Bad Trackers
I’ve seen some pretty shoddy data work in my time, but End Fuel Poverty Coalition’s ‘Energy firm “profits” tracker’ (quotations are my own) really takes the biscuit. EFPC do admirable work in campaigning on behalf of those stuck in homes that are falling apart and on behalf of impoverished families, but the use of these statistics is a joke.
What are EFPC trying to achieve? Well - by pointing to the “profits” (we will come onto this) of energy providers and distributors, they seek to portray the government as permitting profiteering to occur at the expense of a population struggling with high energy bills. However, the way these figures are gathered is nothing short of misinformation.
What’s wrong with these stats? When figures are presented as profits, we should assume that they are net profits. This means that we take a business’ total revenue and subtract its total costs, in whatever form (taxes, depreciation of capital, legal costs, salaries, paying interest etc).
What we do not mean is the pre-tax profits, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation), or adjusted earnings. Why? Firstly, these are not what the vast majority of people (and economists) consider to be profits. And, because standardised accounting practices are vitally important if we are going to be responsible commentators on public policy and finances. Excluding taxes, of which the headline rate for oil and gas companies is 78%, is likewise irresponsible as it clouds the high cost passed onto consumers when purchasing energy.
We should also be concerned about the mix of companies presented as “the energy sector” in this tracker. It comprises global oil and gas producers, such as BP, Iberdrola, and Equinor, alongside distributors (ie, companies which do not make energy), such as Octopus, the National Grid (which cannot independently set prices), and Ovo. This is distortive - akin to comparing oranges to lemons. Sure they’re both citrus fruits, but they’re consumed in different contexts and used in different ways, just like energy distributors and energy producers.
EFPC can and should do better - the companies tracked all present post-tax profits in their books. The author could likewise acknowledge the different accounting practices on the worksheet. Sure, the number would not be as big and flashy, but it’d be better than what’s on offer.
