Energy firms to cut bills after Osborne promises to roll back green levies

British Gas says it will cut average £41 from dual-fuel bills, while Scottish & Southern Energy expects to cut £50

Britain's under-fire energy suppliers have said they will cut household bills after the government confirmed a shakeup of green levies.

British Gas said it would reduce gas and electricity prices by an average of 3.2%, equivalent to £41 from an annual dual-fuel bill, with an extra £12 rebate for the government's warm home discount scheme.

Its rival Scottish & Southern Energy said it expected a saving for the typical dual-fuel customer of around 4% before the end of March, equivalent to a saving of around £50.

The moves come after the chancellor, George Osborne, confirmed that the costs of some energy-efficiency schemes would be rolled back in this week's autumn statement.

Npower said it did not plan to increase energy prices before spring 2015 unless there were increases in wholesale energy costs or network charges.

The cut in British Gas bills comes two weeks after it raised electricity prices by 10.4% and gas tariffs by 8.4%, adding around £123 to the average annual

British Gas's managing director, Chris Weston, said on Monday: "British Gas is pleased to be cutting energy bills by an average of £53 from 1 January.

"We have been able to do this because the government has committed to making changes to the environmental and social obligations that are paid for through energy bills. These changes will now allow us to help more people at a lower cost."

The government is cutting the cost of the energy company obligation (Eco), an insulation scheme delivered by major energy suppliers, in a move that should shave £30-£35 off bills, on average, next year.

The Department of Energy and Climate Change also announced it was establishing a rebate, saving the average customer £12 on their bill for the next two years.

Electricity companies will also take voluntary action to reduce network costs in 2014-15, funding a one-off reduction of around £5 on electricity bills.

The energy and climate change secretary, Ed Davey, said: "Energy bills are a big concern for many people, which is why we've been working to reform the energy market, increase competition and make it easier for people to shop around and switch supplier.

"Today's announcement confirms a serious, workable package which would save households around £50 on average."

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Ofgem not a 'toothless tiger' in fight against rising energy prices, insists boss

Andrew Wright tells MPs he agrees with consumers who think the retail energy market is not working well

Ofgem boss Andrew Wright says he understands public anger at rising energy prices but has denied his organisation is guilty of "feeble regulation".

Wright acknowledged "deep distrust" of the big six energy companies – British Gas, npower, SSE, Scottish Power, E.ON and EDF – as some customers face price rises of more than 10% as winter kicks in.

Addressing MPs on the Commons energy and climate change committee, Wright said rising prices, years of aggressive doorstep selling, confusing tariffs and complexity when consumers wanted to switch providers had all created negative perceptions of the industry.

"I completely understand why people feel frustrated and angry about rising energy bills. Prices have more than doubled over the last 10 years at a time when incomes have been squeezed, and consumers are not convinced that price increases that they see are either fair or justified," he said.

"Consumers have a perception that the market is not working well and that's something that we agree with. We think the retail market is not working as well as it should do."

When asked whether Ofgem was a "toothless tiger", failing to address rising prices and accusations of unfair profit taking among companies, he said it was acting within its statutory regulatory framework and rejected the idea he was supportive of the rises.

"I never said it was OK. I have not said this level of profit is right or acceptable. If companies imply we think 5% is right, we've never said that."

He said that politicians were right to debate the issue of rising energy price rises but when questioned about Labour leader Ed Miliband's promise to freeze prices he did not appear to be enthusiastic.

"The sort of things we would consider are, does it have an adverse impact on consumers and on the investment that's needed?

"It is obviously necessary to allow companies to recover the revenues that they need to be able to run their businesses effectively. They should have no guarantee of profits but an efficient business serving customers should be able to recover the costs that they incur. So any arrangement that doesn't allow them to do that potentially puts at risk investment in the industry."

His comments came a day after Ofgem published a report which found that profits per customer rose by 77% last year, from £30 to £53, driven by higher prices and increased demand for heating during last year's cold weather.

