Energy Profit Margins Set To Double!


‘SOMETHING must be wrong’ when profit margins for the big six energy firms are set to double over the next year while families are struggling to pay their spiralling bills, energy regulator Ofgem said.

The regulator piled pressure on the Big Six to cut prices on Wednesday, citing its analysis that the estimated margin before tax for a large supplier over the next 12 months has risen to £106 per household.

That is an increase from £101 last month, £53 a year ago and just £28 in January 2013, data published on Ofgem’s website suggests.

At the beginning of the year energy companies hiked their gas and electricity prices up by as much as 11%, throwing hundreds of thousands of families into fuel poverty, with many forced to take out payday loans to pay their bills.

Dermot Nolan, the regulator’s chief executive, said the widening margins showed there was ‘scope’ to cut prices. That margin should be eroded by competition and if its not. . . then there is something wrong,’ he said.

But the figures prompted a furious response from energy industry body EnergyUK, whose chief executive Angela Knight described them as ‘inaccurate’.

Ofgem unveiled new plans to cap spending by Britain’s power distribution network companies, which it said should reduce costs on a typical energy bill by £12 a year.

Ann Robinson, director of consumer policy at price comparison site, said: ‘Ofgem’s forecasts cement the case for the big six energy companies to cut bills for hard-pressed consumers.’

A year ago, Ofgem estimated that suppliers would make an average pre-tax profit of £53 per dual fuel customer, a margin of 4%. But in the year ahead they now expect energy firms to make £106 per customer, increasing their margin to 8%.

It has already referred the industry and the profits it makes to the Competition and Markets Authority (CMA).

It has also written to the suppliers to ask why falls in wholesale prices last winter have not resulted in lower bills. Five out of the six network companies: UK Power Networks, Northern Power Grid, SP Energy Networks, SSE Power Distribution and Electricity North West – were ordered to cut their prices.

The new prices will apply for eight years, from April 2015 until 2023.