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I almost fainted when I received my last electricity bill. "How much?" I inquired, as I dimmed the lights another notch, "...there must be some horrible mistake!" Thing is, as a family we've done everything possible to cut household energy use. We've switched suppliers, used timer switches where possible to capitalise on off-peak energy rates, and turned off electrical appliances completely when they are not in use. We've even replaced tungsten-filament light bulbs with low-energy ones, which means that everyone has to walk with outstretched arms to avoid bumping into walls and doors. Problem is oil prices have jumped dramatically and supplies of cheap domestic gas are running low. The upshot is higher energy bills. What's more, when you factor in the UK Government's plans to reduce greenhouse gas emissions to 80% of 1990 levels by 2010, then energy costs may rise even higher. Some say the best solution to our woes is nuclear power, and I tend to agree. However, the mere mention of nuclear power can spark unpleasant memories of the Chernobyl disaster, which happened twenty years ago today. And for those of us of a slightly older vintage, it can conjure up nasty memories of the Three Mile Island incident seven years earlier. But nuclear power has come a long way since then, which is why I'm warming to shares in British Energy (LSE: BGY). British Energy is the UK's largest electricity generator. It owns and runs eight nuclear power stations in the UK with a combined capacity of almost 10,000 megawatts. Additionally, it owns a coal-fired power station that can generate around another 2,000 megawatts. Together the nine generators provide about a sixth of Britain's electricity requirements. However, British Energy's history is somewhat blemished. It was first privatised in 1996, but encountered financial problems in 2002 following a slump in wholesale energy prices. After two years of wrangling among shareholders, bondholders and the UK Government, the company was effectively re-nationalised, but only to return to the stock market a year later. Today, British Energy is a profitable outfit. And thanks to higher wholesale electricity prices, it is generating a respectable return for shareholders. In February, the company said it was achieving prices of £29/MWh in the first nine months of the financial year compared to £25/MWh at the halfway stage. Couple this with stable uranium prices -- its main source of raw materials -- and you get a healthy operating margin of some 25% or £7.5/MWh. Interestingly, generating costs at British Energy are relatively insensitive to operational and maintenance costs if the effect of fuel cost is excluded. What this means is that the principal variable cost is the uranium fuel itself. Even still, the price of uranium has less of an impact on generating costs than expected. For instance, a doubling of uranium prices will only increase generating costs by 10%. And according to experts, deposits of low-cost uranium reserves should last for another 50 years or more. Currently, British Energy is valued at an undemanding 11 times earnings. Additionally, a dividend of 42.7p has been pencilled in for 2007, which suggests a yield of 5.9%. Its shares stand at 725p. Of course, all this depends on continuing high wholesale electricity prices, which I suspect may prevail for some time. If I'm right then British Energy should continue to deliver high profits. If I'm wrong, then profits may get squeezed, but at least I'll be able to ratchet up the dimmer switch a notch! > Time To Switch & Save Energy | How To Cut Your Energy Bills
