None, says Havelock, could have foreseen the conflict in Ukraine pushing up prices. But upstream firms have certainly “got lucky”, says Tony Jordan, senior partner at energy consultancy Auxilione.

Nevertheless, in yet another of those statements of the bleedin’ obvious, Russ Mould, investment director at AJ Bell, says the headlines are “still a PR problem for Centrica”. Most casual observers are unlikely to make the distinction, particularly after news that the firm was forcibly installing prepayment meters in the homes of vulnerable customers.

It would hardly make a lot of difference if O’Shea donated his entire wealth to Oxfam and donned sackcloth and ashes, so he might as well brazen it out. And this is what he seems to be doing, insisting that prepayment meters were only installed under warrant as a “last resort”, and that an average customer subject to a warrant installation had £1,000 of outstanding debt and had been uncontactable for five or six months.

This sort of demonstrably mendacious BS opens the way for the likes of TUC general secretary Paul Nowak to declare that: “Britain’s energy market is broken”, making the predictable point that, “While millions of families struggle to heat their homes, firms like Centrica are raking in monster profits”.

Whether his idea of a cure would be any better is moot, but for the record he believes, “It is time to bring energy retail companies into public ownership”. Fixing the wholesale pricing system might be a better idea but neither the industry nor government seem up to the task of initiating sensible reform. Without that, though, it really doesn’t matter who owns what.

In an unforgiving mood, iNews uses its front page to convey a more general dissatisfaction with events, headlining: “Call for ‘obscene’ energy profits to compensate victims of prepay meter scandal”.

As for those pesky prepayment meters, perceptions seem to vary as to future intentions. From The Times we have a report which says that: “Energy firms may face long-term limits on prepay meters”, suggesting that restrictions could apply to these devices once Ofgem has finished its review.

The regulator has written to suppliers notifying them of an “intensive consultation process” into the use of prepayment meters and whether “rules and guidance should be amended going forward”. The review is due to take six weeks and will include evidence from energy suppliers, consumer groups and charities.

This six-week period gives the Guardian cause for concern, as it reads the expiry of the period as allowing the resumption of prepayment meter usage.

However, the paper concedes that Ofgem could extend the ban or make it permanent. It cites a spokesman saying that this date would be when “the new rules will be ready pending our detailed investigation” and that it had asked suppliers to halt forced installations until then.

The ban, it says, will remain in place “until the supplier boards can assure us that they are meeting their obligations”.

As one might expect, though, the suppliers are mounting a spirited defence of their position. Once again, iNews has it, conveying claims passed to Ofgem that, if the meter ban is maintained, “unrecoverable debts from some customers may then be recovered from the bills of paying customers”.

Ofgem, we are told, is analysing the firms’ responses to the question of debt and will then “be able to determine what action we need to take and, if an adjustment is required, we will act quickly”. It says that some suppliers “have expressed concerns” about debt levels “caused” by the halt in forced installations.

What we’re not seeing, however, is any acknowledgement that, had the existing Ofgem rules been obeyed, there could hardly have been the scandal over force fitting of meters in the homes of vulnerable people.

In the fearsomely paywalled Utility Week, we see a headline declaring that: “Suppliers’ court agents ‘may have committed perjury’”, retailing a comment from the chairman of the Commons Justice select committee that agents of suppliers are bringing the courts into “disrepute” by either inadvertently giving “misleading” information or committing “perjury” when seeking warrants.

This should move the focus on, away from Ofgem to the courts where – in my view – it belongs. If Ofgem rules were built into the warrant conditions, magistrates did their jobs properly and applications were properly heard, with both sides represented, the problems would largely be resolved.

Certainly, in the interests of “equality of arms”, it should not be easy for suppliers to apply for a warrant. Otherwise, with an established record for ignoring complaints, the industry can simply by-pass complainants by fitting prepayment meters.

In the final analysis, if customers are forced to repay debt through prepayment meters, they have a problem. If the industry cannot jump the queue by this means, it has a problem – and will start squealing to government to find a solution.

I know which route I would rather see taken.