British Gas owner hits out at Ofgem as energy row continues

 

Personal Finance Editor

The growing row over future energy company profits was further inflamed today by the owner of British Gas.

Centrica’s finance director Nick Luff used the announcement of a 40 per cent fall in half-year profits to launch a diatribe against the industry regulator Ofgem, which had caused a storm on Wednesday by predicting that the Big Six energy companies will double their profit margins over the next year.

“Ofgem does some theoretical calculations with a range of assumptions, but its figures for the last 12 months haven’t come true and it’s very hard to see how their numbers for the future could be correct,” said Mr Luff, who leaves Centrica next month after seven years.

He claimed there are 25 independent analysts covering Centrica and not a single one is forecasting that British Gas’s profit margins will go up. “Ofgem’s figures are unhelpful,” he added.

The argument centres on the regulator’s Supply Market Indicator (SMI), which was set up to help consumers understand what could happen to the different costs that will make up their bill for the next 12 months.

The latest SMI, published officially this morning, showed that the estimated margin before tax for a typical large supplier over the next year will rise from £101 to £106.

That suggests the average energy company profit margin on household bills is eight per cent – a figure that has almost doubled in a year due to falling wholesale and environmental costs, according to Ofgem.

The watchdog has told suppliers to explain to consumers why, when wholesale prices are falling for this winter, they are not seeing cuts in prices.

It was Ofgem’s concerns that savings weren’t being passed on to customers that led it to refer the energy market to the Competition and Markets Authority for investigation earlier this year.

Ahead of Mr Luff’s comments today, Angela Knight, chief executive of the trade body Energy UK, had responded robustly in defence of the suppliers, attacking Ofgem for being misleading.

She said: “Using estimates that are as inaccurate as these, and which often result in misconceptions and misunderstandings, gets us nowhere.”

This evening one of the “challenger” energy companies joined the fray with further criticism of the regulator. Ecotricity’s founder, Dale Vince, said: “Ofgem has a track record of getting these numbers wrong. Last January it predicted a £120 profit for the Big Six, revised the figures down to £28 and the actual outcome was £53. 

“Ofgem knows energy companies buy power at least 12 months in advance. Therefore its figures are utterly misleading. You have to wonder why it publishes them. Ofgem claims to champion simplicity and transparency in the energy market – these figures are over-simple and anything but transparent.”

But consumer groups hit back at the energy providers and attempted to retrain the focus on high bills. Citizens Advice’s chief executive, Gillian Guy, said: “Suppliers keep shifting the responsibility for what’s causing rising prices, leaving consumers struggling to understand why the prices they pay remain high when the biggest chunk of costs that suppliers face continues to fall. 

“It only goes to reinforce why the Competition and Market Authority’s inquiry is so important in order to establish if people are paying a fair price to heat and light their homes.”

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Relations Officer

£13000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Day In a Page

Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

Homeless Veterans campaign

Donations hit record-breaking £1m target after huge gift from Lloyds Bank
Flight MH370 a year on: Lost without a trace – but the search goes on

Lost without a trace

But, a year on, the search continues for Flight MH370
Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

Germany's spy HQ springs a leak

Thieves break into new €1.5bn complex... to steal taps
International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

Whirlwind wit of Simone de Beauvoir

Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

Confessions of a planespotter

With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
Russia's gulag museum 'makes no mention' of Stalin's atrocities

Russia's gulag museum

Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

The big fresh food con

Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

Virginia Ironside was my landlady

Tim Willis reveals what it's like to live with an agony aunt on call 24/7
Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

Paris Fashion Week 2015

The wit and wisdom of Manish Arora's exercise in high camp
8 best workout DVDs

8 best workout DVDs

If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

Paul Scholes column

I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

From the Azteca to Vicarage Road with a million followers

Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

Khan ready to meet winner of Mayweather v Pacquiao

The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable