IT WAS the day after the biggest storm to hit Britain in 25 years. As more than 50,000 people were into their second day without electricity, thanks to cables being down, eight high-ranking men from the various energy companies filed into the Thatcher Room at Portcullis House, a jelly mould of a building across the road from the Houses of Parliament in Westminster, to answer the burning question: how can you justify your price increases?
First up before the select committee of 11 MPs were Tony Cocker, chief executive officer of E.ON; William Morris, managing director of SSE, and Guy Johnson, external affairs director of RWE npower. These are three of the ‘big six’ utility companies that, together, have 98 per cent of the market. And then there was Stephen Fitzpatrick, managing director of the small independent Ovo Energy, which has, over four years, grabbed half a per cent.
I wrote in my notes that Cocker looked like a maths genius, and that was before I discovered he was a maths genius. Or at least, studied maths at Oxford. Cocker looked cross for the whole two hours, just like a maths teacher who can’t possibly fathom how you can’t understand the simplest equation.
Morris only got into electricity and gas last year, a fact he kept reminding the committee of. Before that he had worked in the altogether fluffier world of hotels. By the end of his segment of the select committee, when Morris realised just how much people dislike and mistrust energy companies, he looked like he wished he’d stayed in his old job.
Johnson has been in utilities for six years so he was better versed in body-swerving tricky answers. He was one of the first to speak. Later, one of the MPs, Dr Phillip Lee, with more than a whiff of Alastair Campbell about him, got as close as anyone to asking what so many suspect: did the big six operate a cartel, although he put it thus: “There is a suspicion that you are a chorus line acting in concert.”
And indeed, there were times when the men being questioned seemed to look at each other, as if to say “Who’s going to take this one?” I can imagine they decided that Johnson, with his legal brain, was going to answer the more tricky questions. However, note to you Mr Johnson: next time you’re up in front of a committee accused of being greedy, don’t wear a big gold watch.
The star of the show was former banker (from one hated industry to another) Fitzpatrick, founder of Ovo. He had no issue whatsoever in ratting on the men sitting next to him. “I can’t explain any of these price rises,” he said. “Like some of the committee members, I have been somewhat confused looking at the explanations for some of the rises.”
Two years ago, Management Today warned that EDF and E.ON should be worried about Fitzpatrick. Indeed, as an insider, he was best placed to understand the hideous complexities of the energy business. He also made sure he got loads of publicity for his business, denouncing the others as “the best filibusters in the business… you will never track where the money has gone”.
Let me tell you now that I waited nearly two hours for a light bulb moment of clarity. None came.
Morris insisted he understood how much everyone disliked and distrusted the energy companies because last year that was him. He wanted the costs off customers’ bills and going into taxation and stressed that if his company didn’t make a profit, how could he keep anyone in jobs?
Johnson and Cocker blamed eco levies (which were only introduced in April); Cocker talked about reinvestment and taxes, with some frustration. And frowning. Everybody used the word transparent several times, as if saying it enough times would make everything transparent. It didn’t.
It was no better for the second half which saw Neil Clitheroe, CEO of retail and generation at Scottish Power and a veteran in the energy business, take to the long table alongside former rose-grower Ian Peters, managing director of energy at British Gas; Martin Lawrence, 30 years in the business and MD of energy sourcing and customer supply at EDF energy, and Ramsay Dunning, group general manager of Co-op Energy.
MP Albert Owen tried to get to the bottom of executive bonuses: how could they be justified when ordinary people were struggling to pay their bills? Of course, there was no justification forthcoming, just a lot of slithering.
Later, after a lot of talk about green levies, Dunning, who clearly spends very little of his wages on a haircut, said what everyone thinks – which is that the energy industry looks like an oligopoly. Just before part two was over, Ian Peters confirmed that British Gas made £1.08 billion in pre-tax profits. He stressed “pre-tax”.
Ofgem was called to account for a while but that had to reconvene for another day. And there we had it. A complex issue, dissected and laid bare? Nope. The big six know that their business is obtuse and complicated and that’s the way they want to keep it.
However, the best line of the day went to maths genius Cocker who said something so profound and revelatory, I’m not sure he meant it: “You can get different answers by managing them differently”. And there, right there, we have it. ·