The funniest questions Twitter asked of British Gas boss today


by Sunny Hundal    
1:50 pm - October 17th 2013

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Earlier today, British Gas tweeted this

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Ruh roh. Can anyone see a train crash coming?

Thankfully, Twitter did not disappoint.

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


Euthanasia by any other name, freeze or starve it cuts the OAP budget. Population reduced, sorted. Advert “were committed to keeping Britain warmer this winter” British gas looking after your world

As fun as all this is, the truth is that British Gas’ return on equity/profit margins haven’t changed dramatically for years (and indeed the trend is lower, not higher).

It’s easy to blame the nasty energy companies, but the truth is not as exciting as the blood-lust suggests.

@2 a mere £356 million for the first half of this year.

Profits up 23% in 2012
Profits fell in 2011 but Centrica still made £1.3 billion profit
Profits up 24% in 2010
Profits up 58% in 2009

Gas bills have almost doubled since 2000

If energy companies aren’t making enough profit they should quit.

No shame at all
At least Dick Turpin wore a mask

Is this all to pay you greedy lot a rise again

At least you will all get a huge Christmas bonus

Just be polite.

My energy supplier, Ecotricity, is dropping its prices as well as offering a full green tariff.

Miraculous, considering how bad the Big 6 seem to be finding things.

@ Schmidt

EBITDA profit margin for Centrica:

2005 14.41%
2006 11.81%
2007 15.39%
2008 12.52%
2009 12.39%
2010 14.88%
2011 14.50%
2012 15.45%

Doesn’t look to me like their profit margins have doubled.

Profits in nominal cash terms have grown, but that is because their turnover has grown. In % terms, their profit margins have been pretty static for a long time.

Gas bills have indeed almost doubled since 2000. That doesn’t tell me anything about the gas companies profit margins though.

As we know, wholesale gas prices have shot up – the spot price of gas has roughly tripled since 2000. We also know taxes have shot up on energy companies – including green taxes Ed Milliband put in place.

So while it is nice and convienient to blame nasty energy companies, the reality is that they are charging a bigger profit margin than they have been for the last decade – and other factors are pushing the price of energy up.

10. Robin Levett

@Tyler #9:

Over the period from 2005-2013, BG dividends per share have increased from 3.81p to 16.67p. In the same period share prices have risen from c470p to c1200p. Shareholders seem to be doing nicely out of the increased profits…

@Tyler

Re your claim that spot prices have trebled since 2000: it isn’t true and you know it. See this:

http://www.eia.gov/dnav/ng/hist/rngwhhdd.htm

Briefly hitting an inflated price 3x higher isn’t the same thing as long-term trebling. And once the spot price falls after the spike, those savings aren’t passed on to the customer.

@Tyler, sorry, nor am I buying your argument that BG are behaving reasonably.

Their margin may have been flat in percentage terms over the past decade, but that does not prove they have been acting fairly.

If they are passing all the wholesale price increases onto the customer and are making the same margin % then they are making more profits without adding any value.

For example, my gas bill in 2003 was £500. Let’s say £300 was gas costs, £75 (15%) was margin and the remainder (£125) was BG operating costs. Today my gas bill is £1200. Gas costs have trebled to £900 but the running costs are presumably unchanged at £125 (why should it cost them more to handle pricier wholesale gas?) so now they are making a margin of £175 from me. They have added no value, their margin is actually down by a fraction but yet they have more than doubled the profit they are making from me.

13. Paul peter Smith

What’s actually happening is the utility company’s sticking two fingers up to Miliband and anyone else who wants to talk about legislating against them. Legislation happens on Westminster time, British Gas and chums can screw us in real time.

Your dear old relatives and generations prior remember the days before central heating, they are generally better equipt to deal with the cold weather more than youy think. Its the modern generation who are guilty of wandering round the house that is toasted to 30+ degrees, then are shocked to recieve a gas bill that they cannot afford. A reasearch statistic actually states that Gas and Electric is 5th and 6th in order of priority on household bills. 1st & 2nd are SKY and mobile!! Need I say more.

