Consumer Focus today responded to the news that British Gas residential profits for last year were £595m, up from £376m in 2008¹ by calling for immediate and significant price cuts across the market.
The consumer body said that the rude health enjoyed by British Gas and other energy companies², combined with tumbling wholesale costs, means that the energy companies should now play fair and cut customer bills.
Figures from the industry regulator Ofgem, published this week, show that energy firms enjoy historically high profit margins, dramatically up from this time last year.³ The net margin for a typical standard tariff dual fuel customer rose for the fifth successive quarter while wholesale energy costs continue to fall from their peak in 2008.
Philip Cullum, deputy chief executive at Consumer Focus said:
“Energy companies have no excuses for not cutting bills for their customers. It is clear the problems in the energy market are profound and that it requires fundamental reform.
“For consumers, a combination of high prices and cold weather has exacted a heavy cost. Energy companies have taken advantage this winter, while more than six million UK households live in fuel poverty and face a desperate struggle to keep warm.
“That British Gas has been the only major energy supplier to cut standard prices over the past seven months demonstrates a market largely devoid of competitive pressure. Energy companies seem not to care about providing value for money.
“Unlike the other members of ‘the Big 6’, British Gas reports its results in detail and so takes much of the flak that deserves to be shared with the other companies. If ever a market was crying out for greater transparency it is the current UK energy market.
“Our big energy companies are producers and generators as well as retailers. As producers they do very well when wholesale costs are high, as retailers they do very well when wholesale costs are low. It really is a case of heads they win, tails we lose.”
Consumer Focus is calling for measures that will inject greater transparency into the operation of the energy market, as well as a commitment from government or Ofgem to bring in the Competition Commission to undertake a fundamental review of a market that continues to fail consumers.
ENDS
Notes to editors:
[1] British Gas press release and annual report 25 February 2010:
http://www.centrica.com/files/results/2009_prelim_results.pdf
2 Yesterday Scottish Power announced pre-tax UK profits for 2009 increased by 7.9% to £1,293 million. Earlier this year, EDF reported substantial UK operating profits, with the company’s Earnings Before Interest and Taxation having tripled to 1.7 billion Euros for 2009:
3 Ofgem’s latest wholesale/retail quarterly report showed that average energy profit margins have increased to a record high of £105 for dual fuel customers, up from £75 in November 2009 (Source: Ofgem Feb 2010)
Factfile:
- In 2008 gas bills rose by 51% and electricity by 28%, yet they only came down by 8.7% and 8.3% respectively in 2009/10.
- The average dual fuel energy bill is currently £1,230 per year, based on a medium user paying by standard credit.
- Consumer Focus estimates that 6.6 million UK households are now likely to be living in fuel poverty – spending 10% or more of their income on energy bills.
- The number of excess winter deaths in England and Wales in 2008/09 increased by almost half to 36,700 from 25,300. This is the highest level since winter 1999/2000. (Source ONS).
