Many people think their energy, water and other utility bills are too high. We have often examined the EU and UK policy background to some of the high prices, with many of you joining my criticisms of the carbon levies, renewables obligations and the rest that is pushing up our energy costs.
There is a further problem with our utility industries that the UK still has the power to fix. There is a lack of competition in several major areas. People claim these great utilities are natural monopolies. Government buttresses their strong market positions with statutory protections, and they rely on Regulators to avoid high monopoly prices.
Unfortunately the absence of competition means a lack of innovation, a complacent reliance on older methods of production and delivery, and a lack of market test on the cost base. In order to have better industries delivering more and cheaper water, more and cheaper power, and delivering more and cheaper public transport, we need to encourage or require more competition.
John Penrose MP has recently written an interesting paper entitled “We deserve better”. It helps us realise that there are two essentials we need to improve the performance of the large utility areas. The first is the simple ability for customers to switch easily between companies supplying water, or electricity or gas or train travel or banking services. The second is the easy ability of a challenger business to use parts of the existing pipe or cable or clearing network to link them to customers in their early days as they build up their customer base.
There are many good examples of pipes and cables being used as common carrier systems. The UK needs to get on with providing easier access, as the means to create more competition. Once you allow more competition you will get more capacity and plenty of new ideas. Just look at the way mobile phones took off once we broke the BT monopoly.
May 21, 2013
exactly the same could be said in healthcare to lift us from the poor levels of care
May 21, 2013
Agreed
May 21, 2013
I have been reading about average tax levels. I live in Elmbridge, Surrey and it turns out we pay the highest tax per head in the UK (16k p.a.) For the record I paid over 40k in tax this year. The second highest tax rate is 10k in St Albans, in London it’s 5K pa and I believe the average UK tax in 4k p.a.
So .. I think it is a good idea to quote Goverment spending in terms of tax per anum.
I just read a police woman received £20k for being offered a pink gun. That means that 5 families in the UK worked all year just to compensate this woman.
I also hear that Sir David Nicolson resigned with a pension of 1.9 million. Which means that 475 families worked all year to pay for his pension. Or put another way 10 people worked their entire lives just to pay for his pension.
May 22, 2013
JRs blog is academic because the the real killer is the EU directives shutting down perfectly good power stations for nonsensical emission targets. Davey placed an 18 month moratorium on shale gas exploration. When everyone’s energy bill double think it was the Lib Dems fanatical support of the EU that caused it, when people lose jobs through expensive energy remember it was the Lib Dems who were responsible- ably supported by Cameron. And the Lib Dems think it is a price worth paying!! Economic madness. Yet both parties call opponents names like fruitcakes or Ed Davey calls for other parties policies to be examined in detail. SUggest we start with the energy policy because time is running out.
May 22, 2013
@Disaffected: Whilst what you say is very true it doesn’t explain the awful customer service that one gets, the smoke and mirror pricing, the myriad of tariffs etc. even if the cost of a Kwh of ‘power’ was 10 times the price it is today due to EU regulation. Then, of course, there are the utilities that are not directly effected by the great CO2 wheeze, how do you explain away the disgusting service from some of the telecoms, even the water supply companies (some of who do not supply a waste water service either, so no EU river or sea-water discharge issues for them either)?
May 22, 2013
Indeed though the figures are only income tax not vat, fuel duty,IHT stamp duty ……. .
But this 4k is not profit the government has pay for health schools tax credits, etc. for this person too. They make a lost on most and are hugely dependent on the few. Try the figures for the cost of the pointless wars, hs2 or the PVC/wind farm religion, or the BBC. And thanks to all the waste the salaries and tax of the average worker is reducing further.
May 21, 2013
@ iain gill: This is a blog about UK utilities, not the USA, I’m not sure what Medicare has to do with the UK in any case…
When ever my family (here in the UK) have needed to use the NHS both the health care and ‘service’ have generally been fine, the biggest problems have always been with the administration – which of course has grown like Topsy since the creation of NHS Trusts and internal markets – thus the last thing most want I suspect is yet more Topsy’s, just more Nightingales.
May 21, 2013
the NHS let my father die from easily preventable death, the NHS has left members of my family in agony for prolonged periods, I have lived all around the world and have never seen such poor healthcare as I see in the UK and I include several third world countries. I dispair at people defending the NHS it is a national disgrace.
May 22, 2013
@Ian Gill: Please accept my sympathies but please also believe me that is not typical – of the front line staff – when ever my family have been left in pain or in a corridor the cause has always been down to the management and privatising (or what ever) the NHS will only make matters worse as profit will be the only word that matters.
Very true that one doesn’t see people lying on trolleys in corridors in the USA, but that is because they are being left on the roadside or in their own beds at home, as I said, the same problems affect Medicare in the USA as affect the NHS here in the UK.
I would just point out that I have worked for a NHS supply company and have seen more than enough of the back-room management waste whilst the front line staff had to make do and mend.
May 23, 2013
I’m part of the way with you Jerry, but last August, I was rushed into the local hospital, bleeding profusely, with my giblets hanging out from a wound where all the stiches had burst, and had to wait 1 hour and 40 minutes before I was even given a pain-killing injection. I couldn’t even sit down, and that was before any re-organisation had even begun to take place.
Personally, I couldn’t care less who runs the NHS, just as long as it works. But it shouldn’t be a money pit. There has to be value for money and accountability.
Tad
May 21, 2013
Jerry could not agree with you more however mid Staffs was a direct result of Nu Labs never mind the quality just hit the target approach
Unfortunately the taxpayer will now be burdened with “Sir” David Nicholson’s pension. Lets hope when RBS is privatised some activist shareholders get together to ensure Goodwin gets his just desserts. Remember just in case you may have forgotten, he was responsible for the UKs biggest insolvency and has the brass neck to say he is entitled to a pension
May 22, 2013
@Nina Andreeva: I really don’t wish to revisit an old blog but, are you really saying that if the NHS was still run as it was back in the 1950/60/70s that Mid-Staffs would have happened? If you undermined the previously adequate foundations of a building which then collapses do you blame who ever built the foundations or those who undermined them (like in Mid Staffs, often for short term gains)…
May 21, 2013
No you really need to slash away at the number of non medical admin staff and especially at the management. The money saved there can then be used to improve the NHSs frontline delivery. If you want to see what I mean in action, hang around the entrance of a hospital at around 5pm and see how many come out and then ask yourself are that many doctors and nurses still inside?
It’s nice to see Nicholson is still in place and appears to have gotten away with it when one considers mid Staffs et al
May 22, 2013
Nina. I travelled 140 miles and got up at 4.30 yesterday in order to visit my GP. I was unable to book an appointment as he had a day taking any patient without pre booked appointments. I phoned at 8am as advised, could not get through until 9am, by which time he was fully booked.
They offered to have another partner phone me and try to see me. In the end, he spoke to me while I was in a shop, I described the symptom and he diagnosed, leaving a prescription for a tube of ointment. I was able to pick this up as they were open until 6pm. This is hardly a case of GPs slacking.
While finding phone numbers on their website I noticed that the new salaried GP, who is not a partner was listed on ‘NHS Choices’ under his name +partners. A few semi-literate patients had given the practice one star out of five and left very adverse comments, which in my experience were untrue of my GP, who has been very helpful. So I took the time to put a favourable rating and comment to correct the unfair rating. Today, NHS Choices sent me my entry to read. The rating had improved by 2 points but they had taken the name of my partner GP off, leaving the name of the salaried one+partners.
I wonder how much this has cost to set up, how much use and how fair it is. Perhaps Sir David Nicholson can tell us before he buzzes off to spend his huge pension.
May 21, 2013
Given how bad the privatised healthcare is for the poor in the USA I doubt privatisation will deliver better quality healthcare.
May 21, 2013
I wish people wouldn’t assume that the only alternative to the NHS is a US-style private healthcare system. Germany and France both have massively better systems involving both state and private providers. State monopolies are as appalling as private ones.
May 22, 2013
@Steve B: Whilst true the likely-hood of adopting either the German or French model is remote, had it not then I suspect we would have already done so – no – since the 1980s the NHS has been more moving towards a USA style system than away from it.
May 23, 2013
Here’s your chance Jerry, to prove your case with evidence.
Tad
May 22, 2013
Given that the Government seems to be trying to copy US style privatisation, rather than the system used in France or Germany, comparisons only to the USA are perfectly valid.
May 22, 2013
Given that the USA Government via “Obama care” is developing a USA healthcare system along UK and EU lines, I think your comparison is not as valid as you think Uni.
