E.ONs misleading response to Miliband.


In August 2013, E.ON Energy saw profits jump 14.7%, with their profit margin rising to 6.25% from 5.97% after price hikes of 8.7% for duel fuel customers. In the winter – the time when people struggle the most to pay their fuel bills, and in the middle of economic downturn – E.ON decided to put their prices up. They then claimed the profit increase was due to the cold weather….. in winter….. after they put their prices up. Seriously. Remember that when you read E.ON insisting that government programmes are to blame for customers paying more.

When reading E.ONs response, keep in mind that the Big Six netted the following profits collectively since 2009:
2009: £2.15bn
2010: £2.22bn
2011: £3.87bn
2012: £3.74bn
Over £1.5bn more in 2012, than 2009. They managed this during a period of economic stagnation, unemployment, and households struggling to put food on their tables, the big six were happily swimming in pools of profit. Remember that, when you read E.ON insisting that government programmes are to blame for customers paying more.

We can say for certain that Ed Miliband has finally struck the right chord, when energy companies who have seemingly experienced complete impunity with their mistreatment of the entire country for far too long, start to throw their toys out of the pram. Today was E.ON’s turn to act the spoilt brat. We must remember that, like the banks insistence that all the best people would leave the UK if the financial sector was in any way regulated for bringing down the entire system…. energy companies will start insisting that the UK will suffer intense blackouts, if we dare to put the breaks on their exploitation. Threats are worthless, and should not factor into discussion.

Labour’s plan isn’t just a price freeze until the end of 2017, but also the breakup of the big six to ensure a more competitive environment not dominated by what is becoming increasingly clear as a monopoly; and a new regulatory body to ensure necessary investment in greener technology. A completely new energy market. This is absolutely necessary. Centrica’s boss predictably reacted by suggesting that more competition, would lead to economic ruin. The spirit of Capitali….oh wait.

In response to Milibands speech, and the full Labour plan, E.ON UK released this press release, predictably not happy that their gravy train may now be coming to a end. Only an energy company could endeavour to write one long, deluded and manipulative piece that can be summed up with simply: we love our customers that much that despite their struggles in this tough time, we want to keep raising the price of their bills without consequence.

First thing to note is that E.ON are rather adept at misleading responses to customer’s worries. When asked about January 2013 price hikes, E.ON said this:

“Some 16 months after our last price increase, and almost a year since we actually cut our electricity prices, we have had to make the difficult decision to increase our prices in January.”

– A cut? That sounds like customers saved money over the previous year! Well, no. It’s a misleading statement to say the very very least. Which.co.uk provided this graph to show E.ON price hikes over the past three years:
eon
– Dropping £30, after a £160 increase, followed by another £100 increase, and (the graph doesn’t give 2013 date) a further increase of £110 for 2013…. does not in anyway represent a “cut”. The average household energy bill will now be 23% higher than in 2011. E.ON will now be the most expensive for average household energy bills, of all the big six, and £18 higher than the Big Six average. In 2012 the energy watchdog noted that the average annual profit margins per customer for the big six energy companies had risen to £125 in October, from just £15 in June.

In the press release today, E.ON boss Tony Cocker says:

“Let me start out by making clear where we absolutely agree. Our customers are the most important people in the world.”

– So much do customers mean to E.ON, that they rose their prices by over 8% for the first half of the year, increasing their profit margins, whilst knowing that customers would be needing to heat their homes during the cold winter months and in the middle of an economic downturn. So much are customers ‘the most important people in the World’, that Cocker goes on to spend the next 800+ words of the press release arguing his case for continued price hikes that his customers are struggling to afford.

Quick stat: Between 2005 and 2010, energy prices increased 57%:
chart1r2
– There is no positive outcome, is this trend continues. Everyone suffers unless those bars start to fall. E.ON cannot manipulate their way out of that responsibility. What we can deduce from E.ONs angry response to the Labour’s price freeze idea, is that E.ON intend to make those bars keep rising, until at least 2017.