The average profit margin for supplying energy to households in 2012 was 4.3%, up from 2.8% in 2011, with total profits from supplying energy to households and businesses rising from £1.25bn to £1.6bn last year.

Article Source : http://www.guardian.co.uk
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Royal Mail's first-class returns fail to silence critics

On Friday many people could see the value of their stake instantly rocket. While 96% of postal workers are against it, for the government – and City investors – it offers a huge windfall

A half millennium of history will end on Friday when the government goes where even Margaret Thatcher dared not tread and privatises Royal Mail.

In between divorcing and beheading wives, Henry VIII appointed Brian Tuke to the newly created role of "Master of the Posts" in 1516. The job was a forerunner to Postmaster General and the service – which for its first 119 years was reserved for royals to send letters between palaces – became Royal Mail.

The postal service, the world's oldest, has remained in public ownership ever since, despite attempts by both the Tories' Lord Heseltine and Labour's Lord Mandelson to flog it and swell the nation's coffers.

Thatcher, who sold off British Gas, British Airways, British Telecom and dozens of other state-owned institutions in the 1980s, drew the line at Royal Mail, saying famously that she was "not prepared to have the Queen's head privatised".

But on 7am on Friday up to 70% of Royal Mail will be sold to investors and listed on the London Stock Exchange – swelling Treasury coffers by about £2bn, though that will no more than dent the £115.7bn deficit the government ran up on the public finances last year.

The government is pressing ahead with the sale despite fierce opposition from the public, politicians of all hues and Royal Mail's 150,000 postmen and women, who are planning days of debilitating strike action in protest.

Vince Cable and Michael Fallon, the business secretary and business minister in charge of the sale, say that in these straitened economic times Royal Mail can no longer be owned by the state as it has to compete with schools and hospitals for much-need investment. Royal Mail needs to borrow hundreds of millions of pounds to prepare for a future delivering parcels ordered online from the likes of Amazon and Asos, rather than cards and letters that are dying out in favour of emails and messages on Facebook or Twitter. Letter traffic has dropped by a quarter over the past five years to just 58m items a day.

"It cannot be right for Royal Mail to come cap-in-hand to ministers each time it wants to invest and innovate," Cable said. "The public will always want government to invest in schools and hospitals ahead of Royal Mail."

Fallon has said that if Royal Mail were to remain in state hands "every £1 it borrows is another £1 on the national debt. That means growing the national debt. No responsible party could propose that in the current environment, or for that matter in any environment, when Royal Mail – run on a fully commercial basis – has the capacity to be cash-generative, profitable and perfectly able to raise the capital it needs from the private sector."

After years of heavy losses – £320m in 2010 and £258m in 2011 – Royal Mail is now steadily increasing its profits. In the latest accounts available, for the six months to September 2012, it made operating profits of £144m compared with £12m a year earlier, while sales remained roughly flat at £4.4bn.

Royal Mail has also been given greater freedom to increase the price of stamps – over the past five years the price of a first-class stamp has risen from 41p to 60p – and is allowed to make a "reasonable commercial return" (a margin of 5-10%) on its universal service obligation to deliver to every address in the country six days a week, which the government promises will be maintained for the foreseeable future, no matter who owns the company.

Royal Mail has also been freed of its £12bn pension fund deficit by transferring the scheme from the company to the state, at a cost of £1.3bn in the first year alone.

City experts reckon these changes outweigh the threat of strike action and any political and public backlash and will make Royal Mail very attractive both to big banks and investment firms as well as the public, who are able to buy its shares as long as they can stump up a minimum of £750.

Gert Zonneveld, managing director of stockbroker Panmure Gordon, said he expects the flotation to be a "raging success", with investors trying to buy up to 10 times as many shares as are available, But most of the demand, he said, is down to the "exceptionally attractive" value the government has placed on the shares. It has said they will be priced between 260p and 330p, giving the company a maximum market value of £3.3bn.