May 23, 2013
@Edward2: Quite the opposite actually, Obama is adopting a healthcare system along UK and EU lines because the current US system doesn’t work whilst the European and especially the UK system does!
May 21, 2013
We also need some standard comparison formats so that people can compare easily. Also some duty on suppliers to offer the best rates to customers rather than to rip off some customers while ripping off those who do not get round to changing.
This so that the companies do not us confusion marketing and the sign up for one rate today and we will double it a few days later methods that are so common. Not only in fuel but in insurance, credit cards, bank loans, bank accounts, mobile phones contracts, air flights, train ticket, ISA rates, financial investment products and much else.
The right sort of framework and intelligent regulation here could do so much good to give genuine competition and stop these sharp practices.
May 22, 2013
LL. Perhaps add ferry ticket sales to your list. The internet agent I have used for 2 years has changed the order of ports to alphabetical and raised rebooking charges from £10 to £25. So, unlike the french ferry operator who has kept their booking page the same , the outgoing ports now read Calais-Dover and Dieppe-Newhaven, Cherbourg-Southhampton etc. Perhaps it was a psychological mistake, but I clicked, reading it the wrong way round, as I was used to the first click not having to be altered. As a result I paid 25% more than by booking directly with the ferry.
The rebooking operator would not comment when I asked whether this happened frequently and advised me to email the management. I did so and did not receive a reply or receipt. But there was a picture of the young boss getting an award and a list of other competitor sites that are in his group. They have also reversed their order of travel.
May 21, 2013
Perhaps we just need a transparent charging structure so that comparison of prices is rather more simple, and we then outlaw fixed contract periods so switching can be immediate.
May 21, 2013
A limit of 3 tariffs per utility would make it much easier to compare prices.
May 21, 2013
The problem as always is that the regulators get too close to those being regulated. The regulators have little interest in intelligent regulation in the interest of consumers. Their interest is in over complex regulation, no large embarrassments, their salary, working conditions, an easy life, pensions, job security and their personal power base.
One needs to align the interest of the regulators with those of consumers and pay them for positive results actually achieved for consumers. The other problem is they are appointed by politicians & bureaucrats and usually they choose the wrong people and for the wrong reasons.
May 21, 2013
Their interest is in over complex regulation, no large embarrassments, their salary, working conditions, an easy life, pensions, job security and their personal power base.
Either provide evidence to back up these claims or admit that what you actually object to is that regulators can stop businesses abusing their customer in order to make greater profits.
One needs to align the interest of the regulators with those of consumers and pay them for positive results actually achieved for consumers.
How are you even going to determine whether the results are positive for consumers? A large scale survey?
May 21, 2013
Determined by rational analysis – by someone rational, honest and numerate.
May 22, 2013
So you don’t actually ask consumers whether the results are positive you just assume that they are based on a spreadsheet.
May 22, 2013
I agree.
Regulators could be beneficial. They can also be the problem.
Rather than a regulated monopoly I think it could be better to have a state-run monopoly. At least in this case those running the monopoly are accountable to the electorate.
May 21, 2013
Regarding competition between the electricity companies, there seems to be some misunderstanding in government about the way the market operates. In the whole of the UK there are generators of electricity and sellers. The generation comes from a mix of sources and there is an overall control system for choosing the sources and distribution. Sometimes the amount of electricity available barely matches demand. The operation is a complex job and various methods such as prediction and the release of stored energy from pumped reservoirs is used. The proportions of the types of generation are the result of government policy, or lack of it. The sellers do not control this mix of sources.
So what happens if a customer believes in saving mother Earth and picks a ‘green’ tariff? They will be charged a bit extra as if the electricity was being brought down the line from a wind turbine or hydro station. However, in reality the electricity will be identical to their non-green neighbour, who will pay a bit less. The total mix of generation will also be the same. The total profit of the energy supply company will be the same too. This is published as a fraction of the total cost to the customer.
Similarly, when tariffs are simplified ther will be some customers who will gain but other will lose the special offers and be charged more. Hopefully, the money wasted on sales gimmicks will make the industry a little more efficient. One of the silliest ideas put forward by ministers is that local authorities should join the marketing team and arrange for lower tariffs for households who join their club. The club members may get a slightly better deal, but this will be at the expense of customers who do not join, as overall profits will stay the same, as approved by the regulator. In the end we will have an even more complex system and more work for local government.
May 22, 2013
I was wondering why my piece, which has now reappeared marked as awaiting moderation, has been withheld. I checked the facts and am all in favour of simplified tariffs. The green options are to be kept, I read, but in fact do nothing to alter the amount of ‘green’ generation as far as I can see. The carbon charge farce will do this without help from customers.
May 22, 2013
Had a chat with my lefty neighbour, who has installed PV panels on her north east facing roof, improving the streetscape no end. I have put a home made solar water system on my south west slope. So far I have had no useful hot water since early last year. And my neighbour has saved 80 pence worth of electricity so far this winter. And the seagulls don’t like anything shiny and bomb away.Well at least we tried to do our bit Al.
May 21, 2013
A monopoly can only exist in the presence of government protection. They are created by politicians and their meddling. If there had not been decades of control by government we would not have any of these utility or banking monopolies. Now, suddenly, that is all going to be reversed and the cosy relationship of political funding, corporate directorships and mutual back scratching is going to end? Can’t see that happening.
May 21, 2013
My water bills are heading towards £800 pa. An average sized house. No ‘choice’.
Worringly many of our vital utilities are in the hands of foreign ownership with no patriotic obligations to us – much of it state owned anyway.
In my view many privatizations have been bonkers. Look at railways. Look at social housing.
An Evening Standard letter speaks of ex council houses commanding £1700 pcm rent. The munificence of the social security system jacking up the housing costs for all of us everywhere. The national debt and cost of welfarism speaks volumes of the situation post privatisations – especially the cost of displacing British workers in a race to the bottom on wages.
BT/GPO were world leaders in technological innovation. They were not holding back mobile phone technology.
May 21, 2013
That’s £1,700 pcm rent for a welfare tenant with much social housing is in the hands of the private sector.
Surely those council houses were sold off too cheaply and not enough from those sales invested in providing more social housing.
Obviously 4 million extra people in ten years has been difficult to absorb as well.
I am not against the private sector (far from it) but a welfarist state when combined with it seems to be a lethal combination.
The private sector is every bit as capable of corruption, inefficiency, price fixing, cartels, closed shops (professions), needing of subsidy (using non-British workers), being a drain on the taxpayer (various notable tax avoiders of late)…
May 22, 2013
@ “I am not against the private sector (far from it) but a welfarist state when combined with it seems to be a lethal combination.”
Indeed, it would have been cheaper to have just kept the welfarist state, the only people making money out of the current combination are the private (now days, often BTL) landlords. But then selling off the council houses, as they were, had nothing to do with either the Right to Buy nor the needs/wishes of the tenants.
We now have people in (ex-)socail housing who could have afforded to buy on the open market whilst those on welfare are renting (at a cost to the state) from private (often BTL) landlords when they could be living in the now sold-off socail/council housing were the only cost to the state would be that of on going maintenance…
May 21, 2013
E Kevin
Are you on a water meter ?
We are, and our bill is now £12 per month, it was very many years ago approaching £700 same house, same number of people, same way of living, just the two of us !
If you are on a meter then I suggest you have a leak, or have very many people in the house who have a number of baths each day.
May 22, 2013
Alan Jutson
Our water rates are currently nearing £700 per annum and I was thinking about a water meter as there is only my wife and I in the house. Several years ago it was made compulsory in our area for all business premises to be on water meters and after the meter was installed at my business premises our water charges were halved.
May 22, 2013
I have a water meter. It was installed by a tenant who was rarely at the house. The house owned by an absentee landlord who bought the house from photos. He should not have been allowed to do it, but was part of the reason we got the house. When families saw the water was on a meter they ran a mile.
Any stories like Mikes about low bills are because they do not use any water. They claim they do but when asked how much often refuse to answer. It is a very expensive way to pay if you are a normal water user i.e. a couple using a shower and occasionally watering the garden.
Five hundred quid last year 2 adults and a six year old child. Not excessive use by any means. You have been warned.
May 22, 2013
One reason for the extortionate water and sewage charges in the South West is the regulation of sea water quality to EU standards and the long coastline in relation to population. Unfortunately, they seem to be tightening these again. Another is that many properties in the countryside have septic tanks and this part of the bill is not chargeable. The remainder have to pay in order to pay for extremely clean seas. I don’t know how people on low pay can afford these bills.
