The British privatised power industry is again beginning to increase prices for the U.K. consumers. Both British Gas and N Power are raising their prices in the region of 9% in the coming weeks.
The graph below shows the difference in price for U.K. consumers (Customers of the biggest 6 electricity providers) and the wholesale price over the past five years.
The graph shows that where the wholesale price dropped two-thirds through 2011, the big electric providers pretty much maintained their prices.
This price level has been maintained through 2012 even though the whole sale price has at times during this period has decreased significantly, which will have increased income for these companies.
So here are the influential factors...............
THE REGULATORS
The problem with these private companies is that there is little to prevent these companies raising their prices to improve profits. We have all seen what is a failure by so called regulators, who seem to have plenty of talk and waffle about what should be happening, but in reality, rarely have any affect.
Strangely, the F.S.A., the U.K. banking regulator seems to suffer what seems to be identical problems to Ofgem, the U.K. power regulator. The idea is that billions of pounds of our taxes go to these regulators for them to prevent us from being ripped off by the businesses in these respective industries. However the slowness of their reactions, often total lack of reaction to some situations, and also their often what seems to be un-justified defence of their industries or businesses with in them, will draw conclusions to many cynical people that the regulators, are merely to create a buffer between complaining cusomers and those industries. Therefore allowing these private companies to keep their priority of making money, and not being inconvenienced by pesky customers.
THE GOVERNMENT
There are added costs which are as a result of penalties against new green policies which are also adding to the costs of these businesses. The problem is that, if companies are being given penalties whilst they do not comply to new higher standards, this is actually a hinderence to the companies becoming greener ! The potential investment is going to the government. This could have the affect of the companies not investing enough in green energy and could risk the company's existence in the future.
Either the government has not given this enough thought, or the scheme is purely a way for the government to get more money out of these companies due to many avoiding paying taxes, and has little to do with green energy.
PRIVATISATION
Before all these companies existed, both electricity and gas were provided by national owned companies. If it was like this today, there would not be a number of companies apparently competing in the same market to buy gas in bulk, power stations, fuel for the power stations etc. Basically, this means privatisation pushes up the price as the sellers of these commodities knows that if one business is not willing to pay a certain price, another company probably will. Privatisation has therefore not really improved competition on the retail side, which is one of the apparent advantages according to people like David Camerron, it has simply increased competition on the wholesale side. Instead of Russia only being able to sell to one national business in any particular country, which would create more stability in this market, the Russians know there are many different buyers within each country where privatisation is rife, such as in the U.K. Therefore claims by various politicians that privatisation is a more efficient way of supplying our power are completely without foundation.
BORROWING
Companies in a good position to lever money out of their customers, for example in the power industry tend to get into major debt. This is because the banks know that we all need heat and electricty, and therefore know that the companies are likely to be able to increase their prices to recover money to pay off loans and other costs associated with the debt such as interest payments. Therefore the businesesses can easily get money from banks to buy other assets including other companies, or simply get a mortgage simply to pay off existing debt ! However, the banks enthusiasm to lend to these businesses can bring major difficulties to these companies. However, a temporary solution could be to encourage competing companies to also get into debt. This strangely enough would create temporary stability as competing companies would be in the same situation. This would be quite easy if you were to tell the executives of these companies that the debt could fund a nice pay rise as well as some new assets such as company cars ! However, this would be to the customers cost as they will be paying the usual costs of running the business as well as some un-necessary costs associated with debt. This is likely to result in many customers not being able to fuel their homes. If people are going to die as a result of the needs to feed bankers bonuses and the life style of the executives of these companies, those people can expect that the majority of the voting public are going to want to see a change in the way our vital sevices are provided. .......................Many of these companies are in debt and they have been run badly, on the finance side of the business at least, due to banking and various types of inefficient investment. That is investment that creates un-sustainable demands on a business. There is a possibility that some of these 'business people' who I really have to correctly refer to as landlords of the services mentioned (No offence to landlords intended, but they are their to syphon profits from these businesses whilst doing little to earn it, just like landlords), could find themselves being upstaged by operators who could run these services, with much lower costs. Due to a much more responsible attitude to finance. Electricity companies, gas companies, water companies, health companies could be run at much lower costs if it wasn't for demands associated with interest and returns on investment generation, along with leverage from banks. In short, they would have to be run in the way a nationally run business would be run.
....Before you say that privately opereated businesses perform better than national run businesses, well you may have an argument if I didn't know better. It's true that many National businesses may appear to have struggled as compared to private businesses when you judge them buy surplus cash or profits There are a number of reasons for this..........
The first is that ,the companies didn't need to make a profit.
Prices charged to customers were based on the costs of providing the service. To charge much more than the actual cost would have been greed. Yet politicians defending privatisation will use this as there ace whenever privatisation of industries comes under scrutiny. They will always bring up the profits the new privatised businesses acheive in comparison to the lack of profit or surplus cash from pre-privatisation.........The businesses were not trying to make a profit.........Hence prices did not keep rising..............They employed more people, and those people were not treated like slaves, doing the work of would be redundant staff.
Second...... Loyalty or responsibiliy to the customer.