Zonneveld reckons the government's range represents an "exceptionally good entry level for investors", and said the shares should have been priced at up to 450p.

"I'm so convinced they [the government] got it wrong," Zonneveld said. "I think they're more than £1bn too low [in their valuation of the company]."

By comparing Royal Mail's profits and revenues to that of other listed postal services in other countries, Zonneveld thinks the company should be valued between £3.7bn and £4.5bn.

Under his valuation, Royal Mail would join the FTSE 100 list of Britain's biggest companies, which means tracker funds would be forced to buy the stock, sending demand – and the price – even higher. "I think this is going to be massively oversubscribed," he said. "Institutional investors who want £10m will increase their order to £50m because they know their orders will be scaled back."

He predicts that the share price could rise by 30% on the first day of trading on Friday. It means the government could lose out on about an extra £500m if it had priced the shares at 450p. The government has said it will not increase the price range above 330p no matter how high the demand for the shares.

The expected jump in the share price could go some way to placating Royal Mail's 150,000 employees, who are in the midst of voting for nationwide strike action, the first since 2009, which cannot take place until 23 October.

The government is giving employees 10% of the shares for free. If the shares at the top end of the government's 330p estimate,each employee will own shares worth £2,200 on Friday morning. If they perform as Zonneveld predicts they could be worth £2,860 by Friday afternoon.

But even the prospect of nearly £3,000 is not enough to win over most postmen and women. The Communication Workers Union, which represents 115,000 Royal Mail staff, says that 96% of employees are adamant in their opposition to the sell-off.

"I don't want the money," Theodore Mbungu, 56, said as he trudged about his north London round last week. "I want my job to stay the same. When it's private we will be paid less and have to work harder. What other job is there where you talk to people every day and they are happy and smiling and excited to see you?

"In what other job can you do your work and then go straight home, even though you're still being paid? I love being a postman. It's the best job in this country, but I know once the men in the City get their hands on it, it will never be the same again."

Article Source : http://www.guardian.co.uk
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Cold snap boosts profits at British Gas owner

Centrica says it will try to avoid more price rises for as long as possible as it faces protests at annual meeting on Monday

British Gas's owner, Centrica, enjoyed a huge boost from the cold snap as consumers turned up the heating, driving consumption up by almost a fifth compared with last year.

The company, which raised prices by 6% shortly before the harsh winter set in, said any benefit from the "exceptionally cold weather" would be used to prevent further price rises "for as long as possible".

The finance director, Nick Luff, said: "The fact is we make a margin selling gas. We will have made a higher margin because of the extra volume and we will use that to keep prices down during the rest of the year."

But he said the cost of implementing the government's energy efficiency scheme and higher transport costs would hit profits, while the gas price remains unpredictable – meaning there may be little extra to invest in keeping prices low.

The energy comparison and switching service uSwitch.com still welcomed the news at a time when consumers are struggling to pay bills. Ann Robinson, director of consumer policy at uSwitch.com, said: "British Gas has recognised the pressure facing customers and is using the financial gain from the extended cold weather to maintain its competitiveness. In plain English, this means that British Gas customers should expect no further increase in prices at least for the foreseeable future."

Gas consumption has surged during the cold snap

Centrica faces protests at its annual meeting in London on Monday afternoon as campaigners gather to challenge the company on price hikes, multimillion-pound payouts to British Gas bosses and plans for a new generation of gas power stations instead of cheaper, clean renewable energy.

Households' average gas consumption was 18% higher in the first four months of 2013, compared with the same period last year, while electricity consumption was 3% higher. Residential customers in the UK also rose by 28,000 in the first four months of the year, which Centrica put down to competitive pricing and good customer service.

The company said this "strong performance" put it on course to meet expectations and deliver full-year profits before tax of £602m, down 1% on last year.

As an oil and gas producer, Centrica also benefited from higher commodity prices, and the group's full-year earnings after tax are expected to be 2% higher at £1.4bn.

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Article source : http://www.guardian.co.uk