Only £12 cut for consumers as energy profits riseAdded proof that energy market reforms are needed

31 July 2014

Stacks of ever increasing numbers of coins

Energy supplier profits have doubled in the space of 12 months

It was announced yesterday that consumers could expect an average of £12 to be knocked off their electricity bills, thanks to new price controls enforced by Ofgem.

Although this is good news, Ofgem has today revealed that energy suppliers are currently predicted to make a £106 profit margin before tax per customer in the next year – a figure that has doubled since this time last year.

New electricity price controls

Last year, Ofgem examined the business plans of the six major UK electricity distribution networks, to see if they were providing adequate value for customers. 

Out of these six, only Western Power Distribution’s prices were agreed to be demonstrating sufficient value for money, so Ofgem forced the remaining five electricity networks to revise their figures.

Since then, Ofgem and the electricity networks have managed to shave £2.1 billion from the combined business plans. Part of this saving will translate into a reduction of £12 per customer off electricity bills for the next eight years.

At the same time, these electricity distribution companies will also be investing £17 billion in order to upgrade and maintain the UK’s local electricity network.

Profit margins set to double for energy suppliers

The announcement of potential savings for consumers may be overshadowed by the latest figures published by Ofgem showing that energy suppliers’ pre-tax profit margins have increased to 8%, from 4% only last year.

Energy suppliers are yet to answer why, despite a fall in the cost of wholesale energy, they haven’t passed on any of these savings to their customers.

Executive director Richard Lloyd said: "Ofgem reports that supplier profit margins are set to double, while energy costs continue to be the top consumer concern. Energy companies must do everything they can to pass on any savings to their customers including falling wholesale and network costs. That's why we need the competition authority to establish whether the price we pay for our energy is fair."

Ofgem has agreed that these figures show that the energy market is not working as well as it should be. Pre-tax profit margins will be examined during the Competition and Market Authority’s investigation into the UK energy market.

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