In 2009 The Independent reported that whilst wholesale gas prices had halved, bills had fallen by just 4%. It took campaigns by newspapers, and grassroots groups to convince people to shop around, after discovering that the Big 6 were charging almost £200. The Independent noted:

“Quarterly and pre-payment customers who switch to Ovo or First:Utility would save £287.”

The Energy Contract Company, an independent energy forcaster said:

“The fall in spot prices has meant the domestic market is now highly profitable”.

– E.ON knew what it was doing. They knew that people were struggling, and that energy bills were one main reason, and they did nothing. But then, how else would they pay for E.ON CEO Johannes Teyssen’s £3.6mn in salary and bonuses for 2011?

“You’ve called for us to be fair and reasonable in our pricing and our profit levels. We already are.”

– This is an opinion. I do not believe it fair to inflate prices during the coldest months, and during economic stagnation, knowing people are struggling, and forcing the most vulnerable into further hardship and debt, whilst profits soar. The Poverty and Social Exclusion (PSE) Project, in March, published its report into poverty in the UK. The report – ‘The Impoverishment of the UK‘ – found that one in three people couldn’t afford to adequately heat their homes throughout the winter in 2012.
Save The Children reported that families are going without food, to stop getting into debt over energy bills they cannot afford. This must be what E.ON believes is “fair and reasonable”.

“Read the letters from customers telling us of the difference to their lives, not just their homes, that the insulation we put in has made. Meet our customers at our Open House store in the middle of Nottingham who value and appreciate the extra help our people have given.”

– Why are we even discussing this? Everything is great! It’s like being mugged for £10, and then given £1 and the mugger telling you that he’s only trying to help.

Mr Cocker then writes:

“What do I mean by political programmes? Successive governments have collected taxes for different schemes through energy bills and this has added extra pressure and is a factor in why bills have risen over a sustained period of time. All politicians, from all sides, need to acknowledge that fact. At a stroke you could remove a large cost from energy bills simply by moving these costs to general taxation.”

– This is the crux of the entire press release. It is one big “tax us less, and we might consider not leaving pensioners to rot in fuel poverty. Deal?” And whilst we’re at it…. General taxation. Take the ‘burden’ away from massive profit making companies that pay their CEO’s extortionate bonuses, and onto the general public who are already seeing incomes drop? And what should those taxes be used for?…..

“So I’m asking all politicians: Help me to get Smart meters into more homes more quickly. Help me to get British homes up to a modern, energy efficient standard. Help me to get UK businesses on top of their energy use.”

…. of course. Those general taxes should go to E.ON! They want to pay nothing, and reap the benefits of everyone else paying. They don’t want a more competitive environment, they want the government to help their own company get ahead. What Mr Cocker is admitting here, is that despite vast profits, they are still unwilling to do anything to help bring your bills down, without government subsidies. A failing sector. More competition is absolutely vital. Force them to act for the benefit of their customers, through well regulated competition.

If successive government programmes were in fact responsible for much of the size of an energy bill… then it stands to reason that E.ONs profits should be at best flatlining, rather than skyrocketing. There would be no 14% profit jump. Government programmes have apparently been that restrictive on an incredibly small number of energy companies, that in 2012, they still managed to net £3.74bn between them, according to the regulator. How terrible!

Mr Cocker writes:

“Of course there are people who need our help and yes, there are a few we’ve let down but we have, and we are, making the changes needed to get things right: Simpler bills, clearer products, changes for businesses. Of course we need to rebuild trust with our customers, and reset our relationship. We acknowledge that, we have made changes, and we are making changes.”

– I’d like him to elaborate on who he thinks he’s let down? Perhaps the 100,000 former customer they overcharged for switching to a different provider, and which took the regulator to investigate and actually force E.ON to act? And when they speak of the changes that they are making…. how many of those were not forced upon them when it became clear that E.ON and other energy companies were ripping customers off at every possible opportunity? Clearer products – forced. Simpler bills – forced. Ed Davey insisted that the energy companies and the government were working to make bills more transparent. The fact that the government had to get involved and energy companies weren’t willing to make bills transparent in the first place, is a problem. You do not ‘rebuild trust’ by claiming to be fixing the problems of your own generous, good will, when in fact, you were forced. And until they’re forced to bring down energy prices, they will continue to manipulate, blame everyone else; usually government, kick and scream, and then eventually give in and accept that ‘we need to rebuild trust’.

