Give with one hand, take with the other

yes-min

I have to admit it, I love British humor. Back in the 1980s there was a series called “Yes, Minister” and its sequel “Yes, Prime Minister”. It was about a new minister and its crew. The punchline was that the head of administration (Sir Humprey) always outweaseled the minister, but in the end gave the impression the minister was always right. Hence the title.

A couple days ago I had the strong impression that I was caught in one of the episodes…

It all started with an article in Het Nieuswblad [a Belgian newspaper] titled: “Energy invoice decreases with 430 euro”. This is the most important part of it:

Thanks to the ongoing price war in the energy market, an average family that consumes electricity and gas, now pays about 430 per year less. This has been calculated by Minister Johan Vande Lanotte (SP.A) [the Flemish Socialist Party], writes Het Laatste Nieuws [another Belgian newspaper] on Monday.

The minister started an offensive against the ‘excessive’ energy prices in December 2011. This first led to a price freeze, later the oil price became disconnected from the gas and electricity prices. “Now you pay in Flanders about 4 percent less for electricity and 9 percent less for gas,” said Vande Lanotte.

€430 per year less. Hallelujah! Someone give that man a medal! However, like all Sir Humprey-like statements, the truth is a little bit different than portrayed.

When looking for more information, I found the same article with EXACTLY the same wording appeared in all (online versions of) other newspapers, including the reference to Het Laatste Nieuws. For some strange reason I couldn’t find it electronically on the pages of Het Laatste Nieuws. It was only to be found in the opinion section and also there it was a copy/paste of the same wording as in the other papers, including the reference to itself… Mentioned as source was Belga (a Belgian news agency). So it appeared that Belga made the story about the article in Het Laatste Nieuws and other newspapers just copy/pasted it.

Luckily I had the paper version of that day. The article was on the top left of the frontpage and had about the same wording. There was a reference to the second page for more information and … again the same introduction, plus some more info about the number of those switching providers and future plans. So Het Laatste Nieuws copied it from the frontage to the second page, Belga seem to copy/pasted it from their frontpage and other newspapers also just copy/pasted the story. Hey, they sure like repetition!!

The first thing that hit my BS meter was the amount of €430 profit PER year. The paper version mentioned it was counted from April 2012, so this was the first full year. In that sense “per year” is a bit misleading. It would better stated “the last year” or something. “Per year” has the meaning of something is repeating while this was the first time (and probably also the last).

But €430 in somewhat more than one year, that’s still a lot! When I take my energy invoices of electricity and gas, that €430 gain would be more than one third of it. That’s much more than the 4% or even 9% decrease they talk about. Even if one takes an “average” family (in Belgium that seems to be 3,500 kWh electricity and about 23,000 kWh gas) I get a decrease of about €165 in the best scenario, not €430 as told.

This brought me to the next question: how high would the invoice be of someone with €430 profit from a 4% decrease in the electricity part and 9% in the gas part? If I take the same proportion as the invoice of the “average” family (about 30% of the bill for electricity and 70% for gas), it would be about €5,800. Wait a moment, is that guy a student with Al Gore? Or is this maybe the bill of the Minister himself? That is not even close to an average family energy bill (which would be around €2,300/year).

So it depends on the definition of “average” family. According to the wording of the article, it is probably not the average, but the difference due to the price war. Does this means a family that changed provider and came from a provider with the highest tariff and went to the one with the lowest? Or the average that one could save according to price differences? Or the average that was really saved by the consumers over that year?

According to the paper one can still decrease one’s bill by 15% by changing provider! Obviously not if one is already with the cheapest provider. It seems he took another definition here of a family, because this time according to the minister this 15% means only a decrease of €155 to the bill (while 4-9% was €430). I sure am curious about his calculations and all the assumptions he made…

De Standaard made the interesting remark that probably the (lower) market price of august is taken for the calculation, but in real life the provider will also take the (more expensive) winter price into the yearly invoice. So the 430 euro could well be just hot air, totally dependent on the assumptions of the summer price and probably a change to a cheaper provider as a basis.

To be honest: I surely applaud decreasing prices of gas and electricity. I don’t have a problem with bringing good news. We have to give credit where credit is due. But the reporting seems rather distorted.

When looking a bit deeper, this is what the Minister “forgot” to tell us. Sure the price fell beginning 2013, partly due to more competition. Convenient. But when we look back in the past we see the prices suddenly skyrocketed in 2011 and are now coming back to a similar level as before that time.

Why was this? The reason was the OVERsubsidizing of solar panels. The then energy minister (also SP.A) gave huge amount of subsidies to companies and individuals who installed solar panels. The netmanager paniked by the sheer amount of them, they had the obligation to buy those green power certificates at a high price. So the netmanager invoiced that cost to the providers and the providers did the same to the users. People were not happy to pay the costs of the solar panels production (owners of solar panels first received subsidies to buy/install them and afterwards got compensated with green certificates for the production of electricity). Those who didn’t own solar panels had to pay double: for their own electricity and for the certificates given to solar panel owners (who got their electricity dirt cheap). All that for a energy source that is in proportion so small that it is always rounded to zero.

If there was a sane policy on solar panels, that sudden jump in 2011 should not have happen in the first place. It was daylight robbery of Government funds. Some companies even offered to install solar panels for free and people would have the benefit of a lower electricity bill. The only thing they wanted were the green certificates. That’s how lucrative it was. And not only solar power subsidies. Wind power receives huge subsidies. Offshore wind now gains 2/3 of its profit from subsidies and the duration of these subsidies went from 10 years (as imposed by Europe) to a whopping 20 years (this means about €700 million non necessary extra per year for 10 years).

In the meanwhile oversubsidizing (partly) stopped and that made the sellers and installers furious. Those green jobs were dependent on the oversubsidizing and many had to file bankruptcy.

The decoupling of the gas price with oil price is of course a good thing. It made no sense in the first place. Good that we don’t need to pay for a virtual cost anymore. But look at it from the other side: we overpaid our gas many, many, many years.

To summarize: the hand that so generously (seems to) give, also generously took. And also generously overstates its case. Sir Humprey would be proud!

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