British Gas (Centrica) profits 2011
British Gas's parent company, Centrica, has today released its figures for 2011.
British Gas’s parent company, Centrica reported operating profits of of £2.4 billion for 2011, up 1% on 2010. The residential arm of British Gas, meanwhile, saw a 30% fall in operating profits to £522 million.
But what about British Gas Business? Well, it accounted for 9% of Centrica’s overall profits last year, but profits fell to £219 million - a 6% decrease on 2010.
This decrease may have a lot to do with the fact that British Gas Business actually saw a drop in the number of businesses it supplies, from 1.4 million in 2010 to 1 million in 2011.
Why might British Gas Business be losing customers? Well, as the biggest supplier around, it will always have more customers to retain or lose than anyone else. It also has a smaller pool from which to draw new customers.
However, British Gas Business's prices have also been higher than average, as this chart showing the average prices our customers get from the company shows:
What about the issue of energy supplier profits as a whole? Working in the B2B sector, we want to see businesses do well and make a profit. However, transparency on profits is essential too, a fact recognised by Ofgem which led to the mandating of published accounts from the Big Six energy suppliers. These accounts aren't straightforward though; energy companies are 'vertically integrated', meaning they own both the generation and supply ends of the energy chain. So they can make money at one end even when the other side of the business reports hard times. That's the benefit from inheriting a former monopoly structure and acquiring and investing in that business. Should the banker bashing extend to the business energy market? We'll let you decide....
Liquidity in the electricity market: What is it? Why do we need it?
Ofgem has announced proposals to open up the electricity wholesale market and make it more ‘liquid’, which it hopes in turn will make the energy market more competitive by encouraging independent suppliers. But what exactly is a 'liquid' market, and why does it matter?
What’s the problem?
Well, in order to have electricity to sell electricity to customers, energy suppliers have to be able to get the electricity they need, wholesale, from an electricity generator.
The ‘Big Six’ energy suppliers both generate and sell electricity and sell it to consumers. However, if you’re a small or independent energy supplier and you don’t generate your own energy or aren’t affiliated to an energy generator, getting the electricity you need at the right price can be tough. If you're an independent energy generator, it can also be tough to find someone to buy your power.
At the moment, Ofgem feels that competition is being stifled because independent suppliers and generators cannot always buy or sell the power they need. Ofgem wants a ‘liquid’ market, where there’s a large number of buyers and sellers operating at all times. Ofgem has also found that liquidity in Britain’s electricity market is lower than might be expected.
So what’s Ofgem proposing?
Ofgem is proposing that the Big Six should be required to sell 25% of the power they generate - this would make availability less of an issue for independent suppliers and could also stimulate a market and help independent generators too .
What does uSwitchforBusiness think?
Our director, James Constant had this to say: “Independent players have always been more prolific in the business energy market, however, recently a number have exited the market.
“One of the key issues for these independent suppliers is the accessibility of counter-parties to acquire energy from to supply to their retail customers. It has often been the case that the credit requirements, minimum purchase volumes and the shape of the volume is almost impossible to access at market rates and any ability for the independent supplier to secure an energy deal often involves a significant premium creating an inbuilt risk to the fundamental business model of independent suppliers.
“We strongly welcome Ofgem's moves to increase liquidity in the market and to encourage more new entrants to enter and - crucially - stay in the market. The benefits that independent businesses bring to the market are great, often being at the forefront of innovation as well as bringing much needed options to the average business user who remains on supply with their incumbent supplier in the face of an apparent lack of competition
“We would place a strong caveat on this however that though this is a welcome move, it is essential that this is not confined to the spot or day ahead markets alone and that all medium and long-term power purchasing markets and all shapes and sizes of volumes are rendered accessible to even the smallest new entrant supplier.”
For more information on the business energy market visit our partner company Business Juice.