May 21, 2013
With respects Mr.Redwood any further competition would soon join the present cartel which are presently crucifying households throughout Europe.
We need a regulator that determines what is a reasonable charge for energy or we nationalise the industry and determine a reasonable levy. At present another committee which costs the tax payer investigating the big six on a regular basis levying fines.
Get the government to intervene and set the fees which are affordable to most. Twenty four thousand died of hypothemia over the winter, this is not acceptable.
One wonders as to where the big six, (none that is a british company) are registered and where they pay their taxes.
May 22, 2013
We need a regulator that determines what is a reasonable charge for energy or we nationalise the industry and determine a reasonable levy.
Get the government to intervene and set the fees which are affordable to most.
No, no, no. A thousand times no.
Government set prices do not work. Look at Venezuala, where the government set prices for things like toilet paper, milk and butter to ensure that even the poorest can afford the basics. The result? Mass shortages of said products as the price was set far too low.
Set prices too low and no-one produces as there isn’t enough/any profit in it to make it worthwhile. Set too high and people won’t buy as it isn’t worth the price or you’ll have a glut of said product and quality will drop as well as the presence of black markets and evasion.
If we want fair and affordable prices we need to allow the market to work. This means more competition, fewer taxes and ‘green’ subsidies. It means ignoring the misrepresented science of the sensitivity of the climate to CO2 and allowing the exploitation of shale gas.
May 21, 2013
Dear Mr Redwood, while competition can help, this is really a secondary issue to the provision of electricity and water. We need sufficient generation and reservoir capacity, something governments in this country continue to hamper with their ridiculous affection for saving the world from climatic shifts. Not only are we on the edge of disaster with regard to electrical supply, but the investment to remedy this will do no such thing. Wind, solar and any other so called renewable are totally insufficient to any realistic affordable solution. You are diverting attention from what needs to be done. Why?
May 21, 2013
Labour didn’t govern so did nothing for 13 years despite a growing population through an open door policy. They failed to confront the greens and didn’t build nuclear so we import more electricity from French nuclear power stations. Many politicians today support expansion of Heathrow which involves concreting over a water reservoir for London.
May 22, 2013
@Jon: Indeed, “Blue Labour” wasn’t very well thought through was it…
May 23, 2013
Are you more of an ‘old Labour’ man then Jerry? Nail your colours to the mast, so we can see where you’re coming from.
Tad
May 23, 2013
@Tad Davison: For how many times… I hold no flags for any party, I will criticise were there is fault and praise were there is good. Stop trying to pigeon-hole everyone!
But yes, I would much prefer there to be an old style Labour party, in the same way as I would prefer an old style Tory party, everyone fighting for the dammed same centre ground is a recipe for disaster, most likely walking into a USoE.
Actually, and sort of getting back on topic, modern political parties are very much like modern utility companies, vast in number, confusing tariffs/manifestos, all competing for the same few members of the public, but once they are signed up for the minimum contract period they are then ignored, even treated like dirt, because the party/utility is now off trying to win back those who have (previously) switched…
May 23, 2013
Don’t snap at me Jerry, I actually agree with a lot of what you say. I’m not trying to ‘pigeon hole’ you, I just want to see where you stand on the substantive issues. I’m looking for a bit of common ground, but you’re a bit quick on the trigger, and not just with me.
For my part, I remain loyal to principles rather than a party, and will vote for any party that makes the most sense, or is perhaps the most believable at a time when politics is pretty much in the gutter as far as credibility is concerned. I suspect you’re pretty much the same, and I want to explore that with you.
You make an interesting point about the middle ground, but we’re talking consensus politics here, and for a party to be successful, they have to appeal to the most people or they simply remain a party of protest on the side lines. The difficult bit, is trying to get the political parties to see the strength of our arguments in a reasonable and rational way, and the more people who see it from our point of view, the more chance we have of changing things.
So see my enquiries in that context. If I didn’t think you had something good to say, I wouldn’t read your posts or comment on them, but I’ll tell you now, we won’t agree on everything.
Tad
May 21, 2013
As usual the debate here is conducted in a vacuum as we try to re-invent the wheel. What do other countries do to ensure a healthy utilities sector for both providers and consumers ? Which countries have got it right ? Which do we aspire to match ? What ideas can we use from them and what are the mistakes that can be avoided ? I don’t know, and I imagine no-one else posting here knows either so we just start with a blank piece of paper. It is the same in debates about the NHS and education.
May 21, 2013
Quite right
THere is no such thing as a natural monopoly, even for major infrastructure such as water supply. A quick example. My water bill is about GBP 400 a year. Divide that by a cost of capital of say 7.5% and you get a value of GBP 5,300. Multiply that by the 200 households in my village and you get over GBP 1 million. You can lay a lot of pipes for a million quid.
Regulated state-sponsored monopolies are intrinsically lazy and have no customer focus. For example, why do I have to pay a high price for highly purified drinking water that I use in my washing machine, shower and to water my garden? If the market was opened up, maybe a supplier would emerge who could sell me cheaper (and less energy intensive) water for those purposes.
As JR has pointed out regularly on this blog, when grain prices go up the supermarkets don’t start rationaing bread supplies, yet this is exactly what happens to our water supply every time rainfall is “unexpectedly” low. Time forthe utilities to be exposed to the full force of the market.
May 22, 2013
@Robard K: Very true, there is natural monopoly (as how things need to be) when looking at a blank sheet of paper or the bright blue sky… Think about it!
May 22, 2013
My water bill is about GBP 400 a year. Divide that by a cost of capital of say 7.5% and you get a value of GBP 5,300. Multiply that by the 200 households in my village and you get over GBP 1 million.
£400 divided by 7.5% is £372. £400 only becomes £5,300 if you increase it by 1,325%.
May 21, 2013
Rising energy costs are a result of government energy policy.
May 22, 2013
Yes. High energy prices are a specific goal of the energy policy of the Con/Lab/Lib parties, the aim is to reduce CO2 emissions by pricing fossil fuel-based energy out of the market (by carbon credits for example) and replacing it with high-cost renewables. It always amuses me when the Guardianistas wail in horror when energy prices go up (eg. domestic electricity and gas) because as warmist enthusiasts they should be welcoming it !
May 21, 2013
Penrose like many conservatives believes competition is the be-all and end-all. Like his peers, he denies that natural monopolies do exist and can have significant public purpose.
To quote the excellent Economics Online. “A natural monopoly is a distinct type of monopoly that may arise when there are extremely high fixed costs of distribution, such as exist when large-scale infrastructure is required to ensure supply. Examples of infrastructure include cables and grids for electricity supply, pipelines for gas and water supply, and networks for rail and underground. These costs are also “sunk costs”, and they deter entry and exit. In the case of natural monopolies, trying to increase competition by encouraging new entrants into the market creates a potential loss of efficiency.”
You can see this in the mobile phone market of North America and Europe. Europe has forty odd suppliers that tend to make less than normal profits on invested capital and consequently have to sweat old technology assets longer to get their money back. North America has far fewer suppliers makes more normal profits. The bottom line being North America is covered in 4G cells and the likes of the UK have only just started 4G roll-out.
We are suffering old fashioned, simplistic, neo-liberal economic thinking, especially in the Treasury Department. “It has been consistently argued by some economists that monopoly power is required to generate dynamic efficiency, that is, technological progressiveness. This is because (same source):
1 High profit levels boost investment in R&D.
2 Innovation is more likely with large enterprises and this innovation can lead to lower costs than in competitive markets.
3 A firm needs a dominant position to bear the risks associated with innovation.
4 Firms need to be able to protect their intellectual property by establishing barriers to entry; otherwise, there will be a free rider problem.
5 Why spend large sums on R&D if ideas or designs are instantly copied by rivals who have not allocated funds to R&D?
6 However, monopolies are protected from competition by barriers to entry, and this will generate high levels of supernormal profits.
7 If some of these profits are invested in new technology, costs are reduced via process innovation. This makes the monopolist’s supply curve to the right of the industry supply curve. The result is lower price and higher output in the long run.”
A well designed taxation system can be a more effective regulator than a quango.
May 21, 2013
The bills need to be provide a breakdown showing how much is spent on :-
– wholesale cost of gas
– admin and staff costs
– profit distributed in form of dividends
– sales tax
– investment in infrastructure
– investment in energy efficiency of consumers which the Govt seem to want to devolve
– green levies
– separately from admin , sales+marketing+advertising
Are Dave and the others MP’s ready to risk transparency with the children ?
Consumers may not be very happy to find out that the wholesale cost of gas only accounts for around half of the energy retailers total costs and that the cost of competition (advertising,sales and marketing) account for upwards of 20% .
