Outrage at 733 per cent rise in energy companies’ profits

There was anger today at the news this morning that energy companies' profits had soared eight-fold from £15 to £125 per customer per year, reports Shamik Das.

There was anger today at the news this morning that energy companies’ profits had soared eight-fold from £15 to £125 per customer per year. Friends of the Earth said it was “outrageous” the energy fat cats were raking in the profits while people face “rocketing” bills and “shiver in cold homes”.

FoE executive director Andy Atkins said:

“It’s outrageous that Big Six profits are soaring while families across the nation struggle to pay rocketing fuel bills and shiver in cold homes.

“Government action to end this rip-off is essential, but Ministers must also tackle the main cause of huge fuel price hikes – our reliance on expensive gas. Energy firms must be forced to fix our broken electricity system by investing in energy efficiency and clean, home-grown power we can all afford.”

Energy regulator Ofgem, which revealed the figures, has called for “radical reform” of the energy sector, so we end up with a “simpler, more competitive energy market”. They plan to reform the system to ensure “simple tariffs, clearer bills and annual statements” for customers.

Their headline plans (pdf) are:

• Consumers wanting a no frills tariff will get a simple unit price and a fixed standing charge set by Ofgem;

Consumers seeking more innovative tariffs will get protection against price increases for the duration of their deal; and

• Standardised price information will allow consumers to compare easily standard and more innovative tariffs.

Ofgem say the consultation unveiled today is “the first of four waves of reform” – in November, they will unveil detailed proposals to reform the energy market to help the business sector; in December there will be further decisions on proposals on liquidity to break the stranglehold of the Big Six in the wholesale electricity market; and in the New Year they will publish a report into how to make energy company accounts more transparent.

As the BBC’s Damian Kahya writes, the new plans, though still complex, are likely to bring down prices:

In addition to the new simple tariffs, companies will still be allowed to offer an almost infinite range of fixed rate deals, similar to mobile phone contracts. Though complex, those deals may end up cheaper than a standard rate, especially if they are tied to the planned roll out of smart meters.

These complicated deals may also offer greater savings to households that can afford special devices designed to use more electricity when the price is low. It’s exactly that type of complexity which has put many lower income households off switching to cheaper tariffs, a problem Ofgem is trying to solve.

The coming consultation will give the regulator a chance to see if it can be fixed, perhaps by making all tariffs – even smart meter deals – directly comparable on the same terms.

Let’s hope they do.

See also:

As energy company buckles, Miliband needs to pick more battlesAlex Hern, October 12th 2011

Huhne’s tough talk on energy companies exactly what we needNatan Doron, September 20th 2011

Government needs to take on the energy companies to bring down pricesBarry Gardiner MP, August 17th 2011

Misselling is only the beginning of the energy companies’ sinsHuw Irranca-Davies MP, July 25th 2011

Warnings over Scottish fuel poverty target as energy chief enjoys £2m bonusEd Jacobs, July 25th 2011

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