energy news

Energy companies making £105 profit per customer


22nd February, 2010

Energy companies making £105 profit per customer

This is an increase of 40 per cent over the last three months, according to Ofgem, the industry regulator, and the highest level since at least 2004, when records started.

It is also, experts believe, the most money energy companies have made since they were fully deregulated by the Conservative government at the end of the 1990s.
The figures come just a few days before British Gas is expected to unveil a bumper set of profits. Helped by strong demand for gas during the cold weather in December, annual profits at British Gas could beat the record of £571 million set in 2007.

Ofgem said it had concerns about the very high profits that companies were now making. Over the last year, though customer bills have fallen slightly, they have not fallen nearly as much as wholesale gas and electricity prices.

Ed Miliband, the Energy and Climate Change Secretary, called on all the suppliers to cut their bills as soon as possible,

Mike O’Connor, chief executive of Consumer Focus, the Government-backed watchdog, said: “At a time when householders are worried about their winter energy bills, they will no doubt wonder why margins have increased for the fifth quarter in a row, while wholesale costs continue to fall. The answer seems to be depressingly simple – energy companies are pushing up their profits by cashing in on the cold spell.

“There is mounting evidence – and mounting demand from consumers – that price cuts should be passed on. We agree with Ofgem: energy companies should play fair and bring bills down to offer some respite to their hard pressed customers.”

This winter has been the coldest for thirty years, according to the Met Office, and most consumers have been forced to use more gas and electricity to keep their homes warm.

Mark Todd at the energyhelpline, the price comparison site, said: "I can't believe that in absolute terms profits for energy companies have ever been higher. We have to hope that this means there is plenty of potential to cut bills."

Since last summer, the only company to trim customers' bills is British Gas, who knocked off 7 per cent from its gas bills earlier this month. However, this still makes them considerably more expensive than they were two years ago.

According to Ofgem, the average dual fuel bill across the country – combing both gas and electricity – totals £1,130 a year, cheaper than 12 months ago when it was £1,205. However, in that time the wholesale cost of energy has fallen substantially.

This means that, after the companies have paid for their energy, as well as tax, staff wages and other operating costs, they are left with far higher profits.

A year ago the average customer generated no profits whatsoever, because of the high wholesale energy costs. They are now generating profits of £105, on average.

Energy companies insisted they were not profiteering, pointing out that over the last five years there had been long periods when they made no profit, or even substantial loses from supplying customers with gas and electricity.

Christine McGourty, director of Energy UK, which represents the leading gas and electricity companies, said: “The regulator Ofgem has pointed out before now that the business of supplying energy to the home moved into profit last year, but admitted this came after three years in which the companies were earning close to nothing from supplying dual fuel customers."



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