Shale Gas 2008
Invest if you have it. Or invest because you have to.
As we all peer further into the abyss, some are closer than others. Those heading south with locked in prices are closer than others. They will shortly be paying double what their competition is for energy. Did they make the right decision?
No and Yes.
No, because anyone should have seen that prices for oil, gas and electricity were completely unsustainable and had been entirely divorced from reality for some time. But for those who buy fear instead of energy, it's always easy to see some scary disaster story out there which means they take out the insurance policy of fixed energy prices. But the definition of scary, risky surprises is that they are unknowable. Who would have predicted 2% interest rates in June, nationalised banks, and a renewed interest in joining the Euro? It comes down to what premium you attach to security.
Lots of fixed price guys will be paying nothing for energy by next spring at this rate. They'll be in administration and the lights will have been turned out.
But a high energy price still provides an incentive to invest long term. Sure some people were mad enough to sign up three year fixed prices. But spend that money now, on efficiency or renewables and there won't be any money spent, or wasted, on energy in the future. Assuming you have any money left, this is the time to spend, spend, spend.
Pay as you go
What is the attraction of paying by direct debit? Customers sometimes automatically ask for it, but that is because there is often a supplier or TPI whispering something in the ear about risk, set monthly costs, stability etc, etc.
One reason people use DD's is that they aren't given an alternative such as floating prices combined with smart metering. Utility metering has yet to reach most parts of the twentieth century let alone this one and most people seem to think no monthly billing is as British as driving on the left. Which is bizarre considering that every piece of information most of us ever wanted, and quite a few pieces we wish we could lose, is now digitised and stored somewhere for ever. Apart from your gas bill. Nanotubes? Battlefield robots? Interstellar travel? Time Travel? Computers that think? Some is science fiction, but the pretty sad science fact for most of us is that a monthly gas bill is as unattainable as a vacation to Alpha Centauri.
This is a sad story, from the paper that is so unrelentingly dismal in it's usual outlook that its a wonder most of the readership hasn't topped themselves, is even sadder from being true. We speak of the Daily Mail of course:
Shaun and Julie Lock, who run a post office and village store in Mawgan, Cornwall, signed up with E4B because the company claimed to offer cheap electricity. Four months into their contract, the couple discovered they were being overcharged on their direct debit to the tune of £200 a month.
When they complained, they were assured that it would ‘all work out OK at the end of the year’. Weeks later, E4B went into administration, owing the Locks £2,500 they can ill afford to lose.
Mrs Lock, 43, said: ‘It’s a huge burden for a small business like ours. In future we will pay each gas bill as it comes. Direct debit? Never again.’
Four months of the year, a DD pays for the utilities actually used. Business people have to decide if they want to spend four of the other months giving an international energy company an interest free loan, or whether the business is so hard up that it needs to borrow at an exorbitant rate simply to keep the lights on.
Ofgem Energy Probe
Friday afternoon is the traditional time to bury news you'd like others to ignore, miss out on or just plain forget ever existed.
Ofgem released this afternoon two pretty damning reports on both SME and domestic end user engagements with the energy market that Ofgem's Energy Probe already essentially cleared in early October.
As a rule, Ofgem would issue any supporting research and the report itself simultaneously. Not when the reports (which Ofgem commissioned) show results completely at odds with Ofgem's usual rosy picture of how great the UK energy market is. This time around Ofgem was wavering slightly, probably due to sustained public criticism from energywatch and the Parliamentary Business Affairs Committee and Public Accounts Committee. We assume that Ofgem is also feeling the heat from any MP of any party on literally thousands of complaints over either price or service or both on energy suppliers.
But now we see why: Ofgem's own reports show a complete breakdown of energy markets:
Few are both willing and able to seek out better deals proactively. Some who attempt to do so
struggle to compare prices easily on price comparison sites. Price comparison may also be
complicated by issues such as length of contracts
Business customers were at best fairly satisfied with their energy supplier and often
disappointed. They felt that energy companies deliver, at best, moderate standards of service
with no attempt to offer value-added services
This study suggests tighter regulation of TPIs and energy companies may be desirable.
The competitive energy market does not appear to have resulted in:-
companies seeking to deliver high levels of service
small businesses comparing prices easily, and being confident that they are comparing on a
like for like basis
A few days after interviewing was completed the British Chamber of Commerce issued a report
claiming that energy suppliers were not giving businesses the same “fair and transparent”
service as that received by domestic users.
BCC argued that, compared to domestic users, businesses were “significantly more vulnerable”
to exploitation and unfair practice, partly because
domestic suppliers are required to publish their tariffs but there is no regulatory requirement
covering business suppliers
domestic contracts allow people to switch every 28 days, but businesses have to sign up to
David Frost, director general of the BCC said:-
“with the economy slowing and energy bills on the rise it is totally unacceptable that
hard-pressed businesses are left so open to exploitation by energy suppliers.”
This study provides strong evidence in support of BCC‟s arguments.
Why didn't Ofgem release this research at the same time as the probe itself? Probably because the research would seem to contradict the conclusions.
Ofgem and Smart Meters
Ofgem has suddenly changed course 180 degrees and says that
Mr Buchanan agreed with the committee members that the best solution to billing problems now appeared to be smart meters. He said: “Ofgem has been an advocate for smart meters for three or four years and we are very hopeful that the Government will push on with this.”
Is this the same Ofgem that has seen no proof that Smart Metering provides efficiency (2007)? And thinks that it will cost an average of £340 per meter to implement (2007), while Italy provides it for less than €90, Ontario for less than CDN$250, or California for less than US$200?
Is this the same Ofgem and BERR who think that SME's should get Smart Meters in exactly the same time frame as domestics i.e. at least 10 years but less than 20 years? As opposed to Ireland with 100% by 2012 or France with 100% by 2015?
No this is the same Ofgem which all of a sudden is in danger of being disbanded entirely.