26th Nov 2013 16:36
LONDON (Alliance News) - The acting chief executive of UK energy regulator Ofgem Andrew Wright Tuesday launched an attack on the record of the big gas and electricity suppliers over the prices they charges consumers and defended the regulator's record in restoring trust in the market.
"It is not surprising that consumers jump to the conclusion that prices are being driven by profiteering," Wright told British lawmakers on the Energy and Climate Change Committee. "Customers are not convinced that the price increases they see are either fair or justified."
Wright denied allegations by the ministers that the Ofgem had not gone far enough to restore confidence in the market but admitted that there is "a deep distrust of anything the energy companies do or say."
On Monday, Ofgem published data showing that profit margins in the industry had risen to 4.3% in 2012 from 2.8% in 2011, and that the big six energy companies made GBP23 more in average profit from each UK household since last year, a rise of 75% on 2011.
Centrica PLC, the owner of British Gas, had the highest profit margin, at 6.6%.
Ofgem said that average energy bills rose by GBP168 in 2012 and the latest average profit for all suppliers from the average dual fuel customer hit GBP53 in 2012 but was measured at double that on November 21 this year at GBP105.
The figures show that together British Gas, E.ON, EDF, Npower, ScottishPower and SSE recorded underlying earnings, before interest payments and tax, of GBP1.19 billion in 2012, up from GBP221 million in 2009.
Ofgem said in the study that bill increases in 2012 were partly caused by colder weather during that period, coupled with a 14% increase in prices for gas and electricity on the wholesale market, plus a 20% combined rise in the costs of transmission and distribution and Government levies.
The companies have argued that they've had to put up prices to cover rising wholesale costs, green energy costs and to cover investments that would otherwise have to be slowed or stopped.
SSE said earlier this month that its pretax profits were down 11.7% in its first half year as the company's retail unit recorded an operating loss of GBP115.4 million compared to an operating profit of GBP48.3 million in 2012.
Centrica PLC also said that its pretax profit fell 11% between the two periods but did say that the operating profit for its British Gas operations increased 1.1% to GBP569 million from GBP563 million.
The regulator said it was now considering whether companies needed to provide more detail on the profits and capital investments they make in the generation side of their businesses to help provide better transparency.
Five of the big six UK energy suppliers have raised prices in recent weeks, with E.ON expected to follow in the coming weeks.
Energy prices are turning into a political football ahead of the next election. Dwindling household budgets are set to become one of the main features of party campaigns as wage growth remains low while things like energy prices increase at rates well above inflation.
The increases have prompted a storm of protest from consumer groups, and politicians of all parties. The protests were stoked when Ofgem said that wholesale prices have risen by less than the rate of inflation and that its data suggests that wholesale electricity and gas together have risen by just 1.7% over the last year.
UK Prime Minister David Cameron recently announced a review of energy pricing and competition in the commons, while the Conservative leader has also pledged to cut green taxes next year.
Opposition leader Ed Miliband has said Labour will freeze energy prices for two years if it is elected to power in 2015, prompting energy companies to warn that they may not be able to fund investments and warnings from critics who say companies may raise prices even more ahead of any freeze.
By Tom McIvor; [email protected]; @TomMcIvor1
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