Business week in brief: 17th February 2012
Ofgem's Retail Market Review: our response
The Retail Market Review is Ofgem's investigation into the gas and electricity market for households and small businesses in Great Britain. As a result of the Review, Ofgem made a series of proposals for improvements to the way the business energy market works and it opened these proposals to feedback.
Naturally, I've sent my thoughts to Ofgem, and I thought I'd share them you too. It's a 41 page document - you can read it in full here or I've made a ten-point summary, if you don't have the time or inclination to read the whole thing. (I won't hold it against you!)
10 recommendations to improve the business energy market
1. Put the date the contract is due to end on all business energy invoices. If businesses know when their contract is due to end, they'll known when to act, which will make the market more competitive.
2. Make all energy obligations universal for business customers. Business customer should get the same standards of service, whether they're dealing with an energy supplier, broker or anyone else they deal with in relation to their energy.
3. Extend SLC7A to all business customers. SLC7A is a licence condition, which says suppliers must give customers a clear contract in plain intelligible language, with full transparency on when that contract ends and what the customer needs to avoid being locked into another contract when the first one ends. Currently SLC7A only applies to microbusinesses, but we think it should be extended to all businesses, whether they're a small hairdresser, a large accountancy firm, or a huge chemical works.
4. Ban rollover contracts. The practice of rolling customers over to a new contract is widespread, unfair and should come to an immediate end.
5. Introduce rules for how energy suppliers have to communicate with business customers. Switching supplier can bring great benefits for businesses, but the process can be interrupted if suppliers misuse the 'objection window' (a period where an energy supplier can object to and temporarily stop the customer's switch from going through). We think there should be rules to dictate that if a supplier delays a transfer, they must contact the customer within 24 hours to give their reasons and explain what action the customer needs to take to get things back on track.
6. Make the registration and objection windows longer, to cut the impact on customers whose supplier has an issue with their switch. Following on from point five, we think contract start dates are often missed when there's an objection because a supplier hasn't told the customer what the issue is and what they can do about it, so we're also pressing for a longer window than the current 5 days, to give the transfer a better chance of success at the first attempt.
7. Make information about commission available on request. We believe a business customer should have the right to request and to receive information about the commission paid by a supplier for 'acquiring' their contract, whether it was through a broker, a supplier call centre, a media campaign or any other method.
8. The implementation of a robust, enforceable and meaningful Standards of Conduct on all non-domestic customer interactions. There should be Standards of Conduct to govern all interactions between suppliers, brokers and business customers, whether it's a sales conversation or a service conversation, to ensure that a business customer can expect to receive the same standards of service from their supplier, broker or any other person they interact with regarding their energy.
9. The implementation of a universally-applicable single, robust and enforceable Code of Practice. The regulator should also implement a single Code of Practice covering suppliers, brokers and any entity involved in the business energy contracting process, alongside the Standards of Conduct. This will require accreditation and performance monitoring. Failure to gain accreditation or to adhere to the rules should result in exclusion from the market.
10. The consideration of whether the best vehicle to deliver the intended aims is better served through a Supply Licence Condition or through a series of individual actions. We think there should be a discussion about whether all of the above should be enshrined in a Supply Licence Condition which would mean if someone broke the rules, they could potentially be prevented from operating in the market.
For more information on business energy rules, regulators and schemes visit our partner company Business Juice.
Last chance to have your say on Ofgem's Retail Market Review
There’s not much time left to give your feedback on Ofgem’s Retail Market Review - the deadline is 15th February 2012.
Ofgem is proposing changes to the business energy market in four main areas:
1. Protections for smaller business customers
Ofgem currently offers protection to microbusinesses, which are businesses that consume less than 200,000 kWh of gas or 55,000 kWh of electricity a year, or have fewer than ten employees and an annual turnover, or an annual turnover of €2m or less. It’s suggesting that these protections be extended to small businesses with less than 50 employees and an annual turnover of no more than €10m. Find out more about the protections for microbusinesses.
