Ofgem said British Gas had paid £10m into a trust for vulnerable customers to settle a fierce row over pricing.
The donation is almost level with the record £10.5m fine Scottish & Southern Energy paid in April for “prolonged and extensive” mis-selling on the doorsteps of homes across the country.
British Gas was expected to announce its “donation” at the end of last week but it only came to light when sources contacted The Daily Telegraph on Monday morning.
The regulator claimed that between 2006 and 2011, British Gas failed to “round down” the calorific value, a charge that covers the heat or thermal energy in the gas a customer uses.
British Gas, the UK’s biggest supplier, used four decimal points, when Ofgem asks companies to use just one.
It’s hard to fathom. In March 2013, the UK, Europe’s largest gas consuming nation, was reportedly just “six hours from running out” of natural gas. With North Sea gas production falling and gas imports hitting a record high during the fifth coldest spring on record, the country’s dependence on overseas supplies is growing steadily. All of which has re-focused attention on the coalition’s dithering over the UK’s potential “new North Sea” of shale gas.
Along with increasing dependence on expensive Qatari LNG (which got the UK out of the fix it was in during March) and Russian and Norwegian imports, the UK government has just announced a prospective deal to import Azerbaijani gas. If UK industry and domestic consumers were hoping for an early cut in gas prices – already twice that being paid in the United States – it seems they can forget it. At the root of the foot-dragging is a Department of Energy and Climate Change (DECC) headed by yet another green Lib Dem zealot Ed Davey. Davey is patently more concerned with theories about climate than he is with hard economic facts about energy. While George Osborne’s Budget ostensibly set up the Office of Unconventional Oil and Gas, allegedly to “co-ordinate” matters for potential shale developers, the plain reality is that the DECC has put a whole bunch of environmental obstacles in the way of a nascent shale industry.
Albeit the process of fracking (shale fracturing) has a 60-year heritage with not a single drinking water aquifer being polluted and with associated tremors equivocating to the impact of jumping off a ladder, thus far the DECC has imposed an 18-month moratorium while constantly playing down the prospects for UK shale extraction. The DECC has made no effort to help developers navigate the complexity of licensing laws, and there is no sign of George Osborne’s promised tax breaks.
A new analysis of government and industry figures shows that wind turbine owners received £1.2billion in the form of a consumer subsidy, paid by a supplement on electricity bills last year. They employed 12,000 people, to produce an effective £100,000 subsidy on each job.
The disclosure is potentially embarrassing for the wind industry, which claims it is an economically dynamic sector that creates jobs. It was described by critics as proof the sector was not economically viable, with one calling it evidence of “soft jobs” that depended on the taxpayer.
The subsidy was disclosed in a new analysis of official figures, which showed that:
• The level of support from subsidies in some cases is so high that jobs are effectively supported to the extent of £1.3million each;
• In Scotland, which has 203 onshore wind farms — more than anywhere else in the UK — just 2,235 people are directly employed to work on them despite an annual subsidy of £344million. That works out at £154,000 per job;
EDF and the consumer group Which? are calling for suppliers to offer a national unit rate for electricity and gas for each tariff, scrapping regional variation in prices and standing charges.
EDF said the move to “petrol forecourt-style pricing” would mean “consumers would be left in no doubt as to which suppliers were offering the best deals”.
But other major energy suppliers came out against EDF’s proposal, warning it could cost the majority of users £100 extra and could benefit second home owners at the expense of vulnerable families.
Ofgem has already pushed forward reforms, backed by ministers, to try to simplify the energy market by limiting the number of tariffs a supplier can offer to four, each consisting of a standing charge and a unit rate. Previously suppliers had often used two-tier rates.
Ofgem said it had already looked at the single unit price option but it was “not as simple as it sounds”.
British households forked out a massive £1.2billion in subsidies to wind farm operators last year – a sector that creates 12,000 jobs for the economy.
That means every job in the industry is effectively costing £100,000 a year in handouts from inflated domestic energy bills, according to a report today.
The figures in the Sunday Telegraph are yet another blow to the beleaguered wind industry, which already faces increasingly fierce opposition from residents in coastal areas ripe for hosting the technology.
The Sunday Telegraph reveals how many ”green jobs’’ the wind-power industry really generates in exchange for its generous subsidies. The figures show that for 12 months until February 2013, a little over £1.2 billion was paid out to wind farms through a consumer subsidy financed by a supplement on electricity bills. During that period, the industry employed just 12,000 people, which means that each wind-farm job cost consumers £100,000 – an astonishing figure.
Of course, we all want to preserve the environment and, in an ideal world, we would invest in energy production that is as clean as possible. But before pouring money into any potential power source we need to discuss honestly its costs, its potential to create jobs and its efficiency. Our story shows that the claims of the green lobby that wind farms will generate abundant energy and economic growth are not consistent with the facts.
Regarding costs, the £1.2 billion figure is merely a starting point. According to the Renewable Energy Foundation, the subsidy is likely to rise to £6 billion by 2020 if the Government is to meet its target of providing for 15 per cent of the country’s needs with renewable energy. Finding space to build the wind farms has created a veritable racket – landowners can expect to receive payments worth an average £40,000 a year for each large, three-megawatt turbine built on their land.
And what is the benefit of all this expense? In terms of jobs, disappointingly little. Greater Gabbard, an offshore wind farm, employs 100 people at its headquarters in Lowestoft, Suffolk. Divide Greater Gabbard’s subsidy of £129 million by 100, and each job is worth an incredible £1.29 million. The spend might be more justifiable if wind were an efficient and abundant energy source – but it simply is not. Its output fluctuates wildly depending on the amount of wind available. This week, our thousands of wind turbines managed to generate an impressive 12 per cent of our total energy production. But during our last cold, windless winter – when electricity demand was at its greatest – that fell to lows of 0.1 per cent.
