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MPs say Ofgem is ‘muddying waters’ for consumers over energy firms’ profits



A lack of transparency around the profits that energy companies make is undermining consumer trust, a committee of MPs has claimed.

In a new report, the energy and climate change committee warns that by revealing consistent profits while at the same time raising prices, the ‘big six’ energy firms are making consumers suspicious.

Sir Robert Smith MP, a member of the committee, said, “At a time when many people are struggling with the rising costs of energy, consumers need reassurance that the profits being made by the big six are not excessive.

“Unfortunately, the complex vertically-integrated structure of these companies means that working out exactly how their profits are made requires forensic accountants.”

Since 2009, Ofgem has required the big six – British Gas, EDF Energy, E.ON, Npower, Scottish Power and SSE – to publish annual consolidated segmental statements that make it clear where the companies’ profits are coming from.

However, the energy committee’s report argues that the regulator is not doing enough, and that the statements have only worked to “muddy the waters”.

Independent supplier Good Energy, which derives 100% of its electricity and gas from renewable sources, has claimed that cleaner energy may be the key to a more open market.

Consumers should be able to see the impact of the rising costs of fossil fuels on their bills, and why we need to invest in new, renewable sources of energy to address that”, said CEO Juliet Davenport.

“We need to be asking our politicians not just why our bills our going up, but what they are going to do to ensure that the shift to using more renewable energy delivers a more open and a more transparent energy market.”

Meanwhile, energy secretary Ed Davey said, “Our policies to support renewable energy and reduce energy waste are insulating consumers from the rising cost of fossil fuels. And by 2020, our analysis shows household energy bills will on average be £166 lower than they would be if we did nothing.”

In 2012, a report by the Committee on Climate Change claimed that the UK’s dependence on gas-fired generation would mean electricity bills for the average household could be up to £600 higher in the coming decades than they would be under a low-carbon system.

Further reading:

Energy giants pull the plug on green electricity – but viable options remain

Clean energy can save UK £45bn and slash emissions, says climate watchdog

Committee on Climate Change letter condemns government’s ‘dash for gas’

Energy giants prepare for fossil fuel exploration in vulnerable Arctic

The Guide to Limitless Clean Energy 2013