Energy company profiteering

In September, the firms were making £65 annual profit per customer but that figure is now £97 on a typical household energy bill of £1,200.

Well, yes, OK, but, umm.

How much capital are they using? A quick peek at the Centrica accounts (which isn\’t British Gas alone, I know, but using it as a proxy) shows that they have some £18 billion of assets upon their balance sheet.

And while you can indeed look at profit per customer, you should/could also use profit on capital being used as a measure. Or even how much capital is being used to service each customer and what would be a reasonable return on that?

Say it costs £1,000 in capital to service each customer (thus B Gas….and noting that this is Centrica, not BG accounts that we\’re looking at) is a £97 return, just under 10%, excessive?

I\’ve no idea what the actual numbers are mind, no intention of finding out either. But looking only at profit per customer without looking at the cost of the infrastructure required to supply that customer strikes me as being wrong.

And yes, whether that profit is going to a private company or to the State, if such companies were nationalised, makes no difference. We would still want to charge the market rate for the capital allocated to the sector, whoever owns it.

3 comments on “Energy company profiteering

  1. Gosh, £97 on £1,200. So profit margins are up from about 5% to 8%.

    That’s generally lower than the media sector. The Telegrah is privately owned, of course, but it would be interesting to know its figures. (Yes, I know profit margins aren’t really comparable across industries. But all the same!)

  2. “Say it costs £1,000 in capital to service each customer” –

    How did that Nixon ’72 campaign ad go?

    Ha ha. Ha ha ha ha. Ha ha ha ha ha ha…

  3. i don’t know – this is complex. But I think you have to seperate out the cost of the energy and the cost of getting it to you. The latter bit should be regulated as its the monoply bit. The question with the former is is it really a free market with competition

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