Gas and electricity isn’t a commodity like any other. It is a necessity for most. It can be the difference between life and death, and therefore energy companies must put people before shareholders. They sell an extraordinary product that cannot be allowed to reap great profits for companies at the continued expense of the lives and finances of the public. During economic downturns, if the price of energy is causing economic pain across the country, then I would suggest that energy and gas profits should be minimal. This is not like selling jam, or Xbox games, or football shirts. If profits soar, whilst fuel poverty soars, something is deeply flawed, and the market is broken. E.ON call this “reasonable and fair”. Right there, is the problem. They see no problem.

And as I noted previously, we can deduce from E.ONs angry response, that they have every intention of rising prices over the next five years; the same period of time that the Chancellor announced austerity will now last until. The hardship and the economic pain will only continue, prices will rise, there will still be a lack of competition, and that’s what E.ONs press release argues for.

So, they don’t control much of the price, the government are to blame for the majority of the Bill, and they want the public to be taxed more to pay for their lack of investment? Why not just renationalise gas and electricity? I see no use for these big six companies any more. And judging by his statement today, neither does Tony Cocker. He doesn’t seem to see any issue whatsoever. For Cocker, they cannot afford to modernise, without government help, and according to Cocker, all the problems can be fixed by taxing them less, and taxing people more to fund E.ON. So why not just cut out the middle man? They were given a chance, they enriched themselves, and immiserated everyone else, whilst calling it ‘fair and reasonable’. Nationalise them.

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3 Responses to E.ONs misleading response to Miliband.

  1. In November 2010, we were being charged £70 a month by BG just for gas, the Electric was with SP, but pre-paid £12 a week. British Gas wanted to up our gas to £90 a month, so we went to E.on for £40 a month gas and electric still pre-paid. Last year they put our gas up £20 a month to £60, we’re paying £20 a week via card for electric. In April they said they were going to put our gas up to £80 a month, we said no and stopped them we are at present looking elsewhere.
    Since we joined them we have used 16467 kWh of electric at a cost of £2435 to date.
    Gas is harder to work out. In therms 2225 = 70116 kWh at a cost of £1560 with approx £300 out standing.

  2. frasoire says:

    What utilities companies often seem to say is that they use profits to invest back in infrastructure. this investment may not show up in the profit figure (I suspect they would do everything they could to keep this away from profit and in the balance sheet instead). what i would be really interested to see is the retained earnings number (basically what the return to shareholders is) adding back the dividends paid out to the shareholders over the past few years.

  3. John M says:

    The ‘government’ is a big business, an international trading corporation, with incorporated subbusinesses. Using McDonalds, for example, it has to be independently incorporated inside the UK in order to do business in the UK, with shops, etc on a large scale. The EC is allegedly an attempt to reduce the number of incorporations an international business has to do.

    My point: a company that has a land mass claim, a standing army, a population on said mass, is in a good position to become a COUNTRY, really nothing more than a business. If the queen is truly anglican, I have three butt cheeks.

    My next point: whomever rules over the banking, and secondarily the defacto goverment, takes on aspects of the local flavour. But doesn’t care so much about indigenous anything, no matter how beautiful, in most cases. Government, AKA international trading corporation executives, are beholden to bankers, and bankers are beholden to nothing but suteth and natural law: the public legal code is strictly for peasantry.

    I like the detail of your article, but like so many, it assumes the itc – ‘government – is accountable to the people. Quite the other way around, the people are accountable to the government. They are the employees; don’t get it twisted. Elections are staged to provide an illusion of choice: people tend to work harder, when under the delusion they have one in such matters.

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