National companies have employed more people than their private counterparts. Afterall the services that are being provided are for the people and you would not want any of those people to be left without heating, water, electricity etc. As a national company, if some body was being left without any of these services , then as a provider, you would not be doing your job. So the priority of these industries was to provide a service to the people. And that is all the people.
Today things are different. These private businesses are now controlled by people who directly or in-directly have investments in them. Whatever form is financing these business, they are all affectively in debt to any one who has shares in them or to the private equity company that may own it, along with the banks who hand the debt to private equity companies to buy them. (This is un-related to any extra debt which the company may have which may be used to buy assets, or use for running costs.)
Debt to investers, share holders, private equity managers, banks (Private equity companies constantly borrow money and then re-finance before the previous debt is paid off. Therefore if a company is owned by private equity, it will constantly be in debt ! This makes the banks a kind of share holder in a lot of these utility companies.)
The responsibility to investors, share holders, private equity companies, pension funds and banks means that supplying a service to all the people is no longer a priority. The customer is secondary to all of these investors.
To acheive returns on investments and to pay off debt to banks, these companies are run at a minimum cost as far as staff are concerned. National companies would have more staff. But the companies were nationally owned, and a few extra staff would have been no major problem. The people paying for them know that they, or family members need jobs.
So may be private investment can make a business reduce the costs to the public. But, this has nothing to do with private investment or the way executives run these companies when privatised. The same kind of measures could have been adopted if there was a need to do so by the government, whilst they were in control.
If national run companies were expensive to run, then much of this wasted money would be down to the government departments not giving them enough attention. Also some near retirement people were probably employed along with disabled people. The privatised businesses are less likely to employ these people, as they will be looking to acheive something closer to 100 % efficiency from their wages budget. (This is not to say that people with disabilities are less able to do the job, but they are less likely to take on a person if there was any doubt) In fact being of age or having a disability are not the only characteristics which may cost you your job if a business is intent on cutting costs. Just being British could become a disadvantage as many investment incentivised companies actively seek foreign workers. The foreign workers accept lower wages due to the extra value their wages have when sent back to their home country. This is a situation that many british potential workers living in a country where homes are targeted by investors putting an un-realistic pressure on prices, and costs of living have difficulty competing with.
GOVERNMENTS DISTANCED FROM THEIR RESPONSIBILITIES BY P0RIVATISATION..........................
THE FINANCIAL WORLD INFLUENCING THE WRONG KIND OF GOVERNMENT
CANDIDATES...................................
THE MEDIA & PRESS MIS-LEADING THE PUBLIC ON THE PROS & CONS OF PRIVATISATION AND INVESTMENT IN BUSINESSES......................................
The graph below shows the difference in price for U.K. consumers (Customers of the biggest 6 electricity providers) and the wholesale price over the past five years.
The graph shows that where the wholesale price dropped two-thirds through 2011, the big electric providers pretty much maintained their prices.
This price level has been maintained through 2012 even though the whole sale price has at times during this period has decreased significantly, which will have increased income for these companies.
So here are the influential factors...............
THE REGULATORS
The problem with these private companies is that there is little to prevent these companies raising their prices to improve profits. We have all seen what is a failure by so called regulators, who seem to have plenty of talk and waffle about what should be happening, but in reality, rarely have any affect.
Strangely, the F.S.A., the U.K. banking regulator seems to suffer what seems to be identical problems to Ofgem, the U.K. power regulator. The idea is that billions of pounds of our taxes go to these regulators for them to prevent us from being ripped off by the businesses in these respective industries. However the slowness of their reactions, often total lack of reaction to some situations, and also their often what seems to be un-justified defence of their industries or businesses with in them, will draw conclusions to many cynical people that the regulators, are merely to create a buffer between complaining cusomers and those industries. Therefore allowing these private companies to keep their priority of making money, and not being inconvenienced by pesky customers.
THE GOVERNMENT
There are added costs which are as a result of penalties against new green policies which are also adding to the costs of these businesses. The problem is that, if companies are being given penalties whilst they do not comply to new higher standards, this is actually a hinderence to the companies becoming greener ! The potential investment is going to the government. This could have the affect of the companies not investing enough in green energy and could risk the company's existence in the future.
Either the government has not given this enough thought, or the scheme is purely a way for the government to get more money out of these companies due to many avoiding paying taxes, and has little to do with green energy.
PRIVATISATION
Before all these companies existed, both electricity and gas were provided by national owned companies. If it was like this today, there would not be a number of companies apparently competing in the same market to buy gas in bulk, power stations, fuel for the power stations etc. Basically, this means privatisation pushes up the price as the sellers of these commodities knows that if one business is not willing to pay a certain price, another company probably will. Privatisation has therefore not really improved competition on the retail side, which is one of the apparent advantages according to people like David Camerron, it has simply increased competition on the wholesale side. Instead of Russia only being able to sell to one national business in any particular country, which would create more stability in this market, the Russians know there are many different buyers within each country where privatisation is rife, such as in the U.K. Therefore claims by various politicians that privatisation is a more efficient way of supplying our power are completely without foundation.
