Dear British Gas,
I think a few points of clarification are needed about the enormous profits you announced yesterday. As a Conservative, it doesn’t bother me that companies are working towards higher profits because that’s what every business in the country is trying to do. However, I’m a little concerned that there isn’t a level playing field, which is why Ofgem have been called in.
My initial reaction to the story yesterday was ‘who cares?’. If your customers think you are making too high a profit, they can leave. If customers of rival companies think you’re making a profit, then can stay put. There are pretty decent levels of competition in the gas and electricity market, so if anyone really wants to take issue with your profit levels then they can choose a different provider. However, Ofgem are going to be looking at whether any price-fixing has been taking place between the major suppliers and whether you and other large companies have been keeping small players out of the market in order to push up your own revenues. Either of these behaviours should be met with extortionate fines if they are found to be true, but of course price-fixing and putting up subtle barriers to entry in markets is always difficult to prove.
Obviously the socialists have gone loopy about your reported profits but I don’t really see where the problem lies. The Government is already supporting those on lower incomes (in theory) when it comes to heating and electricity, but they must obviously look carefully at how recent price hikes affect them. I await the findings of Ofgem’s investigation with interest.
Yours sincerely,
A.Tory
6 responses so far ↓
Madeley // February 22, 2008 at 12:00 pm
I think the heart of the matter is whether or not price fixing is taking place. A free market is only of genuine use to consumers if it is truly free. Recent stories of the major supermarkets engaging in price fixing (of milk, of all things) don’t do anything to reassure that big business is acting appropriately.
Within the free market, it goes without saying that businesses acting like businesses is to be encouraged. By the same token, regulators should be encouraged to do their jobs in order to ensure transparency.
Letters From A Tory // February 22, 2008 at 3:34 pm
A free market must also have no barriers to entry, which is something that several large companies can easily introduce without leaving a paper trail.
And what will happen if the companies are found guilty? Refunds to customers are unlikely to be high on the list of priorities, as government regulators are always happy to pocket a large fine instead.
The Animanachronism // February 22, 2008 at 3:39 pm
There’s also the problem that too few people seem willing to switch suppliers. As you say, in theory consumers should vote with their feet but too few people feel able to do so, despite the plethora of comparison websites et cetera available. Perhaps its the perceived trouble involved, or the belief (whatever the reality) that there is price-fixing.
In any case, the unwillingness of consumers to switch doesn’t help this ‘market’ thingummy that everyone’s so keen on.
Madeley // February 22, 2008 at 4:01 pm
Consumer unwillingness to switch (or apathy, or laziness) is really their own lookout, isn’t it?
Letters From A Tory // February 22, 2008 at 4:34 pm
Couldn’t agree more. I think politicians and commentators underestimate the power of inertia when it comes to consumer behaviour, while rubbish businesses can thrive on it.
Nick // March 26, 2008 at 11:49 am
I didn’t realise until today how much gas and electricity providers making profit annoyed socialists. I have came across a few blogs today that has some raging socialists on it.
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