Big six energy firms accused of ‘cold-blooded profiteering’

I’m sure I’m not the only one who’s noticed exorbitant increases in their energy bills.

Via The Guardian:

The big six energy suppliers have been accused of “cold-blooded profiteering” after official figures showed they had more than doubled their retail profit margins over the last 18 months and were now earning an average of £95 profit per household on dual-fuel bills.

The industry regulator Ofgem, which produced the estimates, said profits per household would reach £100 over the next 12 months.

Other new figures obtained from British Gas, EDF and the four other suppliers showed their profit margin from power generation – a separate part of the business – averaged more than 24% in 2011. They are believed to have risen since.

The escalating earnings were condemned by fuel poverty campaigners, rival energy companies and the shadow energy secretary, Caroline Flint.

They have led to further calls for the gas and electricity market to be reformed to break the stranglehold the big six have on supply, and will increase pressure on energy executives who are due to appear before parliament’s energy and climate change committee on Tuesday as part of an inquiry under the title “energy prices, profits and poverty”.

Sam Robertson, a campaigner with Fuel Poverty Action, said millions of UK households facing a choice of whether to heat or eat would be left wondering what difference an extra £95 could have made.

“This cold-blooded profiteering has to stop, but piecemeal market reforms will not go far enough, especially given the threat of a dash for gas that will send bills through the roof,” Robertson said.

The big six, which include SSE and RWE, already under fire for increasing domestic bills during an economic downturn, but the latest weekly Ofgem projections show dual-fuel retail bills are now up to an average of £1,420 a year, delivering £95 in profit per customer – a profit margin for the firms of 7%.

That is up from an average bill in 2011 of £1,030 and a profit margin of 3.2%, according to figures provided earlier by the companies but only now published by Ofgem.

The 2011 figures – the first the companies provided under the regulator’s drive to bring more transparency to the market – also revealed the profit margins of the big six on their power generation divisions. EDF, the French-owned business that is demanding huge subsidies from the UK government to build nuclear plants, had a profit margin of more than 30% in 2011 while Centrica’s was 17%.

Ofgem said average margins in generation across the big six increased from 18.4% in 2010 to 24.4% in 2011.

Caroline Flint, the shadow energy and climate change secretary, said the Ofgem numbers revealed the true scale of the problems in the power market.

“Energy companies always claim that when they put up people’s bills they’re only passing on increased costs. What these figures show once and for all is that energy companies have increased their profits on the back of spiralling bills for hard-pressed consumers,” she said.

“These companies like to pretend they are the victims of wholesale prices, but they have been allowed to arrange their businesses in a way that enables them to make huge profits whatever the cost of wholesale energy.”

Ed Kamm, chief marketing officer at Warwick-based First Utility, a small energy provider, said the figures underlined the dangers of huge companies dominating the wholesale and retail markets.

“The control the big six have over the wholesale market makes it difficult for independent suppliers to compete on price, which ultimately harms consumers. The big six firms’ generation margins are nearly 25% and increasing because they are not exposed to the market pressures which drive efficiency unlike other truly competitive industries. This is bad for competition and, ultimately, bad for consumers.”

A spokesman for Centrica said the company’s post-tax profit margins on the retail market had averaged 5% for the last five years and was currently the equivalent of £50 per customer.

He said the wholesale margin needed to be higher given that it funded power stations and forward contracts for up to £50bn of new gas supplies. “We believe it is a fair margin.”

EDF was unavailable for comment.

SSE said retail operated as a standalone business as it did for all other energy companies. “Cross-subsidising energy supply with profits from the wholesale business would create a barrier to entry into the market, to the detriment of healthy competition. We expect to make a profit margin of around 5% in energy supply over the medium term, which we believe to be fair and sustainable.”

An Ofgem spokesman said it was up to individual companies to justify their profits and prices to their customers, but the regulator was playing its part by forcing companies to release their internal figures while shaking up the market.

“We are planning the most radical changes to the market since competition began, to make it simpler, clearer and fairer,” he said. “To achieve this we propose to cut down the number of complex tariffs and simplify their structure. This will make it easier for consumers to find a cheaper deal. We also want to introduce other major changes to increase competitive pressure on suppliers. Our reforms are due to take effect from this summer.”

All of the big six energy companies increased their prices between October 2012 and January 2013. The firms blamed rising wholesale power and other costs.

Ian Marchant, the chief executive of SSE, which raised its gas and electricity prices by 9% from mid-October, said at the time: “The increases in costs that we have seen … can no longer be absorbed and mean that we are unable to keep prices at their current levels beyond this autumn. An increase in our prices has therefore, regrettably, become unavoidable.”

The SSE boss warned last month that “there is a very real risk of the lights going out” in Britain.

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One response to “Big six energy firms accused of ‘cold-blooded profiteering’

  1. Whenever these companies increase their prices, they give us the impression they’re having to do so just to survive. But the profiteering they have made tell us a different story altogether, & that it’s GREED Not Need motivating their actions.Over a year ago i went over to British Gas because it was recommended to me as being fair ( even giving rebates!!!, heck rebates in this day & age?!!! Anyone remember those in the olden days? Any due rebate nowadays i ‘d imagine going into the bulging pockets of the energy supplier owner, it is that bad with these gluttonous people.)As soon as i hired them, it was announced they intended increasing their prices, i thought at first it must have been some kind of mistake, coming as it did just prior 2012/13 wintertime starting. I intend ditching British Gas as I don’t intend going through another winter with these people bleeding me dry as they’ve just done so these past cold months. Whoever i am with come next winter i have no intention to make them rich by my survival. Instead I am going to invest in a sleeping bag. I’m a physically disabled pensioner and wonder if these owners and benefactors of the fuel companies can sleep in their own warm beds at night? I expect they do, as it’s pretty obvious they don’t have a conscience at all. I think the whole matter ought be put to a nationwide referendum as to whether we wish our energy suppliers remain in the clutches of private profiteers or be made nationalised, with any profits ploughed into the NHS, the same with the rail companies ( which as it currently stands makes itravelling via rail impossible for poorer people) & Water cimpanies. Nationalised may i stress, with proceeds going into the pockets of the public for things they need, welfare,NHS & not into the bank accounts of those running the local town & county halls. Thank you Orwell -Was-Right people for hightlighting this matter re energy profiteering and allowing we readers comment on the matter.
    Kindest & Bless You from pennine:-)

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