Iberdrola, the owners of Scottish Power, is not a company that is struggling.
2010 profits – €4bn
2009 profits – €2.8bn
2008 profits – €2.5bn
Nonetheless, the power giant’s subsidiary Scottish Power has decided to raise electricity prices by 19%. (Note that Scottish Power is a prime contributor to those profits, making £1.2bn last year)
It is a desperately depressing move from yet another company that is clearly putting shareholder value, dividends and bonuses ahead of a fair deal for consumers. I actually used to assist in the external audit for Scottish Power and I can recall the despair from the Glasgow workers at the new aggressive culture that the Spanish owners were sweeping through. I wonder how this news will go down with the employee faithful.
It is surely time for some sort of super-tax on any super-profits that a company generates. The super-rich UK citizens are taxed 50% for income over, I think, £150k. Why don’t we have this same slicing of income for companies that are simply making too much money? George Osborne is reducing Corporation Tax to make the UK more competitive. I disagree with that argument but can at least grudgingly accept it. Nonetheless, the Chancellor’s philosophy will not be compromised by a new tax rule stating that profits over £1bn will attract an extra 10%. That could mean as much as £100m of tax from power companies to fight fuel poverty or force them to keep power bills reasonably low. If the power companies won’t give us a fair deal then perhaps the Government can assist?
We’re entering tough times and, easy Tory-bashing to one side, we are as a country going to have to find a way to tighten our belts for the next few years but surely there must be a way to ensure that simple necessities like power, food and housing can be safeguarded most of all?
Corporate greed and relentless growth irrespective of the social and human cost must be stopped in its tracks. In the meantime, may I heartily recommend Scottish & Southern Energy.
#1 by David Gray on June 8, 2011 - 6:01 pm
You might not want to recommend Scottish and Southern in a few weeks time. The Bank of England forecasted that energy prices would rise, so my guess is that the other energy companies will just follow suit. The question is how high does the price of energy have to go before we actually change how we use our energy efficiently?
#2 by John Ruddy on June 8, 2011 - 9:11 pm
Agreed. As it happens, the wholesale price of energy HAS risen, but the real problem is that the distribution and generation companies have been split, so that utility companies now have to buy in (most) of their energy. The energy price is an international commodity (traded in futures, naturally), and is affected by all sorts of things, not least of which is the expectation of what might happen.
We (Angus Council) now have out electricity purchased on the international markets, and we had a 10% increase in April, followed by a 3% coming in July. For electricity purchased ahead for next April we are already seeing another 16% increase on the forward markets. Its not pretty.
#3 by Jeff on June 8, 2011 - 10:14 pm
Yes, good point, there’s still far too many people not helping themselves with keeping energy use down. The BoE did forecast energy rises but I believe it was only half the 19% that Scottish Power has gone for. And I don’t know why price rises are necessary when power is a multi-billion pound profit industry.
#4 by Tony on June 8, 2011 - 10:34 pm
That’s the nub I’m afraid Jeff……………….where do we go when the market has all the hallmarks of an unnoficial organised monopoly?
Same with fuel prices, we think we are doing well with getting it a few pence cheaper at supermarkets, but they themselves have to buy it from the few wholesalers and importers that they are allowed to undercut on the forecourt.
I don’t think we are being best served by succesive governments that have allowed this organised rip-off to masquerade as the free market.
As I said earlier (and further down the page) the only answer is nationalisation. It couldn’t be any more expensive surely.
#5 by douglas clark on June 8, 2011 - 6:22 pm
Jeff,
I am surprised that you haven’t had a lot of replies.
It is quite astonishing that a utility should be a cash cow for investors and the government turns a blind eye…
#6 by Jeff on June 8, 2011 - 10:13 pm
Douglas,
well, a busy day on Better Nation I suppose so comments may have gone elsewhere (and more have come on this post since).
I don’t mind Nike and GAP pricing high to make high profits, that’s their prerogative when there’s plenty of cheaper options out there.
Scottish Power’s supposed rivals will follow suit with this price rise and where does that leave us? Of course, you know this as much as I do but it’s still darn frustrating. Maybe because there’s so little people can do to fight this that results in less people being vocal about it…?
#7 by Alasdair on June 8, 2011 - 8:23 pm
This is an inevitable result of the privatisation of essential public services. These organisations should be run in the interest of the only stakeholders who really matter, the end user.
#8 by John Ruddy on June 8, 2011 - 9:15 pm
Yes, however, I’m afraid that horse has bolted. It would probably be too expensive, both financially and politically to nationalise them. The only other solution is a windfall tax. Use the money to make homes and businesses much more energy efficient and to help them afford to install micto-generation solutions.
#9 by Tony on June 8, 2011 - 9:00 pm
I heard some of the debate on 5 live today and there are a lot of angry angry people out there. I then went to put diesel in my car and spent 70 quid on only filling the tank to the 3/4 mark hmmmm.
