Why bumper profits from British Gas should prompt customer action

posted on 27/02/2013 14:40:52 by Jonathan Elliott

How Britain's energy customers can affect high prices by taking matters into their own hands.

Jonathan Elliott shares his views about British Gas's profit announcement on today's Sky News

Energy prices are back in the news today after British Gas announced a bumper profit figure of £606 million in 2012 - a significant increase of 11 per cent on the previous year's figure.

That means the company makes an annual profit of £49 for each of the 15.6 million households it supplies - and £189 for each of its business customers.

It's little surprise that customers - and the general public - are knocked for six by this news, because British Gas increased its prices just three months ago. This hike resulted in an average yearly increase to household bills of around £80.

We can debate the fairness of this as much as we want (I've been talking to Dharshini David on Sky News today while my colleague Scott Byrom is due to apear on the BBC later) - but for the energy consumer (and let's face it, that's pretty much everybody) it's further demonstration that they need to vote with their feet to get the energy prices they want. Thereiscompetition out there - and if everybody was an active shopper this would stimulate competition and almost certainly result in more stable prices.

"We think people don't switch because they fear an administrative nightmare, so we've introduced a £100 guarantee that we'll set up a new home energy tariff successfully."

From the customer's point of view it should be simple. If you think you are being charged too much for your gas and electricity at home or at your business premises, look for a better price.

If you thought a high street shop was being too greedy with its prices, you'd recognise that you have a choice and probably go to a different shop. Likewise, no one is forcing you to buy your energy from any one particular supplier. It's an open market and nine times out of ten there will be another supplier that'll offer you a more competitive price.

There's no doubt that some of the biggest savings to be made in household expenditure are by switching to the cheapest energy deal. You can currently save an average of £230 by changing energy supplier - and it's customers who have never switched before who stand to make the biggest savings. For example, Yorkshire households who have never switched can save an average of £297 and Londoners can save £291. These are deals that are out there now but the reality remains that too many of us are feeding suppliers' profits by standing still.

Consumers need to take control and be proactive about finding a better deal - but the latest figures say that only one in seven of us are switching. We think a lot of people don't switch because they fear some kind of administrative nightmare if they do, which is why we've introduced a guarantee that says if we don't set up your new tariff successfully, we'll write you a cheque for £100. That's how confident we are of not only finding a better deal, but making sure it actually goes ahead. People also need to be aware that there'sno waythe actual supply of gas and electricity into their homes will be affected by a switch.

It's interesting to me that very little seems to get our backs up more than powerful energy companies announcing bumper profits. To put things into perspective, today's announcement from Centrica shows that British Gas makes a smaller profit margin than Tesco - and yet there's minimal public backlash against Britain's favourite supermarket when it publishes its annual accounts.

Perhaps that's because we're happy with their prices, but we should also bear in mind that the retailer is not asked by government to restrict its choice of bread to just four loaves in the same way that energy suppliers are asked to restrict tariffs. I'm not sugggesting British Gas customers have no grounds for complaint - but itisa complicated industry with a complicated market that, for reasons we could also debate vigorously, is under much more scrutiny than others.

The bottom line is that energy customers need to know there are a host of suppliers out there who all want their business - and they might just find themselves better off if they give it to them.

Jonathan Elliott

Jonathan Elliott is Make It Cheaper's CEO and founder. He recognises that small businesses are the lifeblood of the British economy, and is passionate about making it easy for them to save time and money, boost their profits and improve prospects for growth. As a vocal campaigner for fair treatment of SMEs by utility companies, Jonathan collected ‘SME Consumer Champion’ & ‘Most Trusted’ at the 2013 Energy Live Consultancy Awards.

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