Ofgem says Profits made by energy firms on household bills have more than doubled in a year

Profits made by energy firms on household bills have more than doubled in a year, damning new figures reveal.

As the Big Six companies drive through price hikes of up to 10 per cent, it also emerged that the costs to them of buying gas and electricity has remained almost unchanged since autumn 2012.

Increases in what energy companies pay for gas and electricity have added just £10 to household bills, but profit margins added £50 in a year.

Price hikes: Despite gas and electricity wholesale costs remaining almost unchanged since autumn 2012, the Big Six companies have pushed through price hikes of up to 10%Price hikes: Despite gas and electricity wholesale and operating costs remaining almost unchanged since autumn 2012, the Big Six companies have pushed through price hikes of up to 10%

Soaring profits: This graph shows how energy firms have seen their profits soar as bills go up. The wholesale energy cost has remained relatively stableSoaring profits: This graph shows how energy firms have seen their profits soar as bills go up. The wholesale energy cost has remained relatively stable

Bosses responsible for crippling rises this winter are due to be grilled by MPs tomorrow about claims they are driving up costs to make even bigger profits while leaving customers to choose between heating and eating.

David Cameron is under intense pressure to tackle soaring bills, after Labour demanded a two-year freeze and former Tory Prime Minister Sir John Major called for a windfall tax to help the elderly to keep warm this winter.

Four of the Big Six firms have already announced big price rises, with ScottishPower bills going up by 9 per cent, Npower announced a 10.4 per cent price hike, British Gas a 9.2 per cent rise and Scottish & Southern Energy an 8.2 per cent increase.

The firms have variously blamed rising wholesale prices, bills for upgrading gas mains and electricity cables and extra green levies imposed by the government.

But official figures released by energy regulator Ofgem reveal company profits have doubled in a year.

Mr Cameron said last week: ‘I think it is wrong for bills to go up when wholesale prices are not going up substantially, but we have to look at the causes of why bills are going up and act on those causes rather than just have some sort of blanket policy that doesn’t work.’

Ofgem analysis shows that the average bill stood at £1,320 this month, up £70 or 5.6 per cent on the same month last year.

The price hikes will add £50 to every family's bill with some households seeing annual rises of more than £100 The price hikes will add £50 to every family’s bill with some households seeing annual rises of more than £100

Wholesale energy costs – which make up the singled biggest part of the bill – have barely changed, up just 1.67 per cent or £10 in a year.

VAT, operating and other costs make up £1,255 of the bill, up £40 or 3.29 per cent.

However the biggest increase is the average net profit margin made on bills, up 111 per cent from £45 in 2012 to £95 now.

Caroline Flint, Labour’s shadow energy secretary, said: ‘Energy companies always blame rising global energy prices for putting up people’s bills, but these figures show that under David Cameron they’ve been increasing their profits on the back of spiralling energy bills for hard-pressed households.

‘If energy companies won’t treat their customers fairly, then people deserve tough action from the Government. But David Cameron shows how out of touch he is, refusing to act. That’s why Labour would freeze energy bills for 20 months and create a tough new watchdog with the power to force energy companies to cut their prices when the cost of energy falls.’

Prime Minister David Cameron is under pressure to tackle soaring energy bills Prime Minister David Cameron is under pressure to tackle soaring energy bills but came under fire last week when he suggested ‘rolling back’ green levies which he claims are pushing up prices

The revelation will fuel public anger at near double-digit rises in bills at a time when wages are up by around one per cent.

Ofgem admits that overall wholesale costs have soared in the last decade, up by around 140 per cent for electricity and 240 per cent for gas. Although in the last year wholesale costs have barely changed.

However, power firms insist that future prices for them to buy in supplies for this winter have risen.

The wholesale price of gas for use this winter is 8 per cent higher than the price of gas for use last winter, Ofgem says. The wholesale price of electricity is 13 per cent higher.

Mr Cameron sparked a furious coalition row last week when he vowed to ‘roll back’ the green levies which he says are forcing up bills.

Over many years ‘extras’ have been added on all bills to pay to help the elderly heat their homes and cut the cost of energy efficiency measures like insulation.

Ofgem estimates that in the last decade environmental and social costs have risen from £10 to over £100 on the average bill.

In the last year they have risen by around £10 to £115 of an average annual dual fuel household bill. More increases are expected.

However, the energy firms disputed the way Ofgem calculated the figures.

British Gas said: ‘The prices that individual suppliers pay depend on their own hedging strategies, and the Ofgem methodology is, at best, an approximation of what those hedging profiles are.

‘We buy a certain amount of gas more than two years in advance, and if you look at the 24 month figure to October 2013, there has been an 18 per cent increase in the wholesale cost.’

SSE insisted it was ‘simply false’ to suggest wholesale costs had not risen.

A spokesman added: ‘This is very much a global market and we are seeing increased international competition for supplies, which is putting up prices.’

Read more: http://www.dailymail.co.uk/news/article-2478251/Energy-firms-profits-DOUBLE-year.html#ixzz2j46FIl2a
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