May 21, 2013
“Just look at the way mobile phones took off once we broke the BT monopoly.”
This is a complete distortion of history. The BT fixed line monopoly was broken in 1982. BT was privatised in 1984. Mobile phones were not available in the UK until 1985 (and not even in the US until 1983). BT never had a monopoly in mobile phone services. Mobile phones took off because of the miniaturisation of electronic components globally, not because of anything to do with how phone companies were run in the UK. BT would likely have remained the most innovative telecoms company in the UK however it was run. The clever chaps in Martlesham Heath would have seen to that, even with all the awful interference from Whitehall.
May 21, 2013
The problem was that BT was a company run by engineers for engineers. Good engineering, rubbish service. Who remembers the ‘party’ line. I do. A neighbour had to share with another neighbour, ironically as the telegraph pole was about 5 meters from her phone! Rubbish service and engineering. OK if you where both BT engineers and got on with each other. I think this is Johns point.
May 22, 2013
@Bazman: The problem with the GPO/BT was their political masters, if it had been run by the engineers then we would all have had not only our own private phone line but probably a Telex/ISDN line too [1]! Once the politicains took the brakes off, in preparation for privatisation, there were all manor of new services and equipment suddenly available that had been held up in development.
[1] the GPO (telecoms) had prototype video-phones in the early 1970s for example
May 21, 2013
Mmm, my ex BT landline stopped working. I spend 2 years and hours on the mobile phone not being able to speak to anyone in BT other than a machine that didn’t work.
What you call innovation is a telecommunications company that you can’t call to speak to anyone. They forgot telecommunication, not what I would call clever. Problem for me is solved I use a company that you can call. Thats innovation!
May 21, 2013
Energy Bills are simply to complex, why the need for multiple tariffs from the same company, there only needs to be one tariff per type of customer -domestic, business, agricultural and industrial, thus customers will automatically be on the lowest tariff for that supplier, this would make “Switching” a lot easier, nor should there be penalties for a type of payment, some people are paying far more they should be, most often the poor – even more so if they have been placed on or choose to use pre-payment cards.
Unless the UK builds a national water supply grid how can there be competition, how can I (living in southern England) buy cheaper from Scottish Water or even Tent Water, lay my own pipes! If Scottish or Trent water for example were to be able to buy water and its distribution at a discount from my own local water company that would then allow the companies to make a profit from either Scottish or Trent eventually selling that water on to me why can not my own local provider just sell the water more cheaply within it’s own area?! The same applies in reverse, how would the waste water market work. Water meters are irrelevant to all this and talking of waste water, this utility service has become legalised extortion (certainly in my area), using much the same system of charges that applied when the various utilities and agencies were nationalised and in effect run by government departments, in those days it was common and acceptable to rob Peter to pay Paul because all the money ended up in the one place eventually anyway – not so now.
Also, can we please have a law that says that all correspondence with these utility companies should be via the method chosen by the customer, the blind might welcome emails that they then access via their screen readers, someone who can’t read might welcome follow up telephone calls, those without computers might prefer printed letters whilst those who work nights (or those who reject all incoming calls claiming to come from a utility company) might wish to bar any and all contact via telephone. Just because someone has a phone or has a home computer it doesn’t always follow that is the way they wish to be contacted.
I was first tempted to just post the comment “Re-nationalise the whole lot!”, but then thought better although I’m not so sure that my first reaction is not to far from the mark – certainly for water and those utilities that do not have natural competition due to locality or infrastructure… Even were there is genuine competition there is still a jungle out there, still a loaded hand in the favour of the utility companies, regulation is no regulation unless it is policed and that is simply still not happening some 20 to 30 years after privatisation.
May 21, 2013
Is this not all rather simplistic?
I have electricity, gas, water and telecoms services into my house and waste out of it.
If I can, at the click of a mouse, change electricity supplier – whose job is it to maintain the network of cables that delivers power from the power station to the meter in my home?
And the same applies for all the other services. We have to have a grid. And if anyone can use the grid – there has to be one organisation responsible for investing in, and maintaining, that grid. Like Network Rail has to do on the railways.
The idea that you can have different suppliers of utilities supplying their little bit of water, gas, electricity or telecoms is, surely, fanciful. Say I want to supply some water. First thing I need is a reservoir. Who do I have to get permission from to build a reservoir and the pipes necessary to connect my water to the grid? The government, of course.
Likewise for power stations, gas creation and storage and building of massive computer centres to house server farms etc.
What we need is effective government management of our utilities. Unfortunately, under our first past the post, ‘all we are obsessed with is winning the next election’ political system – the development of sane, long term energy and utility solutions is impossible.
We need a separate authority to manage these matters – semi independent of government.
May 21, 2013
@Mike Wilson: You make an excellent case for national boards, national distribution, simple and clear charges (for the sector you’re in) – but wasn’t this what we had until the 1980s?….
Choice, better service or even “telling Sid” wasn’t the rational behind the 1980s privatisation, it was to create income that the Treasury then used to finance tax cuts – often just before an election (whilst North Sea Oil/Gas funded the lines of unemployed). Sorry if I sound cynical about this but that is because I am.
May 22, 2013
Jerry, are you effectively saying then, that you endorse state owned monoliths like the National Coal Board, that took vast amounts of money from the public purse?
May 22, 2013
@Tad Davison: What I’m saying is that dogma should not make policies, I neither support or disprove of nationalisation, in some industries it may well be the correct solution, in others it is clearly not.
But funny you talk about Coal, it took vast sums of money because it was both a vast and costly industry (before the cost of the actual labour element was calculated), so much so that the private companies even in the 1930s were either struggling or cost cutting to survive and this when coal was just about the key to everything.
May 23, 2013
To illustrate your point more fully, give us a run-down of all the state-owned industries that made a profit.
Tad
May 23, 2013
@Tad Davison: Profit is not the only criteria, some industries are service industries, any cost to the nation (“the tax payer”, in modern speak) is off-set by the benefits to all, here I’m talking about water and sewage, transport, and perhaps even the provision of telecoms/broadband services – or at least the hard fibre or copper backbone up to the point of LLU and roadside cabinet.
May 21, 2013
They are not suppliers they are billing companies. You change billing companies.
May 22, 2013
@Bazman: Not completely true since BT was forced to allow LLU a few years back, now telecoms companies can access the hard wire within the racks of the local exchanges, thus your telecoms provider might well be using there own equipment – sharing only the ‘copper’.
May 21, 2013
The problem for gas and electricity, is the suppliers do not control prices, the producers do.
Apart from capital costs, there is no extra cost for transferring a telephone call or data over the Internet. The Service provider then is entirely control of the costs, and thus the prices.
Gas an electricity are affected by supply and demand, sovereign States controlling production and thus supply, subsidies, the extraction companies, and of course the political whims of Governments and their regulatory and taxation policies.
Then the wholesaler.
A start would be to get Government out of the loop, not least by allowing mineral rights on private land to the landowner.
But at least gas and electricity retailers can alter their business models to provide different pricing, and can share transmission structure.
Water is a different problem. Once again you have the supplier… leaving out the weather gods… who captures and processes the water and usually owns the means of transmission.
Moving water, that is altering its source is virtually impossible. An electricity supplier, or retailer in the North, can easily enough transmit electricity to the South, but how do you do that with water?
Allowing multiple companies in an area to extract and/or capture water and feed it into a common transmission grid is a possibility, but they can only take what is there or falls.
How do you bill that? How does company A bill its customer for its water? There would beed to be a wholesale mechanism so water going into the grid can be metered.
Just switching suppliers is of little value in such an interwoven supply structure.
What will help with water is if everyone has a meter. Two things then, people are more careful, but also water companies know they only get paid for water going through a meter not into the ground.
However there may be some advantage in allowing companies who who would build desalination plants, feed into mains supplies, or into reservoirs.
But first and most important, get Government out of the equation.
May 21, 2013
The real purpose of ALL the regulators is to remove ‘responsibility’ from the minister. They certainly have NEVER represented the interests of the consumer as they launch yet another inquiry and produce yet another report or engage in further ‘monitoring’.
The greatest achievement in ‘consumer protection’ was standardisation of ‘weights and measures’. What we need now are standards for fuel, communications and insurance, without that there is no free market. Imagine shopping for beer if it came in 400, 449, 460, 470, 489 or 502 ml cans? Most people just want electricity and gas ‘on demand’, they neither know or care about standing charges and tariff break points. Energy: price per kWh, simple! Insurance for a house, car or holiday: all of the risks that you, as insurer, know about and I don’t.
