Will the lights go out in London?

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Exploring the ploys of Centrica

We have all heard the discussions about the “fiscal cliff” and seen its effects on our stocks but how about the threat to our energy resources?  According to the BBC, power shortage risks could occur as early as 2015.

“The unprecedented challenges facing Britain’s energy industry… to attract the investment to deliver secure, sustainable and affordable energy supplies for consumers, still remain,” said Ofgem chief executive Alistair Buchanan in an interview with the BBC.

If the threat to England’s energy is so real and is to occur soon, a drive for investment should have begun long ago. Meanwhile, consumers are paying the price.

“Energy is still on most minds because the cost of heating our homes and businesses has doubled over the past eight years and the theory is it could double again in the next decade,” says the BBC in a video produced in April.

In November 2012, British Gas owner Centrica received criticism as well as a drop in stock price for its 6% raise of energy costs.

Nine months later, Centrica warns and anticipates costs will rise once more this winter.

“We will keep prices as low as we can for as long as we can,” says finance director Nick Luff.  “If prices do have to go up, we will delay it for as long as possible.”

Tom Lyon, energy expert for Uswitch.com explains, “We would urge suppliers to reduce the pressure on consumers by guaranteeing that they won’t hike prices this winter. Last winter, almost seven in ten households (69%) went without heating at some point to keep their energy costs down.”

The question is how is Centrica’s stock rising in spite of all this evidence? The answer is tactical distraction.

According to the BBC, “British Gas has said it is planning to offer free power on Saturdays to some of its customers.”

“The idea is to encourage them to use more of their electricity at the weekend when there is less demand from businesses,” says John Moylan, the BBC’s industry correspondent.

In other words, Centrica is aware of the problem and the expected criticism to come.

Energy Minister Michael Fallon warns, “There have very been big increases in bills over the last couple of winters, some of that is driven by international price increases but yes all the major comp do have to show some restraint and make sure these increases aren’t too large.”

Free power Saturdays, an action that does not apply to all British Gas customers, seems to be a way to appease consumers for prices that are inevitably on the rise come this winter.

For the betterment of energy efficiencies and our needs, it is time to lessen the power of Centrica and invest our money elsewhere.  Perhaps it is time we research other energy options in order to better prepare and avoid an energy crisis.

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