Here’s a question…
What industry sector enjoys an average pre tax profit margin of over 30%
Pays tax at an average rate of less than 20%
Operates a Monopoly
It’s the Energy sector, funnily enough… 🙂 But it’s not the usual suspects.
It’s not the Big Six energy supply companies.
It’s the companies that own the Distribution Networks – or local grids.
The Big Six have a mere Oligopoly; they have some competition. The Distribution companies run actual monopolies.
You might think that OFGEM would be rather more on their case, regulating them more keenly than the supply sector – for that reason.
But the opposite seems to be the case.
On average these guys make an operating profit margin of almost 50%, and a pre tax profit margin of over 30% – that’s big by any standard, in any sector. And yet they are being allowed (by OFGEM) to impose price rises well above inflation – averaging 5.6% across the UK this year and as much as 11% in some areas.
These above inflation price rises are to continue for years to come, the current ‘agreement’ ends in 2015 – and then a new eight year agreement is expected.
A good chunk of recent energy bill increases for consumers has been due to increases from these Distribution companies.
When the government come up with the slightly knee jerk policy reaction of reducing tariff numbers (as they did the other week) in an attempt to tackle rising energy bills – they miss the point somewhat.
Firstly of course energy bills are rising due to factors such as global supply and demand (not because there are too many tariffs to choose from) and the real solution is to make more of our energy here in Britain, from our own resources.
Secondly energy bills are also rising, due to increased costs from Distribution companies – regulated monopoly operators the government seems oblivious to.
One last thing, worth knowing I think – almost all of these Distribution companies (85% by turnover) are now owned by foreign companies. The profits they make through their ‘regulated monopolies’, operating infrastructure bought and paid for by generations of Britons’ – is money flowing out of Britain.
Here’s a table for all Distribution companies, for the last two years. Showing the ownership and profit margins, and tax paid for each.
And here’s another table that shows the cash flowing out of Britain, to the owners of our local grids – by way of dividend payments to their parent companies.
Just thought I’d flag this up. Thought it was interesting.
It seems crazy to me, that we’ve got ourselves into a situation where our national infrastructure, which generations of Briton’s have paid for, is mostly in foreign hands, is an actual monopoly, ‘regulated’ apparently, and looks rather like a licence to print money and export it. Adding to the problem of rising bills and rising fuel poverty in Britain.
This is where privatisation and the ‘free market’ have taken us.