Energy secretary: energy firms must come clean on profits
The UK energy secretary, Ed Davey, has ordered energy and gas suppliers within the UK to rapidly reveal their profit margins to their customers and regulatory supervisors as energy costs soar upwards on British Gas’s announcement of a 9.2% average price increase.
British Gas announced on Thursday that it will raise its customer’s costs of energy by 9.2% next month whilst other energy companies, such as EDF, not having stated by how much they will raise their own.
That rise will add an average £123 per year to the bill for average UK households, placing the average cost of energy in the UK at £1,444 per year. Currently there is no legal necessity to give prior warning to regulators or customers before the changing of prices by energy companies.
MPs warn that UK citizens are feeling “deep mistrust” towards energy companies through their lack of transparency while costs keep rising without explanation. MPs have urged energy companies to increase their transparency and communication with their customers which are said to have “serious shortfalls”.
“Hard-pressed consumers consistently tell us that the spiralling cost of their energy bills is one of their top financial concerns, with energy companies trusted by fewer than a quarter of their customers,” said Which? executive director, Richard Lloyd.
“We need more transparency from the big six,” said Mr Davey, arguing that energy companies “need to be held to account for the profits they make and they need to declare them in a much clearer way”.
Committee chair of Ofgem, the UK energy regulator, Sir Robert Smith MP, said: “Unfortunately, the complex vertically integrated structure of these companies means that working out exactly how their profits are made requires forensic accountants.”
Ian Peters, managing director of British Gas has responded: “What’s pushing up energy prices at the moment are costs that are not all directly under our control, such as the global price of energy, charges that we have to pay for using the National Grid … and the cost of the government’s social and environmental programmes.”
Reg Platt, of the Institute for Public Policy Research think tank, shifted the emphasis from whether the government’s policies need reforming to why British Gas was delivering them so poorly.
“A third of today’s tariff increase, or £35 a year, could have been avoided if British Gas delivered the government’s energy efficiency policies as cost effectively as [energy supplier] SSE,” he said.