Profiteering by the six main UK energy companies is again in the spotlight after OFGEM reported that average cost per household for gas and electricity is now £1,345 per year, with profit per customer in the midst of this most deep recession having grown from £15 per household to £125. Can anyone be surprised.
The liberalisation of the gas and electricity market was supposed to increase competition and lead to fair pricing between what is a relatively small number of suppliers. The sad reality is that the companies have taken advantage of the market by over complicating pricing structures and preying on consumer ignorance. One customer interviewed this week stated that he thought his 10 year loyalty surely would have been rewarded, when in fact it is exactly this type of customer who is most severely abused. The companies list dozens of tariffs in their pricing material and until recently would not even produce for customers a summary of their energy usage that could be used in “shopping around” the various suppliers. Then by issuing special price deals to entice customers from competitors a façade of competitive pricing could be presented. However, unless the consumer diligently reviews pricing options literally every month, the special deal price would be increased and soon could be highly uncompetitive.
When British Gas was privatised in 1986 – effectively made into a limited company – the government not only handed over into private hands an incredible resource, infrastructure and supply chains, it provided a license to print money due to the public’s absolute need for energy. In order to negate the potential for conflict between the profit motive of newly formed energy companies with virtual monopoly control of the market, and the public’s needs, the government established OFGAS, then later OFGEM (Office of Gas and Electricity Markets). Its primary duty being to protect the interests of consumers where possible by promoting competition. Judging by these most recent revelations OFGEM is badly failing.
Consumer confidence in OFGEM is dwindling.
uSwitch research earlier this year revealed that despite 98% of customers believing that OFGEM should crack down on energy suppliers, less that half believed it was capable of doing so. Hardly surprising when we look at the history of these privatised industries and who established them.
In June of 1990 House of Lords member Peter Walker joined the board of British Gas and the board of Rothschilds NMR (who had managed the flotation of British Gas) merely 3 months after he had left the government. As secretary of state for energy he had made all of the key decisions re the privatisation of BG in 1986. Norman Tebbit was instrumental in leading the privatisation of British Telecom in 1984 and just so happens was happy to join its board of directors in 1987. David Young acted as secretary of state to the department of trade and industry from 1987 to 1989 including conducting key negotiations with Cable and Wireless over various telecommunications licences, a company he was happy to join as Executive Chairman in 1990.
Anyone notice a pattern here? High ranking cabinet minister, privatisation of key public industry or sensitive industry policy, then taking on a senior position in said private company.
But the issue of excessive gas and electricity pricing together with political patronage is only part of the problem here. The whole question of putting key utilities into the “profit making” hands of capitalist companies should be called into question. In this respect the Caliphate governance system is instructive. Scholars such as Taqiudeen an-Nabhani highlight that gas, electricity, water and other utilities under Islamic law are public properties that must remain exclusively under the management of the administration on behalf of all the public – and not the preserve of Kings/Presidents or indeed the not so faceless corporate executives.
Jamal Harwood is a regular contributor to New Civilisation. He is a lecturer in Finance, and a member of the UK Executive Committee of Hizb ut-Tahrir Britain. He can be followed on Twitter @jamal_harwood