Profits soar at UK energy suppliers

Profits for the Big Six energy companies have leapt to more than one billion pounds since 2009, according to regulator Ofgem

Profits for the Big Six energy companies have leapt to more than one billion pounds since 2009, according to regulator Ofgem

First published in National News © by

Britain's Big Six energy suppliers have been accused of "profit grabbing" as figures from regulator Ofgem showed their earnings had multiplied five-fold to more than £1 billion since 2009.

It meant they pocketed an average of £53 profit per home last year, representing a margin of 4.3% - up from £30, or 2.8%, in 2011.

The figures show that together British Gas, E.ON, EDF, npower, ScottishPower and SSE recorded underlying earnings - before interest payments and tax - of £1.19 billion in 2012, up from £221 million in 2009.

They fuelled further anger over rising gas and electricity bills following recent steep tariff rises.

The figures come ahead of Ofgem chief Andrew Wright's appearance before the Commons energy select committee tomorrow.

Suppliers have blamed rising wholesale energy prices, higher distribution costs and Government green levies for the increases.

Labour has pledged a freeze on tariffs if it gains power. The coalition is widely expected to announce changes to the way it levies charges on bills to pay for energy efficiency measures.

But TUC General Secretary Frances O'Grady said: "Ofgem show excess profits are the real source of soaring energy bills.

"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."

John Allan, national chairman of the Federation of Small Businesses, said it was "truly worrying" that profit margins were often far higher than those paid by households at a time when they are trying to put the UK "back on a path to growth".

Shadow energy secretary Caroline Flint 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 consumers."

Audrey Gallacher, director of energy at Consumer Futures, said: "The increase in supplier profits contrasts with declining affordability. The sector is riding out tough economic times better than its customers are, so there's a pressing need to help the latter."

A spokesman for the Department of Energy and Climate Change said: "Profits are a matter for energy 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.

"The Government is introducing more competition and more transparency in the energy market so that consumers get the best deal and have a clearer picture about where their money is going."

Energy UK, which represents the energy industry, said the figures did not take into account the costs of "huge investment" being made by energy companies and used profits calculated before interest payments and tax were deducted.

It claimed that Ofgem's figures about the reasons for tariff rises supported what energy companies had been saying.

"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," Energy UK said.

Ofgem's figures showed the rise in profits in 2012 from the year before was partly explained by higher gas consumption during a period which was colder than average, compared to 2011, which was warmer than average.

It said bill increases in 2012 were caused by higher prices for gas and electricity on the wholesale market, up 14%, plus rising costs of transmission and distribution, and Government levies, up a combined 20%.

The report showed that from 2009, a number of loss-making domestic suppliers had moved from loss to profitability, as prices had "increased significantly".

It said there was "some evidence of rising profit margins" - attributed to higher prices and volumes rather than lower costs.

The report added: "It is not yet possible to assess whether this is a sustained trend or the result of unusual weather over the past three years."

Ofgem noted that all of the Big Six supply firms also generated power, where their businesses showed a profit margin of 19.9% in 2012.

However, the regulator said that this figure - which has been falling since 2009 - was "not too meaningful" since it did not take into account large sums required to invest in power stations.

Total profits across supply and generation fell by £133 million, or 3.4%, in 2012 compared to the previous year.

Ofgem has already introduced measures to try to introduce competition in the energy supply market, including the opening up of wholesale electricity for independent suppliers to be able to compete with the Big Six.

The regulator is currently carrying out an assessment and is due to publish its findings next March.

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