July 30 2014 Latest news:
Adam Aiken, Editor
Friday, October 14, 2011
Domestic energy suppliers have come under fresh fire with news their profit margins have soared at a time when many households are struggling to afford rocketing bills.
A recent round of price hikes by the so-called Big Six suppliers has seen the average dual-fuel bill rise by £175 a year, and by next month the average annual domestic bill will be £1,345.
But despite the providers claiming that market forces are behind the price rises, industry regulator Ofgem has revealed that the big providers are now making £125 profit per customer – up from £15 a year as recently as June.
In other words, British Gas, EDF, Eon, Npower, Scottish Power and Scottish & Southern have seen their average profit margins rise by 730pc in just four months on the back of ballooning bills.
Although the providers expect to pay higher wholesale prices over the next few months, the advance increase in their tariffs means suppliers are raking in the profits during the short term.
Ofgem – which said the market was being stifled by complex tariffs, poor behaviour by suppliers and a lack of transparency – intends to push ahead with market reforms, the first of which will be the introduction of simplified standard tariffs.
“When consumers face energy bills at around £1,345, they must have complete confidence that this price is set by companies competing in a fully-competitive market,” said Ofgem chief executive Alistair Buchanan.
“At the moment, that is not the case.”
Scott Byrom, energy manager at Moneysupermarket.com, said: “This news will come as an unwelcome shock for already hard-pressed bill payers.
“In just four months, the profit margins for energy companies have risen from £15 per customer to a staggering £125 per customer – an increase of more than 700pc.
“If bill payers ever needed more encouragement to make a stand against the energy giants then now they have it.
“The rise in bills is supposed to be directly linked to wholesale prices so consumers will be angered that profits have risen when this shouldn’t have been the case.”
But the industry hit back at suggestions it was profiteering on the back of struggling consumers.
Volker Beckers, chief executive of RWE Npower, said: “Ofgem’s analysis shows energy companies are making just over £9 profit on every £100 we receive getting energy to your doorstep.
“Earlier this year, the industry was making just £1.50 on every £100; and between 2004 and 2009, Ofgem’s own figures show that the energy industry was making a loss on the average customer.
“These are not the figures associated with an industry that is profiteering or uncompetitive.”
British Gas, meanwhile, said Ofgem’s methodology was “flawed”.