Energy price hikes see Big Six secure £1.2 billion profit from UK households

posted on 29/11/2013 10:09:56 by Dan O'Sullivan

The Big Six saw a 77% increase in profits last year

Piling the pounds: Consumers have accused energy companies of profiteering

The money that energy companies have made from UK households has been one of the most contentious issues in the debate around gas and electricity prices, with many consumer groups calling for the government to intervene.

But while the topic already dominates arguments about rocketing bills, the latest news has added even more fuel to the fire: the Big Six made combined profits of £1.2 billion from Britain's homes last year, and the figure looks set to jump again in the future.

It's a startling number, and with the Office for National Statistics revealing that last winter's prolonged cold snap resulted in a 29% increase in deaths, some reports have linked that problem to high energy prices.

With the industry's reputation in tatters and the public growing increasingly frustrated at the continued price increases, just what comes next?

Ofgem on the attack

The details have left Ofgem with little choice but to criticise the profits that energy companies continue to post when a growing number of households find themselves in fuel poverty.

Andrew Wright, the acting chief executive of Ofgem, explained: "It is not surprising that consumers jump to the conclusion that prices are being driven by profiteering.

"Customers are not convinced that the price increases they see are either fair or justified."

But while Mr Wright added that suppliers have no entitlement to any particular level of profit, there was little indication that anything will be done to restrict their earnings in the future. So, we could be set for a continuation of current trends.  

Repetitive response

Despite the statistics showing that energy companies have seen their profit per customer jump by 77% in the space of a year, the suppliers continue to maintain that rising bills are an unavoidable result of wholesale costs and environmental levies.

This defence has regularly been called into question - especially given the relatively small fluctuations in wholesale prices compared to the extent to which companies have hiked their charges. The latest news weakens their argument further, it seems.

The issue now is how suppliers plan to regain the trust of consumers - as well as Ofgem's own proposals for improving the market.

Yet with the industry's reputation in tatters and the public growing increasingly frustrated at the continued price increases, just what comes next?

The future

If recent history is anything to go by, any attempts to win over consumers could take years to implement. With the major parties divided over energy policy and suppliers struggling to find ways to improve their image, it's difficult to see any noteworthy changes on the horizon.

The fact is that no matter how much we hope the Big Six will suddenly announce substantial cuts to prices, the chances of that happening are incredibly slim. Switching supplier remains the quickest and easiest way to reduce bills and savings are there to be had. The process is quick - and with authorities continuing to bicker it's far better to act now instead of waiting for a price freeze that may never come. 

Dan O'Sullivan

Dan O’Sullivan is Make It Cheaper's Web Content Manager, which means much of his time is dedicated to ensuring we have plenty of online material to help business owners understand the energy, insurance and telecoms industries. With years of experience working alongside SMEs, Dan is committed to making life as easy as possible for smaller firms. You can email Dan at dan.osullivan@makeitcheaper.com

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