A blog post

Energy firms’ profits up following recent price hikes

Posted on the 14 October, 2011 at 1:46 pm Written by in Blog, Fuel prices, Government

Ofgem says  the profit margin for energy firms has risen from £15 in June, to £125 per customer per year.

The profit figure is a snapshot of the amount suppliers would make from dual-fuel customers if energy prices and bills stay unchanged for the next year.

Predictably energy suppliers argue that Ofgem’s figures were misleading and do not paint a realistic picture of profitability.

“A snapshot of profits every few months does not provide a realistic picture of the average profits over a year of companies in the sector,” said Christine McGourty, director of Energy UK, which represents energy suppliers.

“It is the rising cost of wholesale energy that has contributed to the increase in customers’ bills this year.”

“The approach adopted by Ofgem in calculating this figure is entirely theoretical and does not reflect how a responsible energy supply business manages its energy procurement strategy in reality,” said SSE, which estimates its profit margin at £62 per customer.

Simpler Tariffs
Ofgem also say they are intent on forcing suppliers to simplify their tariffs to make it simpler for consumers to see whether they are on the best possible deal.

Energy suppliers will be forced to have no-frills tariffs, as part of The simplification plan, which would consist of a standing charge – fixed by the regulator – plus a unit charge for energy used.

This would mean the only figure which consumers would need to look at when looking to switch deals is the unit energy charge.

Under Ofgem’s simplification plan, more complicated tariffs would still be available, but they would have to be for a fixed period, with price increases not being allowed for the duration of the deal.

A costly Winter ahead

The average dual-fuel bill is now £1,345 a year following recent price rises from all the big suppliers.

“When consumers face energy bills at around £1,345 they must have complete confidence that this price is set by companies competing in a fully competitive market,” said Ofgem’s chief executive Alistair Buchanan.

“At the moment that is not the case.”

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