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Energy suppliers margins have increased by 40 percent says energy watchdog OFGEM

Energy suppliers’ margins have increased by 40% in the last three months, that’s according to the energy watchdog, OFGEM.

The shocking announcement, taking into account British Gas’ recent 7% drop in prices, will anger householders receiving big energy bills following sustained freezing conditions.

David Hunter, energy analyst for McKinnon & Clarke believes that energy companies will face unprecedented pressure from consumers and government to cut prices in line with wholesale energy costs.

Mr Hunter said: "The industry’s own regulator, OFGEM, is finally standing up and admitting that this is simply not acceptable.

"OFGEM has consistently defended a market that, it is blatantly obvious, is not working for anyone apart from the ‘Big 6’ suppliers that have a stranglehold on the generation and supply of energy.

In September, McKinnon & Clarke called on the energy companies to cut gas and electricity prices by 10% in line with wholesale cuts. Predictably British Gas – the only energy company to reduce prices – waited until the end of the peak winter season to offer a 7% drop. The timing is little more than a PR exercise designed to avoid consumer backlash when the company announce big profits.

‘It is clear that the ‘big 6′ energy companies win either way – their home bills stay high when wholesale costs fall, yet when the commodity markets rise they make huge profits on generating electricity.’

McKinnon & Clarke welcome OFGEM’s