2. Tyler

Bullshit

@ Robin Levett

You’ve missed the point. Totally. RoE/profit margin % hasn’t changed, but as the business has grown the nominal profits have grown. Which means the nominal dividend payment has grown. Shareholders have indeed done well, but not because the company is charging customers more….but because they have more customers.

You’ll also notice that the adjusted earnings per share (EPS) hasn’t moved by more than a couple of pennies for yeas.

@ Sam

You are looking as US gas prices there – which have gone nowhere over the period thanks to fracking. UK NBP prices have roughly tripled.

http://www.arcticgas.gov/asian-lng-buyers-push-back-high-prices

@ Matt

You have oversimplified here. You are ignoring producer price inflation, and the inceasing costs of maintaining and renewing their infrastructure. 3% PPI over 10 years (roughly correct) works out at a roughly 35% increase in heir own running costs over those 10 years.

Another way to look at is turnover increase vs profit increase. Looking through the data you’ll see they are roughly 1:1, suggesting that the growth in profit is predominantly from a growth in turnover….so more customers basically.

People also seem to forget the amount of tax they have to pay: EBITDA might be running around 15% but after they have paid all their other costs (interest and taxes) they are really only returning a profit margin of around 5.5%. Which, for a company, is pretty low.

The only way forward is to fight back & switch, it is VERY easy & is the only way these big companies will realise that they can NOT take advantage of us any longer.
I am with Utility Warehouse an amazing company that offers a double the difference price promise to beat British gas, your regional Electricity supplier HOWEVER it is not simply about getting the cheapest products to start with, its about all the other money saving tools ie a cashback card & much more xx We have to fight back

18. Robin Levett

@Tyler #16:

You’ve missed the point. Totally. RoE/profit margin % hasn’t changed, but as the business has grown the nominal profits have grown. Which means the nominal dividend payment has grown. Shareholders have indeed done well, but not because the company is charging customers more….but because they have more customers.

You’ll also notice that the adjusted earnings per share (EPS) hasn’t moved by more than a couple of pennies for yeas.

If EPS has stayed static while dividends per share have quadrupled, the shareholders are doing very well indeed; but unless you are aware of significant share issues that I have missed out on, it is unlikely that it has.

And if BG isn’t making more money because it’s charging customers more; where did it find another 3 GBs to sell gas to?

On wholesale gas prices; why did you rely on LNG, which even now is only 50% of UK gas usage, after significant expansion recently?

Table 2.1 from this Note in the Commons Library suggests that since the very lowest price in 2005 wholesale gas prices have barely doubled; indeed a case could be made (on precisely the same misleading basis as “global temperatures haven’t risen since 1998″) that prices have actually come down since 2005.

http://www.parliament.uk/briefing-papers/sn04153.pdf

And the lowest price in 2005 was the bottom of the market (adjusted for inflation) over the last few decades; but you knew that…

Robin Levitt – you seem to be getting your companies confused. The company “BG” whose share price you are quoting is nothing to do with Centrica or the “British Gas” brand being talked about.

20. Polish Jenny

The giant profits are a small return given the vast amount of capital invested. This means that monopolies and big corporations cannot afford to maintain their capital, pay dividends and fat cat salaries and also pay tax. One of them has to go and its not the maintenance of their capital, the dividends or the fat cat salaries. Monopoly capitalism cannot even afford its own state except stripped to the bare bones of special bodies of armed me with prisons. Welfare, public spending, greening the capital infrastructure, forget it. From now on its food banks and cave dwelling for an increasing portion of the 99%.

@ Robin Levett

As Graham so correctly points out, BG is not British gas/Centrica. Ecpi fail.

Tell me, if EBITDA and post tax + interest margins are roughly static (which they are for Centrica), and profit is increasing fairly linearly in relation to turnover, how exactly are Centrica profiteering at the expense of the consumer? The data suggests that their prices are rising almost directly in line with their costs.

