Industry Insight and Monthly Predictions from uSwitch.com

Geoff Slaughter, Energy Manager at uSwitch.com, predicts:

The gas man cometh (with profits)! For those who were holding out for some good news in August about further price cuts from British Gas, its half-year results announcement will have disappointed (unless a shareholder).

As expected, there were bumper profits (some ?533m from the British Gas supply business) and a firm commitment to putting shareholder value "top of the agenda"*.

But could we expect customers to be allowed to share in the good news then? "Unlikely" said Sam Laidlaw, its Chief Executive, when commenting on the prospect of further price cuts for customers this year.

* Centrica plc interim results for the period ending 30th June 2007 - published 2nd August 2007 Unfortunately, as Britain's largest household supplier (generally accepted as the leader of pricing-moves up and down), British Gas has sent a clear signal to competitors that the price war is over.

All big six suppliers must now be breathing a sigh of relief that they won't have to slice any more fat from their very healthy-looking margins.

The (smart) meter man cometh The future of current gas and electricity meters is now fairly certain - they will one day be heading for a skip (sorry, recycling facility) near you.

After much discussion and a "job-reassessment" it has been decided that meters need to do far more than just provide a measurement of consumption to enable suppliers to issue accurate bills.

In the future, meters will have to provide consumers with information that's easier to understand and will help them lower consumption, carbon emissions and generally become more energy efficient.

Sound good? Well, before anyone can get their sweaty paws on this smarter technology (and we officially pronounce today's meters as relics for the museum), the industry and Government has to decide how this is going to happen.

The newly formed Department for Business, Enterprise and Regulatory Reform (BERR) has this task in hand with a 90-page consultation for interested parties to respond to, from which it promises to publish a summary of comments received "in due course." Watch this space...

Energy News Reviewed 'I'm alright, Jack!' - BG makes almost £3 million a day British Gas' mid-year results clearly spell out what a difference 2 monthsof low wholesale prices can make in turning a business around, allowing British Gas to report its biggest profits this millennium - £533 million - up £676 million year-on-year.

Despite this, the report contains a crystal clear message to consumers: not to expect any further price cuts from the energy giant.

This will be a blow to customers who have been waiting for a further 11% price cut which would reduce their bills by £92, allowing them to benefit from lower wholesale prices too.

Wholesale prices have plummeted by 56% but British Gas, which put its prices up by £299 (36%) between January 2006 and January 2007, has only cut bills by £207 (18%).

Although British Gas' results demonstrate what a money-spinner low wholesale costs have been, the issue is industry-wide and involves all the Big Six suppliers.

There is still ?3 billionoutstanding to households because of inadequate price cuts made by energy suppliers this year.

Further cuts were predicted following the price war earlier this year, but so far they have failed to materialise.

The last price reductions - EDF Energy's 10% cut on standard gas tariffs and ScottishPower's 11% reduction on gas and 5.5% on electricity - were implemented on 15th June.

Ofgem removes 28 day rule Ofgem recently announced that it will be removing the '28 day rule' designed to protect consumers from being locked-in to contracts with suppliers.

The move has come ostensibly to allow suppliers to begin wrapping energy-efficiency measures, such as new boilers, into people's contracts.

These are costly to provide and as such, suppliers will not be willing to run the risk of investing in such schemes if customers could take advantage and then walk away.

Commentators have expressed concerns that any moves to impose longer-term contracts could have an adverse impact on the switching market and that suppliers could also use these as an opportunity to reintroduce exit penalties.

No long-term contracts have been introduced as yet by suppliers.

British Gas playing 'catch up' on green This month, British Gas announced that it is launching two new 'green' products.

The company has been lagging behind its competitors since it pulled its last 'green' product from the market but this announcement sees Britain's largest energy supplier getting back up-to-speed.

However, there is a sting in the tail: an £84* premium on the 'green' dual fuel plan.

Recent uSwitch.com research reveals that 39% of consumers would not be prepared to pay extra for green energy, while 41% would only be prepared to pay up to £50.

This premium may act as a deterrent to many households who will not want to pay more to go green and so will not do much to boost consumer uptake of green energy plans, which currently stands at only 1%.

The market can also expect to see further product innovation following an announcement from SSE on its green product, to be launched later this year.

This will hopefully go some way towards raising consumer awareness of green energy, while Ofgem's work on agreeing firm definitions of green energy with suppliers will become even more critical.

(*) British Gas press release dated 31 July, 2007 (**) Research was conducted amongst a representative sample of 2194 adults by onepoll.com on behalf of uSwitch.com between 15th and 20th March, 2007 Centrica acquires 50% interest in UK's newest wind farm Centrica, the owner of British Gas, has acquired a 50% interest in a Scottish onshore wind farm.

The project in Stirlingshire, which cost Centrica £42 million, took the UK's total wind capacity past 2,000MW for the first time and will produce enough electricity to power the homes of 46,000 British Gas customers.

Centrica expects to become one of the largest investors in offshore wind farms, adding the Braes of Doune project to a portfolio that includes the Glens of Foundland site in Aberdeenshire, the Barrow Offshore Wind development in Cumbria and the Lynn and Inner Dowsing wind farms off the Lincolnshire coast.

Offsetting should be encouraged concludes Parliamentary committee The House of Commons' Environmental Audit Committee published the results of its investigation into voluntary carbon offsets on the 23rd of July, concluding that they have a 'useful role' in reducing carbon emissions and engaging the public and are 'helping to compensate for some of the problems in the compliance market'.

The report claims that public support for offsetting has been 'tainted' by 'a few failed projects' and defends the scheme, which has stirred up a certain level of controversy within the energy sector, stating that "there is little evidence that offsetting encourages polluting behaviour".

Innovative new energy plan needs a 'buyer beware' stamp British Gas has announced an innovative new wholesale market tracker which will allow consumers to peg their energy bills to the wholesale energy market.

It will work in a similar way to a tracker mortgage, where a homeowner can elect to have their mortgage rate pegged to the base rate.

It is the second energy tracker plan to be launched by a supplier this year.

However, the tracker is pegged to British Gas' standard rate, which is currently the fourth most expensive in the market*, plus wholesale energy prices are predicted to be on the way up.

The product will not be suitable for all consumers as energy bills could go up as well as down on a far more frequent basis.

* Based on the bill size for a duel fuel medium user (20500 kWh of gas, 3300 kWh of electricity per year) on a standard plan averaged across all regions.

Scottish and Southern Energy has announced it is to enter the newly deregulated Irish energy market Scottish and Southern Energy has announced that it is launching new ventures in the newly deregulated Irish gas and electricity markets.

Its arrival will inject the first element of competition into the market as it will be able to use the north-south interconnector to import its own electricity.

It also enjoys lower unit costs than local power companies.

SSE expects to start its operations in Ireland in November, focusing first on commercial customers.

It is expected to introduce a service for domestic covers around 18 months later.

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