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BS: Energy Company Profits
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BS: Energy Company Profits |
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Subject: BS: Energy Company Profits From: SPB-Cooperator Date: 29 Jul 13 - 09:32 AM On the news this morning there were discussions about energy charges to consumers, and the effectiveness of the industry watchdogs. One argument that energy companies use is that they need to make profits for future investments. Surely, there needs to be a much more consistent, and transparent definition of profits: (1) What were the divisible profits - those paid to shareholders, not just from the energy supply companies, but also from those companies along the supply chain, eg generation companies, etc. From this what is the aggregate percentage of household energy bills paid that go to shareholders? (2) To what extent to energy companies that have a wider portfolio of services charge a disproportionate level of overhead charges to realise greater divisible profits than they would otherwise achieve in these other parts of their business that come under less scrutiny. |
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Subject: RE: BS: Energy Company Profits From: Q (Frank Staplin) Date: 29 Jul 13 - 01:45 PM Because I am tired of the bickering below the line, I have sworn off posting, but SPB asks good questions. They are not easily answered, but reasonable assessments may be made. I will not attempt to give answers, but SPB, you may arrive at "reasonable" answers with a little study (or search discussions of energy company business-government interactions for pre-digested conclusions). I would add more questions- -To what extent do commodities markets control prices and profits? Do the swings affect the relative profit and how much? -All income and expense is recorded somewhere. Are government tax codes fair or are there dispensations that allow profits to be under-taxed? Remember that global companies may be taxed (and have expenses)in more than one country, and is there any agreement on sharing taxes? (Short answer, no). I will not attempt to give answers to the complex questions raised by SPB, but the annual report issued by each company is a good place to start. Reading them is not easy, but many facts are there. These reports must satisfy stockholders, both large and small. They are studied carefully by investment company analysts. The reports detail income and expenses, money held for exploration and research, money owing for services from others, capital items and all the transactions of the company. It really takes an accountant or analyst to grasp the whole, but you are after the profit portion only. Most energy companies like to clear 10-12 percent above all expenses and predicted future expenses of developments and expansion (these are discussed and detailed). Much of the profit is given as dividends to stockholders. The amount/percentage is discussed. They want a reasonable return on their investment. This applies to publically-held companies such as Exxon-Mobil, but not to private concerns, who are difficult to read. The ten percent figure is considered a reasonable level for most companies. Recently, new giants such as Apple and others in digital-communications fields have posted profits much larger than this moderate rate. Government taxation laws have not kept up with these developments. These remarks are unsatisfactory but I hope they give some direction towards finding an answer. |
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Subject: RE: BS: Energy Company Profits From: Bettynh Date: 30 Jul 13 - 12:59 PM This was on the news today and seems relevant to this thread: JP Morgan Accused Of Manipulating US Energy Markets Using 8 Different Trading Strategies LINETTE LOPEZ JUL. 29, 2013, 6:07 PM 5,760 38 The Federal Energy Regulating Commission (FERC) has accused JP Morgan of using manipulative bidding strategies in U.S. energy markets, Bloomberg reports. The bank's physical energy business is housed within JP Morgan Ventures Energy Corporation. Back in May, the New York Times reported that regulators warned the bank that it was being investigated for allegedly manipulating markets in Michigan and California. According to the report, it was specifically looking into the work of commodities legend Blythe Masters. From NYT: The regulatory document cites her supposed "knowledge and approval of schemes" carried out by a group of energy traders in Houston. The agency's investigators claimed that Ms. Masters had "falsely" denied under oath her awareness of the problems and said that JPMorgan had made "scores of false and misleading statements and material omissions" to authorities, the document shows. Since then FERC ordered that UK bank Barclays and some of its traders pay a $453 million fine for similar violations. Around the same time, JP Morgan was negotiating a $410 million settlement with FERC. To add more drama to the story, in September the Fed will decide if it will continue to allow Wall Street banks to trade physical commodities at all. JP Morgan started entering the business aggressively after the financial crisis, and last week announced that it was considering making its exit as the risks may have become too great. This accusation may make that decision a little easier. Check out FERC's detailing of the allegations below: UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION STAFF NOTICE OF ALLEGED VIOLATIONS (July 29, 2013) Take notice that in a nonpublic formal investigation pursuant to 18 C.F.R. Part 1b, the staff of the Office of Enforcement of the Federal Energy Regulatory Commission has preliminarily determined that JP Morgan Ventures Energy Corporation (JPMVEC) violated the Commission's Prohibition of Electric Energy Market Manipulation, 18 C.F.R. § 1c.2 (2012) by engaging in eight manipulative bidding strategies. Staff alleges that between September 2010 and June 2011, JPMVEC engaged in five manipulative bidding strategies designed to improperly obtain payments at above-market rates from the California Independent System Operator (CAISO): • submission of Day Ahead energy bids of -$30/MWh (the bid floor) that falsely appeared economic to the CAISO system, but in fact led to