Way back when, US companies had a neat trick to boost profits, known as "playing the float". Here's an example. If you were a Maine resident waiting for a settlement from your insurance company, you would receive a cheque drawn on a bank account in Hawaii or the Pacific Northwest. Even after you'd presented the cheque to your local bank, you wouldn't actually see the money in your account until the cheque had wended its way all the way back across the continent (by train) to be cleared. If you lived in LA, your cheque would be drawn on somewhere like Manchester, New Hampshire.
The jet age, and now the internet age, have put the crimp on such shenanigans, though I believe that relatively remote spots like the Dakotas still see a disproportionate amount of clearing activity. After all, even an extra day's use of the funds is worth something to a large company.
I can report that the game of "playing the float" is also alive and well in the UK. I'm one of several hundred thousand domestic gas customers entitled to a refund from our former gas supplier -- no names, but its initials are npower. (For those lucky enough to be unfamiliar with the story, npower overcharged its customers for gas back in 2007 and was careless enough to get caught out). About a month ago, I got a letter from the company advising me that my refund would be £28 or so. I had to return the letter with certain added details so that they could verify that I really was entitled to the refund, which is fair enough.
So then they credit my account, the same one they enthusiastically debited each month back in 2007, with the refund, right? Wrong! OK, so they send me a cheque, then? Wrong! This week I received a letter with a couple of barcodes on it. I had to present this to my local Post Office, together with two pieces of ID, in order to receive the refund in cash.
So this morning that's what I did, spending a pleasant 25 minutes lining up behind people sending Christmas parcels and such before getting up to the counter. There the hapless clerk had to type the 18 digits of my driving licence number into her terminal, verify my other piece of ID, scan the barcodes, stamp the letter from npower and count me out my cash.
The clerk said she thought the reason npower was using this astoundingly primitive method of providing the refunds was that some of the older customers might not have bank accounts. That might be true, but I'd bet that even more of them live in places where the local Post Office has closed. And in any case, non-possession of a bank account never seemed to stop npower from getting its scruffy mitts on the money in the first place.
It's all blatantly a float play. How many people will walk into a Post Office clutching their npower letter, see the pre-Christmas queues and walk right back out, then forget to try again until its too late? (You have six months, according to the letter). How many will be unable to get to a Post Office at all because their local branch has closed? It all serves as a reminder of why I switched from npower in the first place.
Not that I'm spoiled for decent choices in the UK's "competitive" domestic gas market. One of the suppliers has just announced a 9.4% increase in its gas prices, and the rest are certain to follow very soon. This comes against the background of a global gas supply "bubble", which is expected to last anything from three years (according to Qatar, the world's largest LNG exporter) to a decade (according to respected independent analysts). In the very short term the UK is awash with gas because LNG cargoes destined for France were diverted here because of the recent strikes.
The company raising its prices, Scottish and Southern, claims to have lost £58 million supplying domestic customers in the past year, yet mysteriously it managed to eke out a profit of £1.25 billion in its overall business, virtually all of which is gas-related. I smell another refund in the offing -- maybe I should get in the queue at the Post Office right away.
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