The outgoing chief executive of one of the UK’s biggest energy firms, SSE, was paid more than £2.60 million last year.
Ian Marchant, received the huge salary despite the firm being given a record find of £10.5 million by the regulator Ofgem for lying to potential new customers over the savings they could make by selecting certain energy tariffs from SSE.
In the aftermath, Mr Marchant refused to resign and it emerged that he was in line for a £15 million payoff if he waited until the summer.
SSE’s annual report revealed that Mr Marchant received £1.45 million in 2011. This year he received a basic salary of £870,000, an increase of £30,000. He also received shares worth more than £1 million from SSE’s long-term bonus plan on top of a pension worth £680,000.
The details of the long-term share incentive bonus, which makes up most of the increase, is that Mr Marchant received 51 per cent of the maximum that could be received under the Performance Share Plan for 2010-13. The increase is explained by the fact there was no comparable payout for the period 2009 – 2012.
As a result of the Ofgem decision, SSE reduced the other part of the bonus scheme, the annual incentive payment, which would have meant that executives qualified for 68 per cent of the maximum that could have been achieved, down to a maximum of 38 per cent.
Ian Marchant waived that part of his pay, whilst his deputy and likely successor, Alistair Phillips-Davies saw his annual bonus rise from £136,000 in 2011 to £210,000 in 2012.
When David Cameron chose to put global measures to halt cross-border tax avoidance at the top of tomorrow’s G8 agenda, instead of thinking just of Google and Starbucks he should perhaps have been concentrating on a scandal much nearer home – the peculiar game now being played by much of Britain’s largely foreign-owned water industry.
Two events last week lifted part of the veil on this lucrative racket. First was an extraordinary article in the business pages of The Daily Telegraph by Jonson Cox, chairman of Ofwat, the water-industry regulator, which recognised that the industry’s “excessive profits” and tax-avoidance schemes, with water charges rising by up to 11 per cent a year, were “morally questionable in a vital public service”. Then came the annual report of Thames, our largest water company, showing that, on profits of £550 million, it had paid no corporation tax at all, while giving its chief executive more than £1 million. Thames insists that its tax is only deferred, not avoided, because it invested £1billion on capital projects, although its critics point out that this did not include mending leaks, for which it has a notoriously poor record.
This is far from untypical of an industry now averaging profits of 30 per cent a year, and much of which in recent years has been bought up by an array of mysterious private owners registered in overseas tax havens. One firm, Northumbrian, for instance, is indirectly owned by a Chinese businessman said to be the ninth-richest person in the world, whose holding company is registered in Bermuda. Others are owned by financial interests based in Singapore, Malaysia, Canada and across the world. Four of their CEOs earn £1 million or more a year. Yet, despite their colossal profits, many firms contrive to pay little or no tax.
Expect to see more big names from the oil industry, such as Shell, ExxonMobil and Statoil, moving into the British shale sector now that one of their competitors – Centrica – has taken the plunge. The international companies have always taken a keen interest in the UK fracking scene, despite endless statements from their chief executives that there are better prospects in China and elsewhere.
There is some speculation this weekend that the reason Centrica paid a fairly toppy price for the stake in the Bowland Shale licence from Cuadrilla Resources was because it faced competition from Shell and others.
It is not so much the geological uncertainty that made big oil hesitate in the past, but the fear of reputational damage. And as one of the industry players told the Observer: “That all changes now because Centrica has elected to become the lightning rod for the industry.”
Indeed it will. Green groups opposed to fracking because of the chemicals used and because they believe more gas use means more carbon emissions have already condemned Centrica. A couple of small earthquakes in the Blackpool region that helped to trigger an 18-month drilling moratorium have heightened public concerns. Fracking remains banned in France, Bulgaria and some other countries.
In fact it was always likely that the British Gas parent group would be first out of the blocks, not least because it has the largest retail supply business in this country.
Equally, if anyone is going to have the inside track on what government is thinking about the future taxation structure planned for a shale gas regime, it is going to be homegrown Sam Laidlaw, chief executive of Centrica, rather than say Peter Voser, the boss of Shell, who spends much more time in The Hague than London.
Laidlaw is constantly in and out of Whitehall. Until recently he was part of David Cameron’s Business Advisory Group, while Centrica, as one of the UK’s few, and by far the biggest, British-owned power suppliers, stands most to gain from changes in UK energy policy.
Helmut Engelbrecht said that he was disappointed to see a country that had made a commitment to nuclear power in the 1950s fail to have developed a skilled industry of its own.
“It’s just unfortunate that countries who have had the best experience, like the UK, are relying on foreign technology,” said Mr Engelbrecht, a German national.
“I find that a pity. OK, in my country they have made a political decision not to pursue it. But Britain has had this good track record of safe and reliable operation. Why are they just giving in to American or French solutions instead of doing their own thing?”
Mr Engelbrecht, 60, said that when he first developed his own interest in technology and science, “nuclear was the place to go”. But “despite doing an excellent job in winning public opinion round”, Britain now found itself reliant on the likes of France’s EDF to build the next generation of nuclear plants.
Plans for the £14bn Hinkley Point C plant in Somerset, the first reactor for a generation, remain in doubt. EDF and the Government are deadlocked in negotiations over the “strike price” – the amount that consumers will pay for electricity from the plant for up to 40 years.