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Big Six energy companies have questions to answer on profits & costs

energy, personal finances

Published date:  29 Oct 2013

Think tank shows profits make up 6% and operating costs make up 9% of bills.

Ahead of the appearance of the ‘big six’ energy companies at today’s (Tuesday’s) House of Commons Select Committee, Will Straw, IPPR Associate Director, said:

“The key question for the Big Six is why profits of 5 to 6% are acceptable in a competitive market. In 1998, as the market was liberalised the regulator believed 1.5% was an adequate margin for energy suppliers. Profits in other sectors like supermarkets are as low as 2%. Energy companies need to come clean on why their profits have kept rising when consumers are being squeezed by so many other costs.”

 

Infographic

An original IPPR infographic that explores how competition within the Big Six could cut energy bills is available here: http://www.leftfootforward.org/2013/10/competition-between-big-six-isnt-working/

 

Notes to Editors

IPPR’s analysis of Ofgem’s data on customer bills shows that profits in 2013 are 6%. Operating costs make up 9% of bills.

An Ofgem report from 2008 found that energy market regulators set a 1.5 per cent profit margin price control for energy supply in 1998 believing that this adequately reflected the increased risks of competition.

A Competition Commission report from 2008 found profit margins in supermarkets to be as low as 2 per cent.

IPPR argues that energy companies have not been transparent about their operating costs and profits in announcing their price rises this year.

IPPR’s report - The true cost of energy: How competition and efficiency in the energy supply market impact on consumers’ bills – is available from: http://www.ippr.org/publication/55/9040/the-true-cost-of-energy-how-competition-and-efficiency-in-the-energy-supply-market-impact-on-consumers-bills

Contacts

Richard Darlington, 07525 481 602, r.darlington@ippr.org

Natalie Cox, 07983 550 337, n.cox@ippr.org