Socialist Worker

As Bulb goes bust, turn out the lights on privatised energy market

by Charlie Kimber
Issue No. 2783

Privatisation of Britain’s energy system led to a market dominated by the “Big Six” companies

Privatisation of Britain’s energy system led to a market dominated by the “Big Six” companies (Pic: Flickr/Gerard Stolk)

The Tory government is handing out £1.7 billion to maintain the privatised electricity and gas system after the collapse of supplier Bulb this week.

Bulb is the biggest energy supplier to collapse in Britain in nearly 20 years—and the 23rd since the beginning of August.

Then on Thursday two more firms, Orbit and Entice, also went under. 

The energy firms are now going through a profit squeeze that is driving some of them to the wall.

But this comes after decades of a bonanza for the bosses. Privatisation of Britain’s energy system under Tory governments in the late 1980s and early 1990s led to a market dominated by the “Big Six” companies.

A report by the Common Wealth think tank says that in the “last ten years, the Big Six have paid out almost £23 billion in dividends.” This amounts to “six times their tax bill for the period”.

Overall, the Big Six have paid out the equivalent of 82 percent of their pre-tax profit in dividends over the past five years. Their effective tax rate has been just 13 percent in the same period. This is well below the current statutory corporate tax rate of 19 percent.

Common Wealth’s analysis shows that the Big Six have paid out almost £23 billion in dividends the last ten years, nearly six times their tax bill for the period.

Most of these dividends did not go to small investors. The two major shareholders of SSE are US asset managers BlackRock and Invesco. Scottish Power is 100 percent owned by Iberdrola. It’s a Spanish energy electric utility, which counts BlackRock and the Qatari Investment Authority as its major shareholders.

Capitalism will not solve energy squeeze
Capitalism will not solve energy squeeze
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The major shareholders of Centrica, British Gas’s parent company, include British asset management firms Schroders and Abrdn and the US Bank of New York Mellon Corporation.

Other capitalists saw the fat profits available and poured into the market, often offering special deals to attract new customers. Before the recent cull there were 50 suppliers, all trying to grab their share of the loot.

Then the days of easy profits disappeared as wholesale prices rose and a price cap meant companies could not instantly fleece customers.

Bulb, which was Britain’s seventh-biggest supplier with 1.6 million customers, admitted this week that it was being placed into “special administration”.  Instead of renationalising the whole sector, the government will make available £1.7 billion in working capital so that Bulb’s customers continue to receive electricity and gas through to April.

The only formal opposition to the scheme comes from another set of capitalists. Sequoia Economic Infrastructure Income Fund, which has lent about £55 million to Bulb, is contesting the decision because it fears other creditors will be paid before it is.

At the end of the process, Bulb will be sold to another greedy capitalist, restructured or its customers transferred to an alternative provider.

Profits are privatised, losses are nationalised.

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