Income-seekers warned over utilities' 'horrific' balance sheets

"Utilities are too highly regulated"

This is a typical statement from an investor who doesn't care about service to the general public. From a consumers point of view Utilities aren't regulated enough. The public are always getting stuffed with large price rises when the weather gets cold and they need to use more electricity/gas. Hundreds of different tariffs where is it not possible to compare one with the other. Low investment in infrastructure adding to the risk the UK not being able to generate enough electricity to meet its needs.

This IS an investment site Jonathan. Investors make money from whatever is the situation. They are neither politicians nor regulators.

Artist39

Are you sure this is an investment site? I thought it was low-brow comedy.

Artist39

Yes, and it shows the low morals of fund managers and investors.

Jonathan - So Adam Smith was wrong then?

Zaydac

I'm sure like us, he was wrong about many things.

From the Victoian web:

."..Smith was not an apologist for the capitalist class. One of his least repeated statements warned that a group of capitalists rarely gather together under one roof without the talk turning towards collusion against the public. For this reason Smith firmly favored anti-monopoly laws. Furthermore, his support of competition remained contingent on the fact that it encouraged economic growth, something Smith felt would benefit all members of society. He proposed that as long as markets grew, an increased demand for labor would prevent owners from exploiting their workers. But he failed to consider that the process of urbanization would wreak havoc on the labor market, and his optimism about growth seemingly ignored the possibility that capitalists might disproportionately consume the benefits of expansion. The inability of growth to substantially increase general living conditions became the primary concern of Smith's intellectual descendants. Thinkers such as Ricardo and Malthus postulated that overpopulation, low wages, and starvation would always continue to plague society. Economics, which started with Smith's guarded optimism, quickly became known as "the dismal science" (David Barber, Adam Smith)."

Yes it seems Smith was wrong. Complicated isn't it! We are only slightly intelligent apes after all!

Never invest in things where politicians get involved, utilities are a prime example. Basically they are not "supposed" to make a profit from tax payers so get vilified when they do and then get heavily regulated. The recent case of BG shows this, they were hammered for making a profit when gas prices went up yet no one mentions that BG makes profits from its activities all around the world and not just the UK.

Think you are confusing BG group, which is mainly a gas and oil explorer and distributer with Centrica which sells gas and electricity under the British gas banner! I think this misconception is common and isn't helped by the company names!

Risk and reward. My own income portfolio is up nearly 28% October to October (total return), which I find amazing. I agree with the proposition that this sector is perhaps too regulated to have any certainty of on-going sustainability of returns. However, I'll hold onto my NG and SSE for the time being - the only really attractive alternative at the moment being cash (crystalising some capital gains), which however doesn't generate much income in a S&S ISA or SIPP.

I often think that were a utility company to keep its prices lower than those of other competitor companies that more consumers would join it and, even though its prices were lower than those of other companies, its profits would grow - as would its reputation.

The company would still need to make profits, but lower profits initially would lead to greater further on through economies of scale. And from what I have read, existing power companies are in the habit of making very substantial profits. Of course, government is not helping matters by imposing higher prices through 'green taxes' on utility bills. It itself is responsible for consumers having to pay higher energy bills - principally because of wind turbines and solar energy

panels - that benefit only those who have these on their roofs and not the general consumer who finds his/her energy bill inflated giving no benefit whatever to him/her.

Yep - regarding feed in tarfiifs for PV panels and wind turbines...it's definitely ' the poor subsidising the rich'..... best thing the Labour Govt did ! So thank you to Labour Govt and poor widow with her single bar electric fire for my 15% p.a. tax-free g'teed return for 25 years !!

I forgot to add that the return is RPI linked ... magic !!

I can't believe that a future government won't eventually renege on the FIT deals, 25 years is a long time. I bet the government has a couple of civil servants working on it already.

That's the beauty of it ..... doesn't cost the Govt (taxpayer) a penny ! all paid by bill payers !

DGL So why did the gov't close down the various schemes when they got too popular?

They haven't closed them down ! They just reduced the FIT rate so not as good as they were ! Political danger - 'cos the press would have picked up the little old lady subsidising the rich bastard down the road.... - now 10-12 % p.a. still index-linked and tax-free (PV) - now 20 years...... and for farmers with planning permission and good wind they can get 'obscene' returns from a chunky wind turbine ( 20% + p.a.)

Exactly, political pressure is the issue which made them reduce the FITs early. There was report a few days ago about the amount of money paid to wind turbine operators to stop them generating on windy days etc and yesterday the politicians were talking about it (enough is enough etc). I can understand that you are happy to receive a good return on your investment but my point is that long term the odds are stacked against you and remember that there are no votes in supporting the few people that benefit from excessive FITs.

I do wish that Lance and his chums continue to make wild statements that can only depress the Nat Grid share price and allow me to buy more at a cheaper rate. Looking at the price curve they managed to get a slight blip but not enough to make it a worthwhile speculation. So next time Lance make the story much better and invent heaps more frightening fiction ie 132 Kv lines are eroding with the recent weather and will all need replacing soon or the recent sunspot activity will interfere with control systems unless there is a huge investment and so forth.

Lesley Holmes

If the government is paying private individuals for surplus electricity generated surely that will only occur in very sunny weather? Isn't that when there is less demand for electricity? Surely electricity cannot be stored?

Lesley Holmes

If the government is paying private individuals for surplus electricity generated surely that will only occur in very sunny weather? Isn't that when there is less demand for electricity? Surely electricity cannot be stored?

Spot on Richard.

A comparison of Mr Lance's fund ROI since launch in September 2010 (approx -5%) to the performance of SSE, UU, NG, PNN, SVT (between +25 & +45%) says it all!! Mr Lance's launch price of 100GBP per share 12 months ago is now worth 94.67GBP. Perhaps the fact that his fund contains no utilities at all (except 13% telecoms) reveals his real reason for talking them down!. If he can get the price to fall, he can take a position and improve his fund's performance!

A comparison of Mr Lance's fund ROI since launch in September 2010 (approx -5%) to the performance of SSE, UU, NG, PNN, SVT (between +25 & +45%) says it all!! Mr Lance's launch price of 100GBP per share 12 months ago is now worth 94.67GBP. Perhaps the fact that his fund contains no utilities at all (except 13% telecoms) reveals his real reason for talking them down!. If he can get the price to fall, he can take a position and improve his fund's performance!

A comparison of Mr Lance's fund ROI since launch in September 2010 (approx -5%) to the performance of SSE, UU, NG, PNN, SVT (between +25 & +45%) says it all!! Mr Lance's launch price of 100GBP per share 12 months ago is now worth 94.67GBP. Perhaps the fact that his fund contains no utilities at all (except 13% telecoms) reveals his real reason for talking them down!. If he can get the price to fall, he can take a position and improve his fund's performance!

That's very interesting Ian. I had my suspicions but no evidence. So many thanks for the information