Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

British Gas Punishes UK Customers with 35% Price Hike

Personal_Finance / Household Bills Jul 30, 2008 - 11:23 PM GMT

By: Nadeem_Walayat

Personal_Finance Best Financial Markets Analysis ArticleA 100% rise in the wholesale gas price has resulted in retail gas suppliers in recent days pushing gas prices sharply higher. First to raise was EDF which announced a 22% rise, quickly followed by Britain's biggest gas supplier British Gas which today announced a 35% price hike.


As the below graph illustrates that undoubtedly the price of gas on the wholesale market has risen sharply for Winter delivery as the bulk of gas demand occurs during the winter months, the current price for October is 85p per therm, against today's spot price of 31p per therm, which illustrates the degree of volatility.

British Gas Price Hike

Firstly gas bills are priced in Kwh rather than pence per therm, therefore the conversion is for 1 therm being equal to 29.31 Kwh., thus 1 Kwh is equal to 0.034 therm's.

Therefore the market price of 85p for winter delivery is equal to 2.9p per Kwh.

The actual price British Gas customers pay is estimated at 7.3p per Kwh - Or 250% of the winter market price .Therefore a 35% price hike would equate to a price rise of 2.6p KwH to 9.9p (corrected 31st July 08)

The new price of 9.9p / KwH is against the current market price of 31p per therm or 1p / Kwh, and 2.9p Kwh Market price for Winter 2008, which equates to 10 times the current market price and nearly X4 the winter price.

A price rise inline with the winter price would have seen a rise of 100% in the market price from 1.5p to 2.9p and therefore 1.4p per KwH. The actual increase is for 2.5p, exactly what are centrica charging the extra 1p per KWh for ? The 2008 and 2009 company results should prove interesting reading.

Is British Gas / Centrica Profiteering ?

To answer this question we would need to take a look at British Gas's parent companies annual accounts i.e. Centrica, as British Gas is part of Centrica after British Gas was split into two groups - BG which is the exploration company, and Centrica which supplies residential and business customers as well as other gas storage activities across Europe.

Centrica & BG Profits

 
2005
2006
2007
2008 Forecast
Centrica
£1.8bill
£.034bill
£2.1bill
£1.9bill
BG Group
£2.5bill
£3.2bill
£3.1bill
£5bill

 

Before the price hike, Centrica made annual profits of approximately £2 billion which equates to £137 per every customer (14.6 million gas+electricity) or approx 14% of the £1000 average annual gas and electricity bill. Following the price hike the average bill is expected to rise to over £1300, and therefore the expectations are now for sharply higher profits for 2008 and 2009, as the price hikes are estimated to be as much as 80% higher than the actual increased costs incurred on the wholesale gas market for Winter 2008.

There clearly exists an illusion of a free market in gas and electricity in the UK which is not borne out by the facts as prices do NOT move in line with the wholesale gas market. It seems price rises occur at near twice the level of the market price rises, and cuts tend to be at far less than when the wholesale gas prices fall, hence healthy profits of £2billion per annum.

According to Uswitch, customers can save as much as £315 by switching suppliers, especially if they have never switched supplier before.

In the meantime Gordon Browns beleaguered government continues to urge wage restraint amongst the mass of workers at below 3%, this does not include MP's (including the generous allowances) or other vocal minorities such as GP's that have in recent years enjoyed pay hikes of over 30% per annum.

Britain is definitely heading for Summer and Winter of discontent, as the public sector unions mobilise to match the surging rate of inflation which is set to pass 4% on the CPI measure, let alone the more accepted RPI which is set to break above 5%.

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-08 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Michael Parry
31 Jul 08, 02:58
British Gas Prices

You write

The actual price British Gas customers pay is estimated at 29p per Kwh

No, if you look at

http://www.britishgas.co.uk/pdf/Standard%20gas%20prices.pdf

their prices are are around 7 p per kW hour for the first 670 kWh per quarter and 3.3 p per kWh for anything more. So for a small user of 10,000 kWh per year, the average price would be 4.3 p per kWh and less for people who use more gas.


Kenneth Morton
31 Jul 08, 04:24
Gas Price

I think something is wrong with your gas figures as public are charged (uswitch) as below: -

Click Energy 5 Dual Fuel from British Gas

Unit prices

Gas

5.968p per kWh

2.504p per kWh above 2680 kWh p.a

Electricity

18.82p per kWh

8.80p per kWh above 500 kWh p.a

All prices shown are inclusive of V.A.T. at 5%

Discounts

* Direct Debit Discount : 10.3% or £67.56, whichever is lower (Gas)

* Dual Fuel Discount : £15.00

* Direct Debit Discount : 4.8% or £20.80, whichever is lower (Elec)

All prices shown are inclusive of V.A.T. at 5%

Click Energy 5 Dual Fuel features

* You must agree to paperless billing

* You must manage your account online

Annual cost

Payment method: Fixed Monthly Direct Debit, Estimated cost: £1306.39, based on a consumption of 23943kWh for gas and 7583kWh for electricity.

How have we calculated these figures?


Peter
20 Mar 09, 08:45
Michael Parry: Put on your reading glasses!

Michael, don't be a fool. Re-read the article!


Post Comment

Only logged in users are allowed to post comments. Register/ Log in