Recent price rises of 7-9% have prompted the energy regulator, Ofgem, to launch a review of the UK’s domestic energy market. Suppliers were revealed to have boosted profits by 38% since September 2010.
With price rises due this winter from at least three of the ‘big six’ energy companies (British Gas, Scottish and Southern Energy and Scottish Power), Ofgem has decided to review the effectiveness of the retail energy market to see if further action is needed to protect consumers.
Ofgem’s chief executive, Alistair Buchanan said: ‘Consumers have the right to expect that the energy retail market is providing them with value for money. Our analysis published today shows an increase in company margins from £65 to £90 at a time of rising energy prices, which causes Ofgem to rightly ask if companies are playing it straight with consumers.
‘The energy retail market can only be fully effective if consumers have confidence that the market is transparent and easy to take part in. So we will go beyond our usual quarterly reports on prices and do a comprehensive review of the retail market and our recent reforms from the consumers’ perspective. We will also carry out a detailed investigation of the newly available retail accounts and the facts behind these numbers.’
Commenting on the Ofgem initiative, Which? chief executive, Peter Vicary-Smith said: ‘It’s absolutely extraordinary that energy suppliers appear to have made a 38 per cent increase in their profits over the last 3 months. We’re pleased that Ofgem has finally decided to investigate, however, this review can’t be another talking shop. Ofgem needs to identify where action is needed and take it – only then will it actually be delivering its statutory duty to protect consumers.
‘Energy prices are the number one financial concern for consumers, with energy suppliers seen as even less trustworthy than banks, so this news will only fuel the belief that energy companies are ripping us off.’
Although price rises are expected across the board, consumers can still look for potential savings by shopping around. By reviewing the best deals on offer and switching energy provider where necessary it is possible to avoid paying over the odds for the gas and electricity you use.
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