O/T New British passports

[KerrAvon]

The energy watchdog recomended a margin of 1.25% for energy companies to operate on .

Typically energy companies are working on a return of 7% for metering and billing .

The CMA inquiry concluded that collectively UK households are paying on average £1.4bn too much for our energy , nearer £2bn last year .

Doesn't appear to be that efficient to me .

When you say the 'energy watchdog' I assume you mean OFGEM? I don't think they have expressed a view about what the profit margin should be. I suspect that would fall outside their brief and be improper.

Roger Witcomb, who lead the Competition and Markets Authority investigation into the energy market suggested that an appropriate post-tax margin would be 1.25%, but I'm not clear upon whether that it the view of the CMA or his personal view as it doesn't feature in the CMA report.

I don't recognise the 7% figure you are quoting. According to the Guardian, the average pre-tax margin in 2016 was 4.48%. When tax is paid, that figure will be significantly lower, but still well above that given by Witcomb: https://www.theguardian.com/money/20...evel-on-record

The utility companies disagree with Witcomb and say that he has failed to take account of the risk that they are carrying due to the unpredictable nature of fluctuations in the world energy market. To a degree, I think they have a point; if they were operating on the 1.25% margin and, say, war broke out between the Saudis and Iran causing world energy prices to soar, they would risk doing a Carillion if they then found themselves sitting on large number of unprofitable contracts. They exaggerate though, as you would expect.

You conflate two issues with your final comment. The profit margins being achieved by the suppliers do not suggest inefficiencies in their operations. Arguably, they suggest quite the reverse.

I think the point you are seeking to make is that the domestic energy market is not working as it should. I agree - it is clearly an imperfect market. In my view, that is because it is, in reality, two markets. There is the competitive market for those customers who regularly change providers (I change every 12 to 18 months and always taken out the new contract through a cashback website, from which I have taken pay-outs of up to 10% of my annual bill) and there is the uncompetitive market for those millions of customers who behave irrationally – sitting with one provider on a standard variable rate (SVR). Because the first part of the market is competitive, providers inevitably use the SVR part of the market to provide a subsidy to it.

The £1.4/2 billion figures that you cite are the CMAs estimate of the savings that customers could make if the utilities market was a perfect market.

Capping the SVR, which is what is coming, will have the effect of reducing the extent to which the competitive part of the market can be subsided (i.e. – prices will probably rise for those customers who are used to switching) and could, in consequence, actually be said to be anti-competitive, but I think it is probably necessary until the economically irrational customers can be persuaded to start shopping around.

Of course, nationalising the utilities would have the effect of eliminating any competition. Switching won’t be possible and customers would be presented with a ‘here’s the price – like it or lump it’ situation.

[yorkshireborn]

The way you phrased the post tends one to believe it was their doing
If they had won why would the price shoot up again as their bid would have been lower than Gemalto's would it not
So why did the price shoot up recently pray tell ?

youve lost as per the norm with your posts the UK company bid 120,000,000 more than the french/dutch company so how do you get their bid would be less.
if i knew that id tell but your pretty good at guessing things maybe you know.