BORROWING
Companies in a good position to lever money out of their customers, for example in the power industry tend to get into major debt. This is because the banks know that we all need heat and electricty, and therefore know that the companies are likely to be able to increase their prices to recover money to pay off loans and other costs associated with the debt such as interest payments. Therefore the businesesses can easily get money from banks to buy other assets including other companies, or simply get a mortgage simply to pay off existing debt ! However, the banks enthusiasm to lend to these businesses can bring major difficulties to these companies. However, a temporary solution could be to encourage competing companies to also get into debt. This strangely enough would create temporary stability as competing companies would be in the same situation. This would be quite easy if you were to tell the executives of these companies that the debt could fund a nice pay rise as well as some new assets such as company cars ! However, this would be to the customers cost as they will be paying the usual costs of running the business as well as some un-necessary costs associated with debt. This is likely to result in many customers not being able to fuel their homes. If people are going to die as a result of the needs to feed bankers bonuses and the life style of the executives of these companies, those people can expect that the majority of the voting public are going to want to see a change in the way our vital sevices are provided. .......................Many of these companies are in debt and they have been run badly, on the finance side of the business at least, due to banking and various types of inefficient investment. That is investment that creates un-sustainable demands on a business. There is a possibility that some of these 'business people' who I really have to correctly refer to as landlords of the services mentioned (No offence to landlords intended, but they are their to syphon profits from these businesses whilst doing little to earn it, just like landlords), could find themselves being upstaged by operators who could run these services, with much lower costs. Due to a much more responsible attitude to finance. Electricity companies, gas companies, water companies, health companies could be run at much lower costs if it wasn't for demands associated with interest and returns on investment generation, along with leverage from banks. In short, they would have to be run in the way a nationally run business would be run.
....Before you say that privately opereated businesses perform better than national run businesses, well you may have an argument if I didn't know better. It's true that many National businesses may appear to have struggled as compared to private businesses when you judge them buy surplus cash or profits There are a number of reasons for this..........
The first is that ,the companies didn't need to make a profit.
Prices charged to customers were based on the costs of providing the service. To charge much more than the actual cost would have been greed. Yet politicians defending privatisation will use this as there ace whenever privatisation of industries comes under scrutiny. They will always bring up the profits the new privatised businesses acheive in comparison to the lack of profit or surplus cash from pre-privatisation.........The businesses were not trying to make a profit.........Hence prices did not keep rising..............They employed more people, and those people were not treated like slaves, doing the work of would be redundant staff.
Second...... Loyalty or responsibiliy to the customer.
National companies have employed more people than their private counterparts. Afterall the services that are being provided are for the people and you would not want any of those people to be left without heating, water, electricity etc. As a national company, if some body was being left without any of these services , then as a provider, you would not be doing your job. So the priority of these industries was to provide a service to the people. And that is all the people.
Today things are different. These private businesses are now controlled by people who directly or in-directly have investments in them. Whatever form is financing these business, they are all affectively in debt to any one who has shares in them or to the private equity company that may own it, along with the banks who hand the debt to private equity companies to buy them. (This is un-related to any extra debt which the company may have which may be used to buy assets, or use for running costs.)
Debt to investers, share holders, private equity managers, banks (Private equity companies constantly borrow money and then re-finance before the previous debt is paid off. Therefore if a company is owned by private equity, it will constantly be in debt ! This makes the banks a kind of share holder in a lot of these utility companies.)
The responsibility to investors, share holders, private equity companies, pension funds and banks means that supplying a service to all the people is no longer a priority. The customer is secondary to all of these investors.
To acheive returns on investments and to pay off debt to banks, these companies are run at a minimum cost as far as staff are concerned. National companies would have more staff. But the companies were nationally owned, and a few extra staff would have been no major problem. The people paying for them know that they, or family members need jobs.
So may be private investment can make a business reduce the costs to the public. But, this has nothing to do with private investment or the way executives run these companies when privatised. The same kind of measures could have been adopted if there was a need to do so by the government, whilst they were in control.
If national run companies were expensive to run, then much of this wasted money would be down to the government departments not giving them enough attention. Also some near retirement people were probably employed along with disabled people. The privatised businesses are less likely to employ these people, as they will be looking to acheive something closer to 100 % efficiency from their wages budget. (This is not to say that people with disabilities are less able to do the job, but they are less likely to take on a person if there was any doubt) In fact being of age or having a disability are not the only characteristics which may cost you your job if a business is intent on cutting costs. Just being British could become a disadvantage as many investment incentivised companies actively seek foreign workers. The foreign workers accept lower wages due to the extra value their wages have when sent back to their home country. This is a situation that many british potential workers living in a country where homes are targeted by investors putting an un-realistic pressure on prices, and costs of living have difficulty competing with.
GOVERNMENTS DISTANCED FROM THEIR RESPONSIBILITIES BY P0RIVATISATION..........................
THE FINANCIAL WORLD INFLUENCING THE WRONG KIND OF GOVERNMENT
CANDIDATES...................................
THE MEDIA & PRESS MIS-LEADING THE PUBLIC ON THE PROS & CONS OF PRIVATISATION AND INVESTMENT IN BUSINESSES......................................
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