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Energy firms: Big Six profits rise from £30 to £105 per UK household - more than threefold in three years

New data demolishes companies' claims that price hikes are beyond their control

Tom Bawden
Monday 25 November 2013 20:20 GMT
The average profit made by the companies per household has more than tripled in three years
The average profit made by the companies per household has more than tripled in three years (Rex Features)

Claims by the Big Six energy companies that price hikes are beyond their control have been demolished by new data showing the average profit they make per household has more than tripled in three years.

The amount the firms make from selling gas and electricity soared from £30 per household in 2011 to £53 last year – and it is now estimated to have increased again, to about £105, according to Ofgem.

As a result, the total profit that British Gas, Scottish Power, SSE, EDF, npower and E-on make from households leapt by 75 per cent last year to £1.2bn. This looks set to rise by even more in 2013, to somewhere in the region of £2bn.

“There is some evidence of rising profit margins,” market regulator Ofgem said. “This rise has been due to a combination of higher prices and volumes rather than lower costs.”

TUC General Secretary Frances O’Grady said Ofgem’s figures demonstrated that the Big Six had been disingenuous in blaming bill rises on factors such as the cost of green levies to insulate houses and rising wholesale gas prices. She called on the Government to intervene to keep bills down.

“Ofgem shows excess profits are the real source of soaring energy bills. With the Government prepared to cap pension charges and pay-day loan interest, they should do the same for energy bills, and stop suggesting that anyone who supports a price cap lives in a Maoist commune.”

“We also need to ask hard questions about why some ministers have been prepared to go along with energy company bosses in blaming green levies and help for the less well-off, when what has gone wrong is profit grabbing in a bust market,” Ms O’Grady added.

The £1.2bn profit made by the Big Six from selling energy is more than five times the £221m collective profit they made in 2009. It comes after a series of inflation-busting bill hikes was followed by increased energy use during last year’s exceptionally cold winter.

Ofgem’s figures escalate a debate that has raged since Labour leader Ed Miliband pledged in September to freeze prices for two years if elected prime minister. Caroline Flint, Labour’s Shadow Energy and Climate Change Secretary, said: “There’s no hiding the fact that on David Cameron’s watch the energy companies have increased their profits on the back of spiralling bills for hard-pressed customers.”

A spokesman for the Department of Energy and Climate Change (DECC) said: “Profits are a matter for companies to justify to their customers and shareholders, but profits are needed if they are to continue to invest in Britain’s energy security and infrastructure.”

A spokesman for UK Energy, the industry association, defended the price rises. “Ofgem’s report sets out the earnings before tax paid for supply side and for generation. The figures do not take into account the costs of the huge investment the energy companies are making, the interest or the tax they are paying.”

“The main reasons customers have seen their household bills go up is because the cost of gas and electricity have gone up as well as other add-ons, such as the social and environmental policies, rising fast,” he added.

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