Ofgem is also proposing changes to rules about rollover contracts; currently a lot of businesses end up paying over the odds for their business energy because their energy supplier automatically extends their contract.
2. Objections to switching
Another issue businesses face (and which we frequently come across) is their current energy supplier objecting and holding up their switch. Ofgem thinks this process doesn’t work as well as it could and is proposing changes.
3. New accreditation scheme for third party intermediaries (TPIs)
Ofgem is suggesting that there should be a new accreditation scheme for energy brokers and third party intermediaries. It is also asking the government for powers to regulate brokers and act on misselling.
4. Enhancing standards of conduct
Business energy suppliers currently have very few supply licence rules; Ofgem wants ‘stronger and broader’ standards of conduct to give businesses more confidence in their energy supplier.
What's our take on these proposals? Well, we've blogged about this at length before, but in short we're in support of anything that Ofgem does to improve transparency and encourage a competitive market, but we think the Review is just the start of a much-needed overhaul.
For more information on business energy rules, regulators and schemes visit our partner company Business Juice.
Business week in brief: 10th February 2012
Could we see collective energy switching for businesses?
Collective energy switching is set to become a reality for domestic customers, but what about for businesses?
Could collective eenrgy switching save businesses money? Image by antgirl via Flickr.
The big story on the domestic energy front this week has been collective energy switching. The new energy minister, Ed Davey, called Martin Lewis from consumer website Money Saving Expert, and asked him to launch a collective switching service. Meanwhile Which? launched a collective energy switching service of its own called the Big Switch, in partnership with 38 Degrees.
So what is collective switching? In a nutshell, it means people clubbing together and switching en masse, to take advantage of the better prices that the collective purchasing power of a group affords.
Is there something similar on the horizon for businesses? Well, it’s something we’ve looked at, but we came across a few potential difficulties.
Firstly, there’s the practical issue of contract end dates - in any group of businesses, the members aren’t going to have contracts that end on the same day, or even in the same month, which would make it very difficult to coordinate a collective switch.
Secondly, we think that you’d need about 50 small businesses to club together to make it workable. All these businesses would need to be credit checked, and some businesses would naturally have better credit than others, which could make it tough to get a deal for everyone.
Thirdly, the risk of dealing with a large group of small businesses could put off some energy suppliers when it comes to making a bid for their custom. Business energy suppliers buy the energy they will need as and when they sign new business customers. When dealing with a single business, they can make a reasonably good estimate of how much energy they’ll need to buy. An estimate won’t typically be accurate, but if it’s only out by a few hundred kilowatt hours each time, it’s not too much of an issue, but when you start scaling this up for a group of 50 businesses, the estimates would be far less accurate and the risk of ending up out of pocket would be multiplied.
Finally, billing lots of separate businesses acting a group has the potential to be a logistical nightmare, which not many suppliers are set up to deal with.
So in conclusion, we think that collective energy switching for businesses would be pretty difficult to turn into a reality - the business energy market is very different to the domestic market.
What do you think of collective energy switching? Is it something that you'd consider doing for your home? Would you like to see it for your business?
Are you racking up half your business electricity bill after hours?
According to a new report by British Gas Business, the average business spends as much as £1 in every £2 of their electricity bill after office hours have ended.
Are you guilty of wasting energy after hours? Image by Tomé Jorge via Flickr
British Gas Business looked at data from over 6,000 smart meters and found that 46% of business electricity is used before 8am or after 6pm.
The average business energy bill is around £2300* - so that means that businesses could be wasting in excess of £1000 when there’s no one in the office.
Obviously when the office is shut, you’ll still need to use some energy - for example to keep essential equipment or appliances running - but there could be plenty of small changes you could make to cut down the wastage. For example, are computers, printers and photcopiers left switched on or on standby? Do you leave vending machines or coffee machines running? Do you light your car park at the weekend? Do you leave display lighting on even when your shop is closed?
This piece of research was released to tie-in with the launch of British Gas Business’s new product: Business Energy Insight.
With Business Energy Insight, you can get a free smart meter and free access to an online dashboard which will give you lots of data about how much electricity you’re using and when you’re using it. This can provide you with lots of information and ideas for ways you can cut your energy usage; for example, if your energy consumption stays high even after the office has shut. I'll paint you a picture: it's 8pm, you're at home, and you log-in to your online dashboard and see that energy consumption at the office is higher than it should be. You probably won't rush down there to find out why, but the next day you can find out what it was, and take action to make sure it doesn't happen again.
Read more about getting Business Energy Insight and a free smart meter from British Gas Business or call our energy advisors on 0800 688 8568 for more information.
Get a free smart meter and free access to British Gas's Business Energy Insight dashboard
Get a free smart meter and free access to the Business Energy Insight online dashboard with British Gas Business.
Is it time to upgrade that old electricity meter? Image by awoodvine via Flickr
We have a special offer from British Gas Business - when you switch your business electricity via uSwitchforBusiness you can get a free smart meter and free access to the Business Energy Insight online dashboard. We estimate that the smart meter would usually cost £300, and access to the dashboard would be around £500 a year, so this deal can give you a great saving.
The smart meter and dashboard themselves can help you save money too; with the dashboard you’ll have access to lots of data about your electricity usage, so you can identify areas where you’re wasting energy and ways to cut back. Plus, with a smart meter, you’ll only ever pay for the energy you actually use, which can really help your cashflow. (Find out more about smart meters.) You also get a dedicated account manager who can provide you with advice about energy efficiency.
If you’re interested, or want to find out more about his deal and whether or not it’s right for your business, give our energy advisors a call on 0800 688 8568.
For more information on smart meters visit our partner company Business Juice.
For Huhne the bell tolls (or 'Who is Ed Davey?')
Is it a bird? Is it a plane? No, it’s Chris Huhne driving past in his car. Whoops, sorry, my mistake, I think it was his wife. Or was I right the first time?
This photo opportunity doesn't seem like such a good idea now...Image by DECCgovuk via Flickr
The path of a political figurehead never runs smooth, especially when one is charged with perverting the course of justice. Yes, I’m referring to the news that Chris Huhne the Liberal Democrat MP and (ex) Energy Secretary has resigned his cabinet post. The well-publicised reason for his resignation is the allegation that in 2003 he persuaded his then wife to take three points on her driving license for a speeding offence.
Now as interesting as the charges against Mr Huhne are, that is not the main purpose of this blog post. We are, after all, an energy broker, so the real issue is the credentials and background of the new Energy Secretary, Ed Davey.
So who is Ed Davey?
Edward Jonathan Davey has a degree in Philosophy, Politics and Economics from Oxford and has been in parliament since 1997, when he defeated the Tory MP Richard Tracey in the constituency of Surbiton. Under the coalition, Davey was appointed Parliamentary Under Secretary of State in the Department for Business, Innovation and Skills (BIS) with responsibility for Employment Relations, Consumer and Postal Affairs.
Davey has a reputation for falling on the green side of the spectrum; he campaigned on environmental issue at university and his voting record shows support for new laws to tackle climate change.
We will watch developments over the next few months with interest to see if there is a particular change in energy policy as result of the change in personnel, but the reality is that both Huhne and Davey are Lib Dems through and through and very little is likely change.
- The draft Energy Bill: a five-minute summary
- 60% increase in business energy costs as average turnover falls by 6%
- Business week in brief: 11th May 2012
- Ed Miliband and the Queen talk energy
- Interview with Steve Fitzsimons of new business energy supplier, Hudson Energy
- Business week in brief: 4th May 2012
- The see saw of corporate profit
- Business week in brief: 27th April 2012
- EDF Energy’s Business Customer Commitments: four key pledges
- Businesses buck the trend when it comes to smaller energy suppliers