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.”

PROMOTED VIDEO
Life and Style
Passing on: George Washington died alert, aware and in his own bed. This is the kind of of death most people would like to have
health
Life and Style
fashion

News
Jeremy Paxman has admitted he is a 'one-nation Tory' and complained that Newsnight is made by idealistic '13-year-olds' who foolishly think they can 'change the world'.
peopleFormer Newsnight presenter is being touted for a brand new role
Arts and Entertainment
Stella Gibson is getting closer to catching her killer
tv
News
Brazilian football legend Pele pictured in 2011
peopleFans had feared the worst when it was announced the Brazil legand was in a 'special care' unit
News
i100(More than you think)
Sport
Brendan Rodgers seems more stressed than ever before as Liverpool manager
FOOTBALLI like Brendan Rodgers as a manager, writes Paul Scholes
News
ebooksNow available in paperback
News
The Magna Carta
archaeologyContemporary account of historic signing discovered
Extras
indybest

Arts and Entertainment
Stik on the crane as he completed the mural
art
Arts and Entertainment
Phyllis Dorothy James on stage during a reading of her book 'Death Comes to Pemberley' last year
peopleJohn Walsh pays tribute to PD James, who died today
Sport
Benjamin Stambouli celebrates his goal for Tottenham last night
FOOTBALL
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

Argyll Scott International: Service Desk Analyst

£20000 - £22000 per annum: Argyll Scott International: Service Desk Analyst Re...

Argyll Scott International: 2x Service Desk Analyst

£20000 - £22000 per annum: Argyll Scott International: Service Desk Analyst Re...

Recruitment Genius: Senior Execution Trader

£30000 - £250000 per annum: Recruitment Genius: A global Rolling Spot FX, Comm...

Citifocus Ltd: ACA - Financial Reporting

£Attractive Package: Citifocus Ltd: Chartered accountant (ACA or CPA), must be...

Day In a Page

Homeless Veterans Christmas Appeal: ‘We give them hope. They come to us when no one else can help’

Christmas Appeal

Meet the charity giving homeless veterans hope – and who they turn to when no one else can help
Should doctors and patients learn to plan humane, happier endings rather than trying to prolong life?

Is it always right to try to prolong life?

Most of us would prefer to die in our own beds, with our families beside us. But, as a GP, Margaret McCartney sees too many end their days in a medicalised battle
Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night - is that what it takes for women to get to the top?

What does it take for women to get to the top?

Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night and told women they had to do more if they wanted to get on
Christmas jumper craze: Inside the UK factory behind this year's multicultural must-have

Knitting pretty: British Christmas Jumpers

Simmy Richman visits Jack Masters, the company behind this year's multicultural must-have
French chefs have launched a campaign to end violence in kitchens - should British restaurants follow suit?

French chefs campaign against bullying

A group of top chefs signed a manifesto against violence in kitchens following the sacking of a chef at a Paris restaurant for scalding his kitchen assistant with a white-hot spoon
Radio 4 to broadcast 10-hour War and Peace on New Year's Day as Controller warns of cuts

Just what you need on a New Year hangover...

Radio 4 to broadcast 10-hour adaptation of War and Peace on first day of 2015
Cuba set to stage its first US musical in 50 years

Cuba to stage first US musical in 50 years

Claire Allfree finds out if the new production of Rent will hit the right note in Havana
Christmas 2014: 10 best educational toys

Learn and play: 10 best educational toys

Of course you want them to have fun, but even better if they can learn at the same time
Paul Scholes column: I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season

Paul Scholes column

I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
Lewis Moody column: Stuart Lancaster has made all the right calls – now England must deliver

Lewis Moody: Lancaster has made all the right calls – now England must deliver

So what must the red-rose do differently? They have to take the points on offer 
Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game