May 21, 2013
My local water company in the South of England is owned by a public company with an Investors’ section of their website open to everyone whom the company deems to have a legitimate interest in their affairs: “Investors information. This area is password protected and access is restricted. Any person requesting the password may be required (upon request) to provide satisfactory evidence as to their status as a bond holder or as an investment professional.”
The rest of the site is a digital rendition of the type of material delivered with the rate demand which is filed in the normal place.
May 21, 2013
A halt in money printing would help if most energy commods are denominated in US dollars. We may be in for a further a shock too when the IMF gets around soon to altering the currency mix of its special drawing right.
The “Sunday Telegraph” this week had an amazing article claiming that the energy bills of the average household could soon exceed what it spends on its mortgage if things do not soon change
May 21, 2013
Well someone needs to speak to the looney tunes at DECC and the ridiculous comments that spout from Ed Davey. Cameron demonstrated quite clearly there is not any difference between LibLab andCon yesterday when voting for gay marriage. Blair dreamt up wind mills Ed Miliband implemented and Cameron and the looney tunes lib Dems followed on. The taxpayer is lumbered for their political fantasy. A change is required from this dopey green rubbish and the EU pricing families out of hearing their homes.
May 21, 2013
Utility bills are not a problem for you are they Nina?
May 21, 2013
But the energy prices in the UK are not particularly high compared to the rest of Europe (http://www.vaasaett.com/wp-content/uploads/2012/06/European-Residential-Energy-Price-Report-2012_final.pdf). That is not an argument against competition just making the point that the issue is Europe wide.
There were far bigger drivers to the change in mobile phone use than the privatisation of BT. The model of how BT was privatised is not a great advert for breaking up monopolies. It led to very few shares in the hands of those who had paid for it and directorships for some of the politicians involved in the decison making.
May 21, 2013
JR, I’m afraid you’ve completely lost me on this one.
The fact is that most of these utilities have to be monopolies, not through any law of nature which makes them “natural” monopolies, but because the cost of installing, and then maintaining, the necessary infrastructure is so high that it makes no economic sense to even duplicate it so that customers could choose between two different suppliers.
Take water.
Just after privatisation our local waterworks, a short walk down the road, held an open day during which it was explained that our water was pumped out of boreholes on that site, filtered, given a dose of chlorine and then a dose of sulphur dioxide to mop up the surplus chlorine, and pumped up to a reservoir a couple of miles up the road, whence it flowed back down under gravity through the mains and so to our houses.
Of course it would be possible for the company to instal connections to other water supplies and to other mains systems, and that may even have been done since that open day all those ago, so that the water that now comes out of our taps may no longer be just the water pumped up out of the local boreholes; but how could I opt to be supplied by a different company and get different water, unless that other company installed its own reservoirs and pumping stations and mains system, to which we could also be connected if we chose, occasionally swapping back and forth between water suppliers according to our level of satisfaction or dissatisfaction with the quality and price of the water supplied, and maybe also the reliability of the supply?
The extreme Conservative position seems to be that there is the profit motive and only the profit motive, there being no recognised human motivation other than personal greed, no altruism only egotism; therefore everything has to be in private ownership and managed with the sole aim of maximising profits for its owners, with efficiency and improvement driven by constant competition between different companies and their owners for their share of the available profits; apparently it is quite impossible for these extreme elements in the Conservative party to even conceive of a publicly owned company being efficiently managed because the managers appointed to run it recognise, and are driven by, their sense of duty to their customers and to the general public.
If it is possible to find people who will run private companies efficiently, surely it should also be possible to find people who will rise to running public companies efficiently?
May 21, 2013
These will be interesting.
The date for the 2014 European Elections is the 22nd-25th May
May 21, 2013
Cast iron heart and soul will be third, perhaps just ahead of the greens, BNP and the Libdumbs on the current course.
Beaten by swivel eyed, closet racist, clowns and a desire for democracy, control of our own borders and a sensible economic and cheap energy agenda.
May 21, 2013
There is a case for re-nationalisation of some of the utilities where pseudo-competition has failed. In many cases what seems to have happened is that the senior management has arranged buy-outs and then instead of modest public sector salaries they get plc level wages and bonuses subsidised by the tax payer. i.e. lose-lose for the customer and tax payer.
The issue of monopolies is just not tackled by the mainstream political elite either due to lobbying, self-interest or inertia.
May 21, 2013
In effect we already have re-nationalised utilities pursuing high cost supply for energy and water at the behest of politicians’ directives (both EU and Parliament). They are not behaving as they would in a properly competitive market, making rational investment choices with an eye on competitive cost of supply.
Going the extra step to nationalise the remaining functions (billing, meter reading, operating plant) doesn’t seem to offer any scope for cost saving, and plenty of scope for inefficiencies to creep back in.
May 21, 2013
I am a believer in free markets in most cases.
However utilities are an exception in my view because they are networks and networks which rely on mutual co-operation do not work well as part of a competitive arrangement.
I think we should nationalise utilities.
I don’t see the need to be dogmatically opposed to nationalisation if it happens to work. With a change to the law and an emphasis on efficiency I believe it can work.
However, this would only be possible if we were to repeal most labour laws that protect strikes etc. Otherwise any nationalised operation can be hijacked by a few activists.
May 21, 2013
A utility is something useful and you want to nationalise it?
Food is useful, water, power, electricity, shelter, homes, the building of hospitals, schools, transport, roads, cars, trains planes, investment, clothes, shoes, fridges, cookers and so on.
Could go on but all the really useful stuff is private sector and good value for money. Why would you nationalise?
May 21, 2013
I agree that a poorly designed network regime can lead to at times severe market distortions – particularly for power networks – as some of Enron’s trading strategies in California demonstrated. There have been other smaller scale problems in the deregulated UK history too – such as booking capacity on the Interconnector gas pipeline to prevent its use to arbitrage with physical gas, or withdrawing generating capacity at short notice (a game that unreliable wind plays all the time).
These are the kinds of issues that a good regulator can provide workable solutions to handle. One of the best is to ensure as much transparency as possible, so that those gaming the system are readily identified.
It isn’t always the case that a monopoly operator optimises the system either: for example, they might commit to supply the Continent via the Interconnector, and then find that demand was much higher, or supply was curtailed, meaning they need to unwind that contract and purchase additional supplies instead. Likewise, a policy of preferentially dispatching wind power can leave the grid open to instability, and cascading blackouts.
Government has been the big ditherer on authorising new capacity too: not only power stations, but also shale gas. A nationalised industry would hold no monopoly of wisdom under the thumb of green politicians and DECC and EU bureaucrats. We were fortunate to have Walter Marshall’s gold plated CEGB: it did provide reliable power, but as the first nearly 20 years of post privatisation competition showed, it was possible to do so at lower cost in real terms.
May 22, 2013
If you can come up with a regulatory system which somehow can deal with the issues you raise: i.e. prevent monopolisation of the pipeline/forward planning & investment etc then that is fine.
However, you still end up with an artificial market and we have found that artificial markets have inherent distortions and can be exploited & monopolised.
I agree that political meddling in nationalised industries is a problem. Perhaps the solution is an arms-length national operator. However, as I said, unions would kill off any national operation unless employment/union law was repealed, so law change would need to be a precondition in my humble opinion.
May 22, 2013
In the US they had strict anti trust laws banning the ownership of production + sales. This ensured separate competition between the two. Here we seem to have many sales companies, mainly foriegn, operating generators and sales companies, while the distribution control is shared and operated to suit a complex and obcure trading system agreed between the companies and government.
May 21, 2013
Dear Mr Redwood,
Most of the policies you propose on your wonderful and much appreciated blog reflect practical common sense, but when it comes to competition and utilities you seems to retreat to an irrational religious fervour reminiscent of Marxists.
You write that we should “allow more competition” but what you actually mean is that we should bring in even more complex and burdensome legislation and regulation to force competition unnaturally.
Experience shows that this usually leads to unhelpful distortions. Most damaging of all, it often leads to a drastic fall in investment ( eg in power stations or broadband) not an increase in capacity. Permanent statutory monopolies are almost always bad for consumers (though the British Gas monopsony may be an exception). Forcing competition artificially through increased regulation is often worse in the long run.
By the way, I was not aware that BT ever had a monopoly of wireless communications. Rather, it was until relatively recently forbidden by regulation from owning a mobile phone company, supposedly to promote “competition”.
It would have been far more helpful to the UK economy if Conservative governments, like New Labour, had been hostile to takeover bids, the vast majority of which have curbed genuine natural competition.
The City takeover industry has been too influential over the past 25 years and has played the lead rule in reducing competition in the UK. It continues to be too influential, which is why creating new “independent” UK banks, though attractive in theory, would be a costly waste of time and do nothing in the long run to help British business.
May 21, 2013
My understanding is that the Governor General of Wales i.e. the First Minister, has decreed recently that Dwr Cymru will retain its monopoly as the provider of water for consumers in Wales.
What about a referendum in Wales regarding the continuing existence of the Welsh Assembly? I would vote for immediate closure.
May 21, 2013
The first is the simple ability for customers to switch easily between companies supplying water, or electricity or gas or train travel or banking services.
So what plans does the coalition have to make it easier to switch between utility companies? When are they likely to be implemented?
Also how is switching between trains companies going to work? Unless there are several trains all travelling along the same route at the same time it won’t be possible for customers to choose which train company they want to use.
May 21, 2013
Well here in the Midlands Uni, I can choose between 3 different train companies to travel to London and two train companies for local commuting.
I find standards have improved considerably over the last few years, with refurbished stations and new faster quieter trains.
Even a good phone app now, to check and see train times, plan journeys and choose the cheapest fare.
You probably don’t remember the bad old days of British Rail.
May 21, 2013
@Edward2: Please read what Uni said and asked, how can you travel at (for example) 08:30 hrs and have a choice, as Uni said, are there going to be trains made up of carriages from several of the TOC’s or are you going to be faced with a Hobson’s choice, the one TOC that operates a train at the time you need, by the route or station stop you need?
“You probably don’t remember the bad old days of British Rail.”
Well I do and they were better than this current 1990s dogs dinner of a fragmented system, in the days of BR there were cheap fairs, plently of trains, with a very few exceptions one could travel on any train, by any of the many recognised routes and travel when you wanted, many trains had proper Buffet services and not just a trolley…
BR for me = many happy days travelling the country, finding excuses to go by rail. Since privatisation, I will find any excuse NOT to use the railways and go out of my way to avoid using the railways! When talking about the mess that is the current railway system I really do wish that Labour, Kinnock and their “Clause 4” had won in 1992…
May 22, 2013
How many people regularly used the trains in BR days, and how many people use them now? I wonder if that’s telling us anything?
May 22, 2013
@Tad Davison: What period are you talking about, considering until the late 1970s many people did not own a car, thus if they travelled they did so by a very few long distance coach services or by train.
In London, the Home Counties and the SE even in the 1980s it might be wise to remember that Clapham Junction Station and track-routes held the record (and still does) for the busiest station in the world for the number of train movements per any 24hrs and that Tad only accounts for two routes to the ten or so London Termini.
May 23, 2013
Jerry, here’s one for you to grapple with then – Beeching! Why would he propose the rationalisation of the railways, if they were widely used, and making a profit?
The present system isn’t perfect, trains are crowded, and people DO have cars. What do you propose?
Tad
May 23, 2013
Tad Davison: Because, as some alleged, he was employed to do so by a transport Minister who was pushing for more Motorways and duel-carriage ways to be built and thus wished to push for the need to use the private motor car, and why was he doing that, because … well perhaps John will allow you to read all about him all yourself;
http://en.wikipedia.org/wiki/Ernest_Marples
As to what I would do about the railways, I really do not know, the system is so fragmented now that I fear that only full renationalisation and a period centralised control will sort out the mess! 🙁
Not that I would like to see this as the final solution, I would favour the return to a fully regional industry that runs all trains and maintains all the track, signalling and stations etc. in their area, either in the way that the nationalised BR ran in the period before the move to a more “Corporate” centralised control in 1964/5 or as private railways as they did between 1923 and 1948.
May 22, 2013
Thanks for the advice Jerry, I’ve read Uni’s post again and my comments stand.
Plainly no train companies can place two trains at the same station on the same lines at 8.30 to the same destination. I don’t know if your beloved British Rail ever managed this amazing feat?
A quick search on my phone app shows I have a choice of two trains from my nearest station around the time you demand from two different companies (one leaves just before 8.30 and one leaves just after 8.30 so I hope this is OK for you) and if I were to drive just a few miles to another station I have further choice of another train company who are the cheapest (for say a journey to London), who run several more trains at around the time you want.
You have dewy eyed memories of British Rail Jerry, mine are ones of old trains on old tracks with old stations and regular strikes by powerful unions and regular sudden cancellations.
Oh and making huge losses, being bailed out every year by the State, who in turn cut investment in new rolling stock and track for decades, a problem which is only now being put right..
May 23, 2013
@Edward2: “Plainly no train companies can place two trains at the same station on the same lines at 8.30 to the same destination. I don’t know if your beloved British Rail ever managed this amazing feat?”
That’s the point, they didn’t need to – Duh!
“one leaves just before 8.30 and one leaves just after 8.30 so I hope this is OK for you”
No, at the time of booking your ticket you need to leave at 08:30hrs (that is the earliest time you can be on the platform, nor can you wait for any train after 08:40), in other words a fixed time, how many choices of TOC do you have – just the one as i said, no choice in other words. What is more, should your life allow you be able to get to the station before hind you can’t travel on that earlier train as your tickety is not valid, on the other hand in BR days you could have got on the first train that arrived for your destination. I get the feeling that you might be to young to know or have understood just how flexible travel by BR was, unlike the hard and fast rules of today. About the only widely applicable rule that applied was that of the Cheap-day/off-peak fair, and even that didn’t stop any-time return travel, even if at the hight of the rush-hour.
Oh and yes BR should have been funded, and had it been there would not have been the same public demand that encouraged the botched privatisation, Why should the state invest tax payers money in private companies, even m0re so when these private companies knew what they would have to invest. Why do so many who keep pushing the free-market agenda object so much to the state investing tax payers money in nationalised industries but welcome with open arms state subsidies in private companies, I hope it has nothing to do with shareholder dividends and the expected returns…
May 23, 2013
You have too much spare time Jerry and a desire to argue just for the sake of it.
May 24, 2013
@Edawrd2: Whilst you are a poor looser! 😛
Don’t start arguments that you might not like loosing…
May 22, 2013
Off subject a bit-sorry.
Jerry pointed out on 17th May that the EU does not state that the TGVs have to run on a TGV track and we could do the same as the French do between the Spanish TGV and Montpellier, thereby avoiding building the HS2 track, while complying. I added a suggestion for linking trains to different destinations by automated decoupling, which could also solve the capacity problem, which only seems to exist at peak times anyway.
May 21, 2013
With the amount of subsidy and cost to the taxpayer I would not expect anything less.
May 22, 2013
Me neither Baz, but don’t forget how much British Rail was subsidised each year by the State.
May 22, 2013
@Edward2: Even advocates of the current franchise system accept that BR (adjusted for inflation etc.) received less in government subsidised each year than is given now.
May 22, 2013
Not as much as now by any means and it’s supposed to be privately owned. Wot a laugh.
May 22, 2013
Jerry and Baz
You are both right in that the starving of money to BR by successive Governments of both colours over a 30 year period before BR was privatised is the reason we now are having to invest so much in new track, trains, platforms and stations.
If you are of your politics you call it subsidy, if not you call it investment.
PS
Baz its What with an H
May 23, 2013
@Edward2: “If you are of your politics you call it subsidy, if not you call it investment.”
Not quite Edward, for those spending the money;
If you own the infrastructure then it is investment.
If someone else owns the infrastructure then it is subsidy.
After nationalisation on 1st Jan 1948 the Government (thus the tax payer) owned the railways, since privatisation in the 1990s they do not…
May 21, 2013
Not all things were bad about BR and not all things are good about privatisation. Visa versa.
I much prefer working on the privatised railway – the pay was pretty poor under BR and one had to be either an enthusiast or stupid to take the job. It’s not what I think that really matters though. The acid test is what the passengers think of our services.
May 22, 2013
@Electro-Kevin: Indeed, but surely it is better to have people who want to work in an industry (even if the pay is poor) than someone who is doing the job simply because the pay is great and they thus don’t give a dammed just so long as they get their pay-slip. Most of the people I used to know who worked for BR (and the various omnibus companies) saw it as a vocation, in the same way as nurses used to, there to serve the public as an essential service – yes there were those who didn’t care, those who on a Friday would go sick rather than take out the 17.35 from Charring Cross but they really were the exception that the norm even if it didn’t seem so to those delayed.
Oh, and the acid test surely is not just what the customers think of the service, it is what the would-be customers think of the likely service, without new customers there will be no growth whilst the existing customer base might use the service simply because there is no other realistic alternative – these customers could be given Pullman style travel and many would still complain.
