Ofgem, the energy regulator called for the ‘Big Six’ energy suppliers to cut their prices following a report of their profit figures released this week. The numbers reveal average profits earned per customer to have risen by a staggering 40% this winter – the highest for five years.
According to Ofgem, British Gas, EDF Energy, nPower, EON, ScottishPower and Scottish & Southern Energy have seen their average profits earned per dual fuel household jump from £75 last November to around £105 this month.
Although this is set to decrease soon, given British Gas’ price cuts and the imminent pricing activity from its rivals, it is the highest amount energy suppliers have earned since 2004. The figures have resulted in more criticism of the energy market, and raised the question why energy suppliers are not passing on cuts in wholesale prices to their customers.
Consumer Focus’ Mike O’Connor said, ‘Householders will no doubt wonder why margins have increased for the fifth quarter in a row, while wholesale costs continue to fall.’ Price comparison website Moneysupermarket.com has reported average annual dual fuel bills to have rocketed from £912 to £1,223 since 2007.
So why are energy suppliers blatantly profiteering, while household energy bills continue to rise?
Ofgem has responded by agreeing all energy suppliers need to remain profitable in order to invest in their infrastructure and renewable energy projects. An estimated £200billion is required by 2020 for future energy supplies and to hit the carbon emissions target.
The good news is Ofgem also recognizes the need to lower gas and electricity bills. Andrew Wright from Ofgem said they, ‘…would also expect recent falls in wholesale energy costs to be passed on to consumers.’
The government is also backing Ofgem by urging suppliers to cut their prices. The Energy and Climate Secretary, Ed Miliband said, ‘Householders facing high winter fuel bills deserve to see the benefits as soon as possible,’ he added, ‘British Gas’s cut was a welcome first move, but we need to see all suppliers passing on the benefits of lower wholesale prices.’
In response to Ofgem’s report, the energy suppliers commissioned their own with the consultants NERA. They disputed Ofgem’s figures, claiming they did not account for other costs associated with energy supply like distribution ad discount tariffs.
NERA’s Graham Shuttlework said, ‘The costs of buying energy only make up around half of a customer’s bill’.
Energy UK, who represent energy suppliers agreed the figures released by Ofgem did not include all the costs faced by energy providers.
There are ways to lower your energy bills. Our article ‘Is now a good time to switch energy supplier?’ covers where and how to find a cheaper tariff online. Our ‘5 cheap ways of saving energy and money’ will also help you cut the amount you pay.
Sources:
http://uk.reuters.com/article/idUKLDE61H0TS20100222?sp=true
http://business.timesonline.co.uk/tol/business/industry_sectors/utilities/article7036992.ece
http://www.ft.com/cms/s/0/9bfd7240-1fef-11df-8deb-00144feab49a.html
http://www.moneysavingexpert.com/news/utilities/2010/02/ofgem-urges-households-to-switch-energy-supplier
http://www.mirror.co.uk/news/city-news/2010/02/23/big-six-energy-companies-making-record-225-from-each-customer-after-slump-in-wholesale-costs-115875-22062788/
http://www.mirror.co.uk/news/city-news/2010/02/23/beating-the-fuel-cheats-115875-22062786/