Now let’s have a look at that report you link to:

I’m not sure where they get that chart of gas prices, but it seems to be a blended chart. The NBP gas price, which is the main traded price for UK gas, has almost trippled (not inflation adjusted) in the time period (see my link above).

Helpfully the article you provide also has information on gas prices. On page 14 they have (indexed) prices….and you’ll see that from 2000 to 2010 inflation adjusted prices doubled.

They also say:

“This also shows that wholesale costs were the main driver of price rises; however the range
of policy-related costs pressures is estimated to have been responsible for 7% of the gas
price rise and 28% of the electricity price rise during this period.”

Going on to say:

“DECC has estimated that current energy and climate change policies added around £33
(5%) to a typical domestic gas bill in 2013″

and:

“Their combined estimate is that with
current policies average dual fuel bills will increase by around 18% in real terms between
2010 and 2020 and that 60% of the increase will be policy related.”

as well as:

“There are a number of reasons for longer term increase in wholesale prices. According to Ofgem the two main causes of the increased price of domestic gas are high oil prices and declining UK gas supplies.29 The gas interconnector with Europe means that the UK is part of the European gas market. Continental gas prices are contractually linked to oil prices so the sharp increase in oil prices have fed through to wholesale gas prices in Europe and the UK. The UK became a net importer of gas in 2004 for the first time in recent history. This means suppliers generally have to pay more for such gas.”

They also give a nice table of the 2004-2011 price increase in gas. The 121% increase in prices is broken down to 66% increase in wholesale prices, 20% for transmission and metering, 7% energy efficiency funding and 5% VAT. We can then compare this to the table they give on page 15 of average annual gas bills….in 2004 the average home bill was 403. In 2011 it was 760. yet a 121% price increase would give us a bill of 891 if it was all passed on to the consumer….

As I say, the evidence shows that Centrica at least hasn’t been ripping off the consumer, as much as it makes nice politics to attack the nasty corporate energy companies.

22. the a&e charge nurse

The winter ‘eat or heat’ conundrum seems to come round quicker each year?

My supplier automatically issues one of these for any customer over the age of 65 with a background of hospital admission for hypothermia
http://static.neatorama.com/images/2009-03/kyecrow-crochet-jumper-coat.jpg

British Gas?
Gitish Bras!

Anyone see the post for Social Media Manager @ BG yesterday?

http://www.chrissmith.org.uk

25. Richard Allen

British gas say that they need to make a healthy profit in order to invest in future infrastructure. But surely if they are realising high profits, it’s because they are NOT investing enough of all that income. (It wouldn’t be profit if they were investing it, would it?) Shareholders need to have a dose of reality and see ‘their’ profits invested in real infrastructure improvements.

I’d never defend their pricing policy, but I do have some weird sympathy for BG over their Twitter mishap. All the gags about their unsophisticated understanding of social media. There’s an element of cool kids at school mocking the nerdy kid for trying to fit in. Did anyone ask BG any proper questions?

9. Tyler

It doesn’t do to criticise someone else’s approximation as inaccurate, with an inaccurate approximation of your own:

“their profit margins have been pretty static for a long time.”

Their margins have not been static at all. I have run your figures through on the spreadsheet. There is a clear trend upwards. The 2 highest years have been within the last 3 years. Last year is the highest of all. Only one year in the first 4 years of data match those of the last 3 years. We have seen the margins have increased by about 25% of their 2009 value. Clearly not “a doubling”, but equally not “pretty static”.

Can you either reference your figures, or provide me with earlier figures so that we can see longer term trends?

The wider consequence of course, is that for too many of British Gas’s houehold customers, their domestic ‘profit margins’ have continued to be around 0% or worse.

While the posts here have been interesting, I found the ‘Twatter’ posts that so entertained Sunny to be the offerings of adolescent-minded ‘try-hards’. ‘Twatter’ is hardly a forum for reasoned political debate. Grow up, Sunny.

28. TONE
While the posts here have been interesting, I found the ‘Twatter’ posts that so entertained Sunny to be the offerings of adolescent-minded ‘try-hards’.

….hmmm… mirror needed perhaps?

