Five of Britain’s biggest energy companies were facing mounting pressure to cut prices last night after figures from Ofgem, the industry regulator, showed the average profits they earned per household leapt 40 per cent this winter to the highest level in five years.
Ofgem said that net profit margins earned by the so-called Big Six companies — British Gas, ScottishPower, EDF Energy, N-Power, Scottish & Southern Energy (SSE) and E.ON — widened from £75 per average dual fuel customer last November to £105 at the start of this month.
The figure represents the highest average margin enjoyed by the industry since 2004, although Ofgem said that the increase was likely to be short-lived after the decision by British Gas to trim its gas prices by 7 per cent. Its move is expected to open the floodgates to further cuts from rivals.
Nevertheless, the report triggered fresh criticism of the industry for failing to pass on wholesale price cuts sooner as Centrica, the owner of British Gas, prepares to report an estimated 50 per cent increase in 2009 profits to £550 million on Thursday.
Mike O’Connor, chief executive of Consumer Focus, the industry watchdog said: “Householders will no doubt wonder why margins have increased for the fifth quarter in a row, while wholesale costs continue to fall.”
Ed Miliband, Energy and Climate Change Secretary, also called for the remaining companies to reduce prices. “Householders facing high winter fuel bills deserve to see the benefits as soon as possible,” he said. “British Gas’s cut was a welcome first move, but we need to see all suppliers passing on the benefits of lower wholesale prices.”
Between 2007 and 2010, the average UK energy bill for a dual fuel customer soared from £912 to £1,223.
Andrew Wright, Ofgem’s senior partner for markets, acknowledged that the companies need to be profitable to afford huge infrastructure investments — estimated at £200 billion by 2020 — to secure supplies and reduce carbon emissions. But he added that Ofgem “would also expect recent falls in wholesale energy costs to be passed on to consumers”.
Britain’s energy companies reaped huge profits this winter because they left the prices they charge consumers largely unchanged from last year while wholesale prices they paid for gas and power plummeted in the recession. By the end of 2009, the wholesale price of gas had fallen to below 40p per therm, down from more than 100p per therm during mid-2008.
Demand for gas and electricity was also high because of unusually cold weather.
Christine McGourty, director of Energy UK, which represents the leading gas and electricity companies, said the Ofgem figures omitted many of the basic costs faced by energy companies.
MPs call for reform of "flawed" electricity marketBritain’s electricity markets are “inherently flawed” and anti-competitive practices may be forcing up the costs paid by consumers, MPs have said.
The study from the Energy and Climate Change Committee on the future of Britain’s electricity networks also called for the introduction of a more efficient “smart grid” capable of intelligently managing demand and supply.
Paddy Tipping MP, a committee member said: “Our existing regulatory and policy frameworks, along with the grid infrastructure we rely on, were developed to serve the fossil fuel economy of the 20th century. The future looks very different.”Mr Tipping called for a review of the British Electricity Trading and Transmission Arrangements, which have formed the foundation for UK power activity since 2005. He also said that by 2020 the UK network would need to accommodate a more diverse energy mix.
The figure represents the highest average margin enjoyed by the industry since 2004, although Ofgem said that the increase was likely to be short-lived after the decision by British Gas to trim its gas prices by 7 per cent. Its move is expected to open the floodgates to further cuts from rivals.
Nevertheless, the report triggered fresh criticism of the industry for failing to pass on wholesale price cuts sooner as Centrica, the owner of British Gas, prepares to report an estimated 50 per cent increase in 2009 profits to £550 million on Thursday.
Mike O’Connor, chief executive of Consumer Focus, the industry watchdog said: “Householders will no doubt wonder why margins have increased for the fifth quarter in a row, while wholesale costs continue to fall.”
Ed Miliband, Energy and Climate Change Secretary, also called for the remaining companies to reduce prices. “Householders facing high winter fuel bills deserve to see the benefits as soon as possible,” he said. “British Gas’s cut was a welcome first move, but we need to see all suppliers passing on the benefits of lower wholesale prices.”
Between 2007 and 2010, the average UK energy bill for a dual fuel customer soared from £912 to £1,223.
Andrew Wright, Ofgem’s senior partner for markets, acknowledged that the companies need to be profitable to afford huge infrastructure investments — estimated at £200 billion by 2020 — to secure supplies and reduce carbon emissions. But he added that Ofgem “would also expect recent falls in wholesale energy costs to be passed on to consumers”.
Britain’s energy companies reaped huge profits this winter because they left the prices they charge consumers largely unchanged from last year while wholesale prices they paid for gas and power plummeted in the recession. By the end of 2009, the wholesale price of gas had fallen to below 40p per therm, down from more than 100p per therm during mid-2008.
Demand for gas and electricity was also high because of unusually cold weather.
Christine McGourty, director of Energy UK, which represents the leading gas and electricity companies, said the Ofgem figures omitted many of the basic costs faced by energy companies.
MPs call for reform of "flawed" electricity marketBritain’s electricity markets are “inherently flawed” and anti-competitive practices may be forcing up the costs paid by consumers, MPs have said.
The study from the Energy and Climate Change Committee on the future of Britain’s electricity networks also called for the introduction of a more efficient “smart grid” capable of intelligently managing demand and supply.
Paddy Tipping MP, a committee member said: “Our existing regulatory and policy frameworks, along with the grid infrastructure we rely on, were developed to serve the fossil fuel economy of the 20th century. The future looks very different.”Mr Tipping called for a review of the British Electricity Trading and Transmission Arrangements, which have formed the foundation for UK power activity since 2005. He also said that by 2020 the UK network would need to accommodate a more diverse energy mix.
Source: The Times
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