Consumer Focus: Energy supplier profit margins

Consumer Focus is warning that the energy market is failing to ensure a fair deal for consumers. The warning comes as the energy regulator Ofgem's own estimates show a widening profit gap.

The regulator's report shows profit margins have increased to a historic high of £25 for electricity customers, £85 for gas and £85 for dual fuel, per customer household. These profit margins are up from £10, £20 and £15 respectively since only February this year. The consumer champion thinks these figures add further to the already heavy weight of evidence that price cuts need to be made immediately, before expensive winter bills hit customers' doormats.

Ofgem's findings are in stark contrast to the suggestions of another report released today, paid for by the ‘big six' energy suppliers. The report suggests suppliers are making only small profit margins per customer household of £9 for electricity customers, £10 for gas and a loss of £1 for dual fuel customers. With energy companies making recession-busting profits from generation through to supply, Consumer Focus thinks that Ofgem's estimates are more realistic.

Wholesale prices have decreased dramatically and have not been fairly passed on to consumers. There are major problems in the energy sector limiting competition and preventing new suppliers gaining a foothold in the market. This means there is no real competitive pressure on the ‘big six' suppliers to cut their prices, leaving consumers suffering unfairly high bills. Consumer Focus therefore thinks a Competition Commission investigation is needed to inject genuine competition in these markets.

Robert Hammond, energy expert for Consumer Focus, said: ‘Consumers who have seen only tiny cuts to their energy bills, while wholesale prices have plummeted, will find it laughable that the suppliers say they are making such miniscule profits. These figures are completely at odds with Ofgem's own analysis today, which shows the energy firms are making huge, and increasing, profit margins.

‘The big question is how much longer consumers will have to wait to get a fair deal. Suppliers should cut prices now, not wait until winter bills have boosted their profits. If energy firms will not do the right thing by their customers it is time for an investigation into the industry by the Competition Commission.'