payments to JPMVEC of tens of millions of dollars at rates far above market prices when JPMVEC's bidding strategy was fully implemented. • submission of energy self-schedules every third hour to obtain large Day Ahead awards, combined with submission of high-priced energy bids in the intervening hours, to lead the CAISO system to pay JPMVEC at its high bid prices for ramping energy in the latter hours. • self-scheduling the ancillary service Regulation Down while also submitting high-priced energy bids for the same hours, leading the CAISO system to pay JPMVEC millions of dollars at above-market rates for the energy needed to support the Regulation Down self-schedule. • bidding at -$30/MWh in the final hours of Day 1, which led to large Day Ahead awards in those hours, and then bidding at $999/MWh for the opening hours of Day 2, which led the CAISO system to pay JPMVEC millions of dollars for ramping energy at $999/MWh between midnight and 2 a.m. Market prices averaged around $12/MWh during these hours of low demand. • obtaining Day Ahead awards for ancillary services, while making energy bids that made it impossible to fulfill those awards, leading the CAISO system to pay JPMVEC its bid price of $999/MWh to exceptionally dispatch JPMVEC's plants. Staff alleges that between October 2010 and May 2011, JPMVEC engaged in three manipulative strategies aimed at improperly obtaining excessive payments from the Midwest Independent System Operator (MISO): • making Day Ahead bids of -$50/MWh or -$60/MWh in the hours before midnight on Day 1, with a Minimum Run Time of four hours, to obtain a Day Ahead award in the final hours of Day 1, followed by $1,000/MWh energy bids and a (false) 20-hour Minimum Run Time on Day 2, leading the MISO system to pay JPMVEC $1,000/MWh for 14 hours on Day 2; • submission of low bids (around $10/MWh) in odd-numbered hours and high bids (up to $178/MWh) in even-numbered hours, leading the MISO system to pay JPMVEC for ramping energy at above-market prices in the latter hours; and • submission of -$15/MWh Day Ahead bids to get Day Ahead awards, followed by Real Time bids aimed at buying back those awards, to obtain unnecessary Day Ahead Market Assurance Payments from MISO. Staff further alleges that JPMVEC violated Section 39.2.5.c of the MISO tariff by increasing the Minimum Run Time of the Kinder Jackson unit from the plant's actual Minimum Run Time of four hours to 20 hours on multiple trade dates in October and November 2010. This Notice does not confer a right on third parties to intervene in the investigation or any other right with respect to the investigation. Kimberly D. Bose, Secretary. from this site |
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Subject: RE: BS: Energy Company Profits From: selby Date: 30 Jul 13 - 01:05 PM As Electricity cannot be stored all the power producers offer their product for sale to the National Grid, they work out what the demand is and buy accordingly. The traders for the power companies are trying to work out the best price that NG will accept, there are some riders in all this I think it is Nuclear First then renewables then others. As a power producer you have your price at which you make a profit and work the market the best you can, taking into account the weather, the state of other power producers plant (boiler tube leaks, turbine problems etc).If it is to windy wind turbines cannot run equally no wind. There is also frequency control and peak loading (television programmes finishing usually) As a trader if you can get it right there are riches for your company if you get it wrong your company comes off the bars. In the middle of all this there are contracts to big users who theoretically get cheap electric. It is a very very complex system. Keith |
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Subject: RE: BS: Energy Company Profits From: SPB-Cooperator Date: 30 Jul 13 - 02:48 PM I think that homes in on my point - consumers who have ever increasing charges do not have clear information about the aggregate divisible (as opposed to retained) profits, ie what percentgage of what consumers pay is for the actual cost of energy generating and energy retailing. Also if all the energy retailers do is purchase energy and do nothing else but sell it on, then it appears that deregulation is of no benefit to the consumer as all the retailers do is add their profit onto what is already available. What occurs to me is that the more people along the supply chain want their dividend, the more people will be in fuel poverty, particularly those who have to make decisions through being on benefits or minimum wage have to make choices about whther to heat or eat. And those who can't afford to run their freezer pay more for food, etc etc etc |
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Subject: RE: BS: Energy Company Profits From: Q (Frank Staplin) Date: 30 Jul 13 - 04:07 PM Selby, a concise answer to the complex electrical distribution. The National grid becomes an international grid in part, since Canada has links to the grid. See The Integrated North American Transmission Grid map at www.electricity.ca in the pdf. (enter International Grid Map in Search and scroll to 2009 article, p. 8. Donèt forget that local users all have State and Provincial taxes, and some cities levy tax. These taxes are a large part of the cost. New York pays 19 cents per kwh compared to U.S. average of 13 cents. |
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Subject: RE: BS: Energy Company Profits From: Bobert Date: 30 Jul 13 - 04:50 PM The problem we have is that we really don't have the "free market" that the corporate big boys brag about... We have monopolies and when you have monopolies you are going to get screwed... Especially when they convince their puppets in Congress (Parliament) that they are being "over-regulated"... Over-regulated??? What a joke... But up the ballgame and we'll see energy prices come down... B~ |
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Subject: RE: BS: Energy Company Profits From: gnu Date: 30 Jul 13 - 06:42 PM This is what I absolutely love about "below the line" at Mudcat - the gems of education one occasionally finds. Reinforces my belief that Max does the right thing by providing the BS section for our benefit. |
