Energy pricing probe stepped up
Energy regulator Ofgem has stepped up its investigation into the big six energy suppliers by appointing a specialist team of accountants to investigate how they calculate their profits.
Forensic accounting specialists from BDO have been tasked to look at the trading profits, wholesale prices and hedging practices of the firms - British Gas, E.ON Energy, EDF Energy, Scottish Power, Npower and Scottish & Southern Energy - to determine if profits at their retail arms have been underestimated to justify higher prices.
The appointment is part of an investigation launched by Ofgem in March, when it stated it had evidence that the big six had pushed up prices in response to rising costs more quickly than they reduced them when costs fell and promised to look into the "facts behind the numbers".
The regulator today said it wanted an independent accountant's view to improve transparency over the pricing decisions made by the power companies and give consumers more clarity over how retail prices relate to wholesale energy costs.
BDO's appointment comes just days after another round of huge price hikes started to kick in for customers following increases by five of the suppliers and blamed largely on a steep rise in the price of wholesale gas.
Scottish Power lifted its bills on August 1, meaning that a dual fuel customer paying by direct debit saw prices rise by £173 to £1,206.
Scottish & Southern Energy has said its gas prices will rise by an average of 18% and electricity prices by 11% from September 14.
British Gas raised its gas and electricity prices by an average of 18% and 16% respectively from last week.
E.ON said the average dual fuel bill for a customer paying with direct debit will rise by 15.2% to £1,190 from next month, while Npower has just announced average tariffs for gas will increase by 15.7% and electricity by 7.2% from October 1.
BDO's investigation is expected to last four months, with a report expected before the end of the year. Ofgem will consider any recommendations made by BDO before it publishes it own findings.