The chairman of Centrica, the parent company of British Gas has resigned, and on his way out he’s called for an end to the “Punch and Judy” style debate surrounding the energy market and the general disdain toward to the Big Six providers. After his resignation, Sir Roger Carr defended the industry and said that customer confidence was being damaged by political rhetoric.
This is a sentiment that has been echoed by a number of companies in the Big Six, and also by a number of Lib Dems calling for direct action instead of the “political football” that has been taking place surround the issues of energy price rises. While Carr be seen as biased having just stepped down from chairing on the Big Six, his statements do carry some weight according to sources at Liberum Capital, a financial analyst firm. They estimate the damage to the energy market stands at around a stock price fall of between 7 and 11 billion pounds. Carr said, “Political rhetoric has inflamed consumer passion, fed suspicion, discouraged investment and damaged investor confidence. All energy companies have been accused of profiteering, collaborating with competitors, manipulating costs to disguise profits, and caring little for their customers. These charges are false. Any attempt to cap prices would threaten the “financial fabric” of energy companies. They have short-term voter attraction, but lay a pathway to long-term under-investment.”
Eon were the 6th and final company of the Big Six to announce their price increases last week which were around 3.7%, much lower than that of it’s rivals but the company said that the price could have been higher if the Government hadn’t alleviated the pressure of green levies.
Carr’s warning to the Government that price caps could unravel the ‘financial fabric’ of energy companies is a sentiment met with support and disdain in equal measure. While wholesale energy prices will no doubt increase over the next few years, it seems almost detrimental to enforce price caps on the industry who are already operating within fairly tight profit margins around 5%. Your average homeowner, of course, will want to see prices reduced as much as possible in the short term. This is why Labour’s proposal to freeze energy prices for the next 20 months carried so much popular favour with voters. But what we need as a country is a more balanced outlook. Lower energy prices now are no doubt good, but how will saving £50 on your annual bill affect the energy situation in the UK in 10 years time? Food for thought certainly.
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