‘A better nation’ should really be looking to nationalise all of our essential public services.
The announced price rise had me wondering what happened to the recent furore on these companies lagging behind in reducing their prices. Did it ever even happen?
#10 by Jeff on June 8, 2011 - 10:15 pm
No idea Tony. I must admit I’m guilty of getting my power bill in, balking, paying it and then not thinking twice about it.
I would be in favour of nationalising essential public services on a not-for-profit basis. Seems the fairest way.
#11 by Doug Daniel on June 9, 2011 - 11:45 am
Definitely. Public transport, energy, water, postal service… these are things that people rely on for a basic existence in modern-day life, and as a result it is every bit as morally wrong for people to profit out of these needs as it is to profit out of someone’s need for healthcare. People shouldn’t have to choose between heating their home or eating a meal. Energy companies operate as a cartel and know they can keep raising prices, because people have no alternative but to continue paying these extortionate prices, in the same way that communters have no choice but to keep paying rip-off rail fares. Rail is even worse in fact, since they operate in a closed market as well – if you don’t fancy ScotRail’s high prices and awful service, the only alternatives are the bus or your car.
Once Scotland becomes independent (whenever that happens), I would hope we would be looking at which services we can afford to have run for the benefit of shareholders rather than public need and which we can’t, then nationalise them accordingly. Perhaps part of a Scottish constitution could be to make it legally binding that closed markets must be run nationally, or at the very least by not-for-profit companies?
But as John Ruddy touches upon, these companies don’t even seem to be energy companies any more. Why are we not getting our energy from the people that generate it, rather than middle men who buy it from source and sell it back to us for profit? It’s funny you mention Nike, because they operate in a very similar way to Nike – all they’re really doing is “branding” our leccy, and leaving the nuts and bolts stuff to other people, the same way Nike doesn’t actually manufacture any of its clothes.
#12 by douglas clark on June 8, 2011 - 11:01 pm
Jeff @ 10,
To be fair to me, I posted first. So why I appeared fifth is a tad strange.
I completely agree with you @ 10. Quite why we are beholden to exploitative capital for essential services is a bit beyond me. It is however what a lot of the worlds’ institutions require. And Westminsters advisors’, of course.
#13 by Indy on June 8, 2011 - 11:32 pm
I think everyone would agree but what I don’t know – and maybe someone who does could enlighten us – is what share of the profits are re-invested into other projects like renewables and research. Because there is a lot of money going into that and presumably most is coming from the private sector. So we need to take that into account. There is a cost to developing the renewables sector although in the long term it should deliver much cheaper energy.
But having said that I feel there should be some legal limit set on the level of increase which is allowed. Many people will just not be able to afford those kinds of increases. There has to be a recognition that energy is not an optional extra. That is especially true for older people and families with young children and disabled people as well.
#14 by Random Lurking Scotsman on June 9, 2011 - 2:17 am
Oddly enough, that’s why I recently switched over to the Co-operative Energy. Not entirely sure whether it will save me too much as the power companies all seem to be pretty much same-ish in terms of price, but at least I know that the money the company makes will be returned to the customers rather than the shareholders!
#15 by Rab o' Ruglen on June 10, 2011 - 8:19 am
Hi there,
I think the denationalisation of the utilities shows what Thatcher really had in mind. Instead of our utility companies manufacturing power / gas / providing telephones etc. and selling the product to us, a captive market, at more or less cost we now have lots of middlemen inserted into the process, owned by international companies acting in concert to exploit us ’till the pips squeak.
Of course the regulators cannot find “collusion” between operators in the marketplace – they were never meant to be able to. So will international capitalism continue to prosper until they own everything and we own nothing? Only if we allow it to happen I suppose.
The only fly in my argument might be that the telecommunications industry is now far more competitive than it was, but I think this is probably due to the availability of new technology and indeed the greater absence of middlemen in this industry.
Regards,
#16 by Doug Daniel on June 10, 2011 - 1:10 pm
The telecommunications industry is probably closer to a genuine market than other public services – unlike with rail you’re not stuck with one service provider, for instance. So consumers are presented with genuine choice, meaning companies have to fight for your custom by offering more or better services at the best prices.
But as you say, this could also just be down to the availability of newer (and therefore cheaper and inherently faster) technology, rather than the companies themselves. Who knows, perhaps a publically-owned telecoms industry would have ensured we had better internet speeds than we do.
#17 by Indy on June 10, 2011 - 10:01 am
There was a good letter in the paper the other day – I think it was the Herald – comparing and contrasting with Scottish Water. A reminder – if one were needed – that Scottish Water should be kept in public ownership.
#18 by Jeff on June 10, 2011 - 1:47 pm
Good point Indy; and good to know that Scottish Water is going nowhere in the next 5 years.
#19 by Joe on June 12, 2011 - 1:42 pm
How much of the increase is due to green taxes – Renewable Obligation Certificates, subsidies for Feed In Tariffs and the like?