Energy firms accused of profiteering after profit margins predicted to double next year

 

Personal Finance Editor

The Big Six energy firms will double their profit margins in the next year increasing accusations that they are profiteering while millions of households are struggling to be able to afford to heat their homes.

The predictions will be officially published by watchdog Ofgem tomorrow, but its chief executive Dermot Nolan let the figure slip out today while announcing the regulator’s plans for upgrading the electricity network.

But that was overshadowed by the row that quickly developed over the news that the regulator reckons energy firms will pocket £106 for each customer in the next 12 months, up from an estimated £53 a year ago, with margins doubling from four per cent to eight per cent.

Labour’s Shadow Energy Minister Tom Greatrex said: “There’s no hiding the fact that on David Cameron’s watch the energy companies are increasing their profits on the back of spiralling bills and a cost-of-living crisis for hard-pressed consumers.”

 

Dale Vince, founder of independent energy supplier Ecotricity, said: “We don’t need Ofgem to tell us that the Big Six model is broken. Yes, there should be a greater focus on large Big Six profit margins, and customers should benefit from lower bills if their margins do increase substantially.

“But just as important is what energy companies do with those profits – which for the Big Six is primarily paying dividends to shareholders in foreign countries, rather than investing in vital new infrastructure in Britain.”

Meanwhile the energy industry refused to accept Ofgem’s estimates. Angela Knight, Chief Executive of Energy UK said: “It cannot be right to publish numbers and estimates which imply profits which turn out not to exist. Using estimates that are as inaccurate as these, and which often result in misconceptions and misunderstandings, gets us nowhere.”

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

Ofgem said that tomorrow’s SMI will show that the estimated margin before tax for a typical large supplier over the next 12 months has risen from £101 to £106 - eight per cent on an average household bill - as a result of falling wholesale and environmental costs.

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

Concerns that savings weren’t being passed on to customers when wholesale prices fall was one of the main reasons why Ofgem referred the energy market to the Competition and Markets Authority for investigation earlier this year.

However the watchdog said that even though profit margins are likely to increase over the next year, bills will fall. It reckons that average dual fuel bills will go down by £18, as energy efficiency measures improve.

Meanwhile, it said electricity customers will see an average reduction of £12 a year on their bills, from April 2015 because of plans to limit the prices that can be charged by Britain's six distribution companies.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future