It is that time of year again.

scorza · 14 Nov 2013 at 10:14

http://www.bbc.co.uk/news/business-24937415

So RWE, the owners of Npower are cutting jobs because of the low wholesale prices for energy, at the same time as Npower are putting the price up partly because of wholesale price rises. Hmmm.

Also, in 2013 RWE will make EUR9bn profit (EBITDA) on revenues of EUR40bn. That's a 22% margin, so I hope we can put to bed this myth that the energy companies only make 5% profit.

alx · 14 Nov 2013 at 10:34

scorza said:
http://www.bbc.co.uk/news/business-24937415

So RWE, the owners of Npower are cutting jobs because of the low wholesale prices for energy, at the same time as Npower are putting the price up partly because of wholesale price rises. Hmmm.

Also, in 2013 RWE will make EUR9bn profit (EBITDA) on revenues of EUR40bn. That's a 22% margin, so I hope we can put to bed this myth that the energy companies only make 5% profit.

But what else do RWE do? Surely their profit margin isn't just related to NPower?

Angilion · 15 Nov 2013 at 00:49

alx said:
But what else do RWE do? Surely their profit margin isn't just related to NPower?

They own other energy suppliers and generators. So while it's not just NPower, it is just energy businesses.

Here's one very simple way to fudge the profit margin figures if you own both generation and supply businesses - simply charge your supply businesses more for the energy your generation businesses generate. You can easily have a 22% margin overall but only a 5% margin on the supply - you've just moved the rest of the profit to your generation business.

I'm not saying that I'm certain that's what they're doing, but it would be an easy way to have a 5% margin on supply and a 22% margin overall (which are the margins that RWE is reporting).

Zenduri · 15 Nov 2013 at 00:58

Ofgem are bringing in some legislation soon that generation and Residential/SME/Corporate operations will split to make it more transparent for what everyone's paying for buying elec/gas. Essentially ensuring a company which has a generation arm cant sell it cheap to it's own retail arm

alx · 15 Nov 2013 at 10:15

Angilion said:
They own other energy suppliers and generators. So while it's not just NPower, it is just energy businesses.

Here's one very simple way to fudge the profit margin figures if you own both generation and supply businesses - simply charge your supply businesses more for the energy your generation businesses generate. You can easily have a 22% margin overall but only a 5% margin on the supply - you've just moved the rest of the profit to your generation business.

I'm not saying that I'm certain that's what they're doing, but it would be an easy way to have a 5% margin on supply and a 22% margin overall (which are the margins that RWE is reporting).

From time working at Centrica, what you say is illegal. If you, as a company, own both supply amd generation parts of the energy business you must sell (eg gas) at market rate. They're very strict on that, you can't deliberately supply another part of your business with cheap or expensive energy to gain an advantage.

scorza · 15 Nov 2013 at 11:16

alx said:
From time working at Centrica, what you say is illegal. If you, as a company, own both supply amd generation parts of the energy business you must sell (eg gas) at market rate. They're very strict on that, you can't deliberately supply another part of your business with cheap or expensive energy to gain an advantage.

Then what's the point of competition? Tbh from my time working in the electricity markets, that sounds more like Centrica policy than the law and I can totally understand why they'd be strict about enforcing it. The concept of a "market price" is rather subjective too and frankly could mean almost anything.

alx · 15 Nov 2013 at 11:54

scorza said:
Then what's the point of competition? Tbh from my time working in the electricity markets, that sounds more like Centrica policy than the law and I can totally understand why they'd be strict about enforcing it. The concept of a "market price" is rather subjective too and frankly could mean almost anything.

The point is there's an official wholesale gas market price, like Brent Crude prices. Centrica Upstream which produces the gas (from the North Sea) has to sell the gas at market rate to Centrica Midstream and British Gas (which is the domestic supplier), or anyone else for that matter.

This article shows a bit how the gas has to be traded between the gas produces and gas traders, even if they are the same company: http://www.theguardian.com/business/2012/nov/12/wholesale-gas-market-300bn-year

scorza · 15 Nov 2013 at 12:17

alx said:
The point is there's an official wholesale gas market price, like Brent Crude prices. Centrica Upstream which produces the gas (from the North Sea) has to sell the gas at market rate to Centrica Midstream and British Gas (which is the domestic supplier), or anyone else for that matter.

This article shows a bit how the gas has to be traded between the gas produces and gas traders, even if they are the same company: http://www.theguardian.com/business/2012/nov/12/wholesale-gas-market-300bn-year

The price is agreed between the buyer and the seller (and the traders in between). The official wholesale gas market price is determined by these agreed prices (which by law companies have to release) as inputs, puts them through a calculation and outputs a nice, easy to understand single price. It's a useful indication of what the market as a whole is doing but it's only that - an indication, it doesn't necessarily follow that anyone actually pays that price.

Angilion · 16 Nov 2013 at 00:40

alx said:
From time working at Centrica, what you say is illegal. If you, as a company, own both supply amd generation parts of the energy business you must sell (eg gas) at market rate. They're very strict on that, you can't deliberately supply another part of your business with cheap or expensive energy to gain an advantage.

Who's very strict on it? Laws mean nothing if they're not enforced and I know very well that it's commonplace for businesses to break laws.

Assuming that it is strictly enforced...how does an energy company show a 5% margin on supply and a 22% margin overall?

teaboy5 · 16 Nov 2013 at 01:32

What's the price per unit on the mainland ?

In NI it's around 17-18 p now

SpeedFreak · 16 Nov 2013 at 10:14

teaboy5 said:
What's the price per unit on the mainland ?

In NI it's around 17-18 p now

Around 10p

Zenduri · 6 Dec 2013 at 11:32

Just got briefed an hour ago, eon 3.7% increase from jan 18th about £ 48 on a duel fuel, but the recent government levy change will covet about £ 40 of it

scorza · 26 Mar 2014 at 19:14

https://twitter.com/UKLabour/status/448838253055967232/photo/1

Gogl · 26 Mar 2014 at 19:27

BBC News said:
SSE, whose companies include Swalec, said the freeze would lower profits, but it would "streamline" its business to cover the shortfall.

The company announced it would cut 500 jobs and shelve four planned offshore wind farm developments.

Maybe all the companies will get in on this and we can have thousands of jobs losses in exchange for a freeze on energy prices. Of course, any job losses will be negated by re-hiring as soon as that period is finished I'm sure.