May 21, 2013
Competition and a simple basis for consumers to compare fairly and to switch work wonders.
May 22, 2013
Might work well in the world of take-a-ways. Transport and medicine are a bit more complicated.
May 21, 2013
Where are we going to get our Nuclear power from. EDF is too expensive but the government hopes that further contracts would help to lower the EDF unit price eventually. In the meantime government cash is the only way we are going to get a sensible energy supply from source. I fear the continual procrastination is going to rebound badly on us all in the near future no matter who tries to set up some supply competition. If there is no power there will be no suppliers.
May 22, 2013
My cable tv has so many channels that it was Scottish Politics Today that I watched by accident last week. An executive from their main electricity company said that we should not rush to order a nuke from EDFrancais. The Chinese are building them cheaper and on time and the Americans are developing smaller safe thorium reactors. We had time to wait. Then 2 Scots politicians were on saying that England would depend on Scotch wind and were even subsidising the Irish to build their Bogland megawindfarm. They seem to think they have got us by the …..
May 21, 2013
A bad example of carrier pipes and cables. BT put up there line rental costs at least twice last year. I’m not a direct customer of BT. I did a deal with my ISP for a year, and within a month of signing, I was advised by them that my line rental had increased, even though I had a contract! What irritates me, is I’m am bound to adhere to my side of the contract, but my ISP and apparently BT can renege on their side at any time.
Ofcom should stop pussyfooting around and come down on BT and ISP’s tout suit!
It’s just not fair, John!
May 21, 2013
Indeed there is no point in comparing only to have the goals moved a day later. nor can every one be expected to read ten page contracts every other day.
May 21, 2013
Although making it a little easier to switch between suppliers may sound like a panacea, it falls a long way short of what is needed to restore fully competitive utilities.
In broadband we need enabling legislation to reduce the cost of securing wayleaves for fibre ducts. Some of that is associated with over-ambitious business rating. There should be much more encouragement for competition from innovative providers such as B4RN.
In water, we need to get out from the EU regime that demands we increase prices and ration supply, and instead work out a sensible balance between repair and replacement of the Victorian network and the creation of new reservoirs, pipelines and treatment facilities, with the aim of reducing cost while maintaining appropriate standards for water quality. We do not have the national shortages that the EU assume – only inadequate distribution and water management that leaves us oscillating between floods and local droughts.
In gas it is essential to develop our indigenous shale resources. The UK’s gas supplies have undergone some dramatic changes in recent years, leaving us dependent on varying amounts of Norwegian supply and LNG to replace the rapidly dwindling North Sea output. It would also help if we maintained coal burn at power stations, freeing gas for domestic and industrial consumption.
The tacit acceptance by OFGEM of the practice of large scale forward hedging in thin longer dated forward markets to lock in cost should be examined. Whilst it makes no sense to expose the general volume supplied to the vagaries of very short term spot markets that can be highly volatile in reaction to unexpected weather or production/pipeline/power station problems, the OFGEM 18 month standard fails to give consumers a real choice on pricing. They should not be effectively compelled to buy 18 month forward fixed prices. Suppliers should instead use their judgement on how to secure cheapest cost supplies, instead of effectively being price takers buying to a predictable pattern.
http://www.ofgem.gov.uk/Markets/RetMkts/rmr/smr/Pages/indicators.aspx
OFGEM itself was set up to replace the individual OFFER and OFGAS regulators, in Labour’s 2001 Utilities Act and in the process lost the prime responsibility for dealing with consumer issues, which instead was fobbed off onto Consumer Focus which had no interest or understanding of the industries and a narrow remit. The industry consolidation and vertcial integration that followed on in 2002, driven by the Act’s wider provisions, created the Big 6 oligopoly we still have today. The provision of Miliband’s 2010 Energy Act that puts green energy interests ahead of any thought for consumers enshrines regulatory capture in law.
There has been a plethora of other Energy Acts (and the current Energy Bill) which have sought to impose uncompetitive practices, taxes and subsidies on energy markets, including forced closure of competitive plant , requirements to invest in uncompetitive technology, and support it via other massive investment such as the grid which has to be doubled to handle production uncertainties from wind etc. Adding to the insult is the programme of smart meters, which will deliver power cuts by computer, and appear to be hackable according to recent reports – with potentially highly damaging consequences.
Just tinkering with account switching won’t hack it.
May 22, 2013
Did I say something controversial?
May 22, 2013
Apparently we’ve both said something too controversial to be published.
And I took quite a bit of trouble and care with what I wrote …
May 21, 2013
But who or what would OWN the common carrier systems? You can hardly expect company A to invest in improvements that would enable company B to compete with it.
May 22, 2013
The common carrier system is owned by us (the government). It is administered, as a monopoly, by a private limited company. Companies A, B, C, etc, who provide a service over the common carrier system are given shares when they obtain a licence to use the common carrier system. There would be no other shareholders. The private limited company would only be able to raise money from its shareholders, and would not pay dividends.
Companies A, B, C etc would pay the private limited company for the use of the common carrier system at a price determined, ultimately, by the shareholders.
The Articles of Association would have to be written by the government to ensure the private limited company did only that which it was set up to do.
The private private limited company and Companies A, B, C etc would have a mutual beneficial interest: the better the common carrier system the greater the profit potential for selling services over it.
May 22, 2013
Well at least not BT, one of the competing ISP’s!
May 22, 2013
A good argument against privatization, and not the only one either!
May 21, 2013
The problem with the current billing methods used by the utility companies is that the poorer the customer, the more they pay for each unit consumed.
Besides looking at the price of prepaid units and higher charges for the first block of units used, we need the companies to remove standing charges and collect all their payments through a single flat rate charge across all units.
May 21, 2013
There are many problems with the broken energy market many of which have been caused by politicians with their plant food centric policies and lack of competition with six incumbents.
In the gas market their creativity seems to be mainly spent on dreaming up lots of tariff packages to confuse the consumer and put them off switching and creative accounting to show how little their retail operations make at pence per month per customer, where their overall profitability is massive, where most of them have their own gas production fields, but the retail arms are charged the maximum using day-to-day spot prices! More storage and competition would enable cheaper prices from buying at cheaper wholesale prices during the summer months and the use of long term fixed price contracts, like many countries in Europe have.
The electricity spot-market market on privatization worked very well to keep customer prices down, so much so the 6 incumbents squealed until the regulator scrapped it!
The profits from the water companies are an outrageous scandal where they are no-risk monopolies. I have expressed my thoughts to you before on how I think competition should be introduced here.
A massive mistake with privatization of the utilities was to allow them to be bought by other state run companies, so all you are doing is swapping one government for another. So we have lost all of the advantages of privatization. As part of the privatization any state run companies owning them should have been illegal. If you want to increase competition why can’t this be done now, so the state run companies have to sell these companies?
Rail services and the system of multiple companies being able to operate on a line, if my memory serves me correctly was how they were privatized by John Major’s Government, but the big problem was ticketing, where you had to buy a ticket for the company that was running that particular train. This could be easily overcome with today’s technology by extending the Oyster card system so it is nationwide and also the use of mobile phone payment systems. You could also have the onboard scanning of tickets to attribute it to a particular operator.
The NHS is a costly, inefficient and poor provider of medical treatment, with many countries having much better medical outcomes and often at a lower treatment cost. France has a much better system at about the same percentage of GDP cost where it is a government run insurance fund who pay the private or public hospital that provides the treatment. Thus you have the vital customer-provider relationship that is missing from the NHS. You choose the hospital where you want to be treated. Countries like Singapore also have better health systems, where they avoided setting up an NHS, which they consider an expensive failure and provide comparable treatment and better outcomes for about half the cost of UK treatment. People that like to defend the indefensible NHS monopoly, alway use the US as an example rather than government / private systems that are much better than the NHS. Sadly, any debate always gets bogged down in this sort of political argument instead of looking at all of the different systems in the world that provide better medical outcomes at a more affordable cost, which is surely what we all want for UK population.
I think you will find BT was privatized before mobile phone systems were deployed in this country. I think you will find the big changes were competition from cable companies, BT still seems to work the hardest at deploying new technologies in these areas to keep market share and also when competitive companies were able to rent space and put their own equipment into telephone exchanges and BT had to provide realistic wholesale prices for the local loop and other services to their competitors. I know BT fought tooth and nail against these proposals in trying to keep their monopoly, but fortunately for the consumer the Government and regulator won.
This battle with BT shows that firm government and regulators can take on these monopolies and win to provide better value to consumers. What we now need is more of this with monopoly suppliers. I can’t see why this should not also apply to many Government and local Government monopolies of supply.