@ David Hodd

Indeed I can. Data available on the web or Bloomberg.

Turnover:

2013 25616
2012 23942
2011 22824
2010 22423
2009 21963
2008 20872
2007 16272
2006 16403
2005 13448
2004 11361

EBITDA (nominal/margin %):

2013 4037/15.76
2012 3698/15.45
2011 3310/14.50
2010 3336/14.88
2009 2721/12.39
2008 2613/12.52
2007 2505/15.39
2006 1937/11.81
2005 1938/14.41
2004 1819/16.01

Net Income Margin post tax and interest charges (nominal/margin %)

2013 1102/4.30
2012 1273/5.32
2011 442/1.94
2010 1880/8.38
2009 650/2.96
2008 46/0.22
2007 1298/7.98
2006 -197/-1.20
2005 968/7.20
2004 638/5.62

These aren’t the numbers of a company dramatically increasing it’s profit margins at the expense of consumers but a company that is increasing the number of customers it has.

31. Radical Rodent

Very witty answers to a not very humorous situation; it is good to see sarcasm and irony have not died out.

Now, can anyone please offer an acceptable definition of the term CAGW?

Articles about jokes on twitter?

Liberal Conspiracy is definitely on the slide.

DH @ 29:

“….hmmm… mirror needed perhaps?”

Puerile. Even more so than ‘Twatter’.

Oh how i remember the gas and other utilities sell off to some of the greedy stupid public WHERE’S SID.And you thought you would all live happily ever after by playing friends with this disgusting government.Live in greed suffer in greed.

Tyler raises as good point.Profit margins have not increased at all 5% and telecoms market make 20% and the banks even more. Your real enemy here ppl is the UK government. 20% VAT and we still take it. 5% VAT on energy? Why? It should be removed, but with the government push for this, will they hell. Also green taxes enforced by the EU (another great move there) are adding around £100 a year on to UK bills. I say re nationalise the energy industry, remove VAT. Another reason we are having to import practically all our gas now is because the UK government has made it unfeasible for companies to drill for gas there due to preposterous levels of taxation. As I said the REAL enemy is successive UK governments and their Greed.

And now with typo corrections and amendments (sorry):

Tyler raises some very good points. Profit margins in the energy industry have not increased by much at al, it is normally 5% (or 5p in every £1) and the telecoms market generally make around 20% and the banks even more. Your real enemy here people is the UK government. 20% VAT on most of our purchases and we still lie down and take it?! 5% VAT on energy? Why? It should be removed, but will the government push for this? will they hell. Also green taxes enforced by the EU (another great move there … not) are adding around £100 a year on to UK bills. I say re nationalise the energy industry, and remove VAT. Another reason we are having to import practically all our gas now is because the UK government has made it unfeasible for companies to drill for gas in the North Sea due to preposterous levels of taxation. It’s just not economically viable for a business. As I said the REAL enemy is successive UK governments and their Greed.

PS – I had to laugh at John Majors comment today about a “windfall tax” on the energy companies for ‘making too much profit’. Unbelievable! The Tories privatised the energy industry (thanks Maggie)in the first place to promote ‘healthy competition’ and yet when said businesses make a profit they now want to tax it.

Do people honestly think if the energy companies were taxed as a windfall that that money obtained will go back to the general public? Seriously? Will it FCUK ! This government (and successive ones too) are all greedy lecherous scum.

Well said mr happy,refreshing to hear people in the know.Ps dont forget the new nuclear power stations will be be built and basically owned and profited from by foreign builders ie france and china?.And all because our sociapath/psychopathic government hadnt or wanted the diligent forethought to look after britains own interests(all our british nuclear engineers have probably all retired and training ended long ago).

Also dont forget as generalised earlier we the taxpayer are subsidising through our energy bills all the solar powered installs you see around you courtesy of the government forcing energy providers to adopt alternative green(dont mention the co2 taxation and gw con) energy and the providers then passing the charges onto the taxpayer(feed in tariff anyone ,lol).This is just touching the subject there’s too much to add.


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