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Energy companies in profits row

Energy companies have been hit by a new storm over prices after it was claimed their average profit per customer had jumped to £125 a year.

Regulator Ofgem's latest price report indicated profits on a standard dual fuel deal had risen from £15 in June following a spate of price hikes in recent weeks.

The average dual fuel bill now costs £1,345 and although Ofgem expects profit margins to drop next year, chief executive Alistair Buchanan said it was "not the case" that customers could be confident that prices are "being set by companies competing in a fully competitive market".

Rising wholesale prices have been cited by suppliers for the recent spate of tariff hikes and while Ofgem said such prices had risen by 40% to £115 per customer over the past year, it added that a combination of confusing tariffs, poor behaviour from energy suppliers and lack of transparency meant that "radical change" was still needed in the sector.

As a first move, a new simplified standard tariff will be introduced. There are more than 400 different tariffs available at present but in future firms will have to offer a no-frills version featuring just the unit price for energy used and the standing charge.

Energy firms hit back at Ofgem's claims and said the methods used by the regulator to calculate their profit margins were wrong.

Perth-based SSE said it "did not recognise in any way" Ofgem's calculation of profits of £125 for a dual fuel domestic customer and estimated the figure for its own customers at £62, and British Gas also said Ofgem was wrong and its methodology "flawed".

Energy Secretary Chris Huhne, who is due to meet energy companies, consumer groups and the regulator on Monday to ensure that households are given help in saving money on their energy bills this winter, welcomed Ofgem's review proposals, which could come into force by next winter.

He said: "Both the Government and Ofgem are working to boost transparency in billing and increase competition in the energy market to help keep prices down."

Consumer Focus chief executive Mike O'Connor said: "Consumers are faced with a thicket of energy tariffs that can seem designed to confuse all but the most persistent and numerate consumers. More than 60 new tariffs have appeared so far this year, despite all the pressure for fewer and simpler tariffs."

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