Five questions on: Energy profits


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The Independent Online

They're going up again are they?

We won't know about energy company profits for last year until they reveal their latest results over the next month. But this week the energy watchdog Ofgem published its latest predictions of what profit margins at the big six suppliers will be like in the next 12 months.

Presumably profit margins are increasing?

That's what Ofgem reckons. It predicts profit margins will climb from £105 to £114 per dual-fuel customer over the next year.

But haven't all the energy companies announced price reductions in the past couple of weeks?

They have, ranging from EDF's paltry 1.3 per cent reduction to npower's slightly more generous 5.1 per cent cut. However, the watchdog says it has taken account of the reductions in its calculations and forecasts that profit margins will still climb by £9 more than its previous prediction, published in November.

Does that mean the providers are profiteering at the expense of gas and electricity users?

The bigger profits will be driven by "significant declines in expected future wholesale costs", Ofgem said. But that doesn't mean energy suppliers couldn't pass on more cuts to consumers.

Richard Lloyd, executive director at the consumer group Which?, said: "Consumers will be questioning why their energy bills haven't been slashed further at a time of rising profits and falling wholesale prices.

Meanwhile the Energy Secretary Ed Davey said: "People want to see bigger savings on their energy bills, not bigger profits going to the big six."

What does the energy industry say?

It hit back by questioning the reliability of Ofgem's predictions. Lawrence Slade at the trade body Energy UK said: "Research shows that Ofgem's reports, time and again, have proven to be unreliable."

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