Personally as an entrepreneur I love competition where the challenge is always to provide an attractive product or service to the customer in the right place at the right price which is well marketed so they know about it and the success is that they buy it.
May 22, 2013
I don’t think retail arms are charged spot prices, except perhaps on relatively small balancing quantities. Instead they are encouraged by OFGEM to buy a long way forward (that’s how they know they’ll have to increase prices for next winter before this one is over). Continental prices are even higher than ours, as EU statistics reveal:
http://www.energy.eu/
May 21, 2013
BT was in fact overrun by technology in the main. The next thing you will be claiming is that Tory policies led to the internet John.
May 22, 2013
BT technology was usually peculiar to BT, where ever they could slip it in, and did’nt work very well and was costly
May 21, 2013
A basic problem is that it is easy to switch between utility suppliers using switching sites. I have done this so many times I have lost count. ( Be careful and take readings/dates) They will play be some rules even if they are their own, but it’s like musical chairs. As soon as a deal or a year passes you have to switch again, but still the prices rises. My car insurance stays the same price as I switch to a different company every year. If I did not it would double. Now this is OK if you are like me, but for many who are not the companies are preying on the vulnerable, lazy and especially the poor who find this sort of thing difficult. Even the savy will find themselves paying two bills in one month at first. These practices needs to be stopped because if they do not they could find themselves in a position of mass no payment. Few have ever had their water cut off and this is a fact. Many just refuse to pay even if they can.
May 22, 2013
I heard recently, there are some 900 different tariffs for consumers to grapple with. It makes me sick when elderly people are so bemused by this complicated system, they cannot work their way around it, so just stick with the tariff they alreay have, whilst others who are a bit more savvy, can take advantage.
That isn’t to say, we who ARE savvy shouldn’t take advantage of the system by shopping around, but often, those who are the least able to afford gas and electricity, are paying over the odds. That is ne of the reasons why I would prefer an altogether simpler system.
Yet few could argue, that we in the UK aren’t paying too much for our energy anyway, right across the board. I’d like to know if a return to the big state monopolies would make that situation better, or worse?
Tad
May 21, 2013
The last things a regulator wants are
New entrants
Nothing more than a dozen large players in the market
Innovation
All these things make their job harder so they work to limit new things like new entrants and innovation. They want rid of SMEs in the market as they are harder to regulate.
If we are to work with regulators then I think the legislators in Parliament need to re write the stated aims and goals and bring teeth to bear when they work against those. Regulators left to themselves will always work in the opposite direction of the aims above. Its not just the energy industry its all industries where they are powerful from here to Australia.
May 21, 2013
A clock regulator in the 19th Centuary would have wanted a job regulating a handfull of clocks all made in a similar way and easy to regulate. They would not want 100 clocks and assorted timepieces all made differently with new ones appearing every day as we have in that industry today.
May 21, 2013
Another though to the above (should he waited!). The clock regulator is virtually obsolete through innovation. That would be nice if that could be achieved in these other industries. Is it because tax regimes etc are just so complicated and keep being changed. If government simplified the underlying rules especially in finance would that reduce the need for powerful regulators?
May 21, 2013
The latest edition of Energy Trends informs us:
DECC are planning on changing the 30 year long term mean period used to calculate temperature data comparisons be changed from 1971-2000 to 1981-2010 with effect from the publication of the June 2013 edition of Energy Trends on 27 June 2013
So why might they want to do that? Ah, yes! using higher base temperatures makes temperature corrected energy bills seem smaller, cutting 3% off the number of heating degree days. Magic! DECC cuts your bill by assuming some of it away.
May 21, 2013
My apologies for going off topic but this is important.
The Gay marriage legislation originated in the EU, that is why other Countries are enacting the legislation as well. (France, Spain, Holland, Germany).
This link gives more details;
http://eureferendum.blogspot.co.uk/2013/02/eu-politics-gay-marriage-required-by.html
Cameron is an EU Quisling and there is absolutely zero chance that he will renegotiate anything, or hold any kind of worthwhile referendum. The degree of deceit is unbelievable.
May 22, 2013
@Nick W: …and your point is what, other than (to perhaps) show your intolerance of those you dislike? I also suspect that this has it’s roots in equality not sexuality legislation, and what bloody difference does all this make to you anyway – afraid that passing the gays coming out (pun intended) on your way in might turn you gay – grow up! Live and let Live….
May 22, 2013
While we can be impressed by “the way mobile phones took off once we broke the BT monopoly”, we can be deeply depressed by future for fixed line communication under a continuing BT monopoly.
Of all the companies that initially tendered for high speed broadband contracts in competition to BT only one is left, and their continuing interest is marginal. This was entirely predictable as OFCOM had commissioned a survey relating to sharing the poles and ducts infrastructure from which it was obvious this would never work.
Of course things are not helped by the farce that is BD(UK). This was set up under the previous government, who clearly did not understand what they were doing, The current government have persisted with BD(UK) as they, too, clearly do not understand what they are doing.
We are becoming a divided nation, those who have access to high speed broadband and those who do not. It is already affecting house price and decisions as to where business locate.
The outlook, for the Nation as a whole, is bleak, and I do not see any prospect of things getting better.
May 22, 2013
JR, is there a reason why my dissenting comment has not been published?
May 22, 2013
@Denis Cooper, et al: I’m still waiting for comments from three or four days ago to be passed and published, I guess John is just very busy – even when Westminster isn’t sitting.
May 23, 2013
Me too Jerry, including some replies to your posts.
May 23, 2013
Although making it a little easier to switch between suppliers may sound like a panacea, it falls a long way short of what is needed to restore fully competitive utilities.
In broadband we need enabling legislation to reduce the cost of securing wayleaves for fibre ducts. Some of that is associated with over-ambitious business rating. There should be much more encouragement for competition from innovative providers such as B4RN.
In water, we need to get out from the EU regime that demands we increase prices and ration supply, and instead work out a sensible balance between repair and replacement of the Victorian network and the creation of new reservoirs, pipelines and treatment facilities, with the aim of reducing cost while maintaining appropriate standards for water quality. We do not have the national shortages that the EU assume – only inadequate distribution and water management that leaves us oscillating between floods and local droughts.
May 23, 2013
In gas it is essential to develop our indigenous shale resources. The UK’s gas supplies have undergone some dramatic changes in recent years, leaving us dependent on varying amounts of Norwegian supply and LNG to replace the rapidly dwindling North Sea output. It would also help if we maintained coal burn at power stations, freeing gas for domestic and industrial consumption.
The tacit acceptance by OFGEM of the practice of large scale forward hedging in thin longer dated forward markets to lock in cost should be examined. Whilst it makes no sense to expose the general volume supplied to the vagaries of very short term spot markets that can be highly volatile in reaction to unexpected weather or production/pipeline/power station problems, the OFGEM 18 month standard fails to give consumers a real choice on pricing. They should not be effectively compelled to buy 18 month forward fixed prices. Suppliers should instead use their judgement on how to secure cheapest cost supplies, instead of effectively being price takers buying to a predictable pattern.
http://www.ofgem.gov.uk/Markets/RetMkts/rmr/smr/Pages/indicators.aspx
May 23, 2013
OFGEM itself was set up to replace the individual OFFER and OFGAS regulators, in Labour’s 2001 Utilities Act and in the process lost the prime responsibility for dealing with consumer issues, which instead was fobbed off onto Consumer Focus which had no interest or understanding of the industries and a narrow remit. The industry consolidation and vertcial integration that followed on in 2002, driven by the Act’s wider provisions, created the Big 6 oligopoly we still have today. The provision of Miliband’s 2010 Energy Act that puts green energy interests ahead of any thought for consumers enshrines regulatory capture in law.
There has been a plethora of other Energy Acts (and the current Energy Bill) which have sought to impose uncompetitive practices, taxes and subsidies on energy markets, including forced closure of competitive plant , requirements to invest in uncompetitive technology, and support it via other massive investment such as the grid which has to be doubled to handle production uncertainties from wind etc. Adding to the insult is the programme of smart meters, which will deliver power cuts by computer, and appear to be hackable according to recent reports – with potentially highly damaging consequences.
Just tinkering with account switching won’t hack it.
May 23, 2013
I have split my post into smaller ones, tackling broadband/water, OFGEM and energy pricing/benchmarking, energy acts and hackable smart metering. I can see nothing controversial, beyond a link to a site that quotes someone who uses slightly colloquial language in describing smart meter hacking and its possible consequences – something MPs should take seriously.