Matt Allwright puts your energy questions to Scottish Power
Over the series Watchdog viewers have been encouraged to send in their questions for the bosses of the 'big six' energy providers in Britain.
Published 6 November 2013:
In our final interview Matt Allwright puts your questions to Neil Clitheroe, CEO of energy retail and generation, Scottish Power.
MATT ALLWRIGHT: Okay Neil. 'Energy companies were privatised to create competition and ultimately give customers the opportunity to choose the cheapest company. Please explain why there is no competition?' (Catriona Howard-Smith, Saddleworth)
NEIL CLITHEROE: Every energy company is impacted by the costs of wholesale costs, the costs of distribution costs, the cost of green levies. So we’re all facing those same input costs while competing. And that’s something that occurs in every industry.
MATT ALLWRIGHT: Yeah but the reality is that you control a lot of that chain. You are generators. You operate networks. You’re part of distribution. You’re also retail. So you’re not just the head of the dog, you’re the tail as well.
NEIL CLITHEROE: I think if you dig deeper – dig deeper into what the bill’s made up of, and actually understand the drivers for that. So, for example the networks costs that you talked about earlier – 21% of the bill’s made up of that. That is…
MATT ALLWRIGHT: But hold on, you run the network.
NEIL CLITHEROE: We do and that’s a fully regulated return based on the amount we invest by Ofgem. We don’t set the revenue.
MATT ALLWRIGHT: But you make huge profits from your network.
NEIL CLITHEROE: And we invest a huge amount as well. So in our networks business we’re investing close to a Billion pounds a year. We’re making profits of 600 million pounds a year.
MATT ALLWRIGHT: Why are you secretive about your dealings on the wholesale market? One of your smaller competitors last week said he doesn’t recognise the wholesale market prices that you routinely hide behind. Why is that?
NEIL CLITHEROE: We’ve nothing to hide. We publish our what are called segmental accounts, which are basically Ofgem regulated accounts. In Scottish Power, this year we put all of it in. So we put our generation business in, we put our renewables business in, we put our retail business in and we put our wholesale business in. So it’s there as a line very clear for everyone to see.
And we give as much information as we can on that side. However, do I need to work hard to actually explain what the gas and electricity wholesale prices are for everybody in the country? Yes we do. And I do take that as a point, and we’ve tried to do that. You know I tried to do it at the Select Committee last week when I walked through line by line why we’d moved our prices, and actually went right into the depth of that. And that’s something that I just need to continue to do.
MATT ALLWRIGHT: Once your price rises have been incorporated the average Scottish Power dual fuel bill will be as you know £1,424 which is 5.5% of average earnings. 'How much did you earn last year, including your bonus?' (Jan Draper, North Yorkshire)
NEIL CLITHEROE: Well I think in terms of what I earn that’s between myself and our HR director.
MATT ALLWRIGHT: There is a part of your income that’s linked to profitability. Why not give up that part of your bonus? And actually say, what I would do is I’ll change it, and I’ll have a bonus based on the number of people who are in fuel poverty on my watch.
NEIL CLITHEROE: Well, you know, effectively that’s, that’s what I have. I have it’s not… directly related to that but like any company, you know, we get bonuses, we get remuneration based on a set of criteria, and one of them is customer satisfaction that we had, and one of them is the profitability.
MATT ALLWRIGHT: You’re receiving money based on profits. And yet you have to make a decision about profit, which affects people’s wellbeing. And while that’s there I would suggest you’re possibly one of the worst people in the country to be setting the price.
NEIL CLITHEROE: If I set the price wrong then people will look at Scottish Power and say ‘that’s not a company that I want to join, as a customer. That’s not a company I want to be associated with.'
MATT ALLWRIGHT: 'If you had to choose between keeping your loved one warm and comfortable or feeding them good quality, home cooked meals, which one would you choose?' Heat or eat? (Elissa McDonald, Cambridgeshire)
NEIL CLITHEROE: Nobody should have to make that choice.
MATT ALLWRIGHT: Somebody clearly is. Somebody clearly is and then asking you personally ‘what would you do?’
NEIL CLITHEROE: I’d say to that customer ‘please, please, please call us. Please call us because we can help.
We can get people onto cheaper tariffs. We offer debt payment breaks. You know, is there more than I can do to help these people?’ Yeah right there is.
MATT ALLWRIGHT: You could give up your bonus. You could give up that profitability-related part of your bonus, and then people would really believe you.
NEIL CLITHEROE: Well, it’s… you know I, I know I come back to this but I earn, you know. Customer Satisfaction. Fuel poverty. You know, my employees. The 5,000 people who work for me. What’s their satisfaction like? I get paid on all these things. And I, our company makes money to invest. And that’s what we do with it.
MATT ALLWRIGHT: 'What are you doing to bring down the cost of domestic energy to ensure fuel poverty becomes a thing of the past?' (Scott Jacobs-Lange, Bristol)
Can you give me a date when that’s going to start happening? Because of your investments.
NEIL CLITHEROE: It’s a good question actually. I think it’s difficult to give that date, because you’re looking at these three things of affordable bills, decarbonising the economy and making sure that we keep the lights on. We power the nation, so you’re balancing these three things all the time. The Department of Energy have been very clear in terms of the investment the UK needs and the investment we need to bring through to try and meet these three things.
Now how will that feed through to customers’ bills is very difficult. Very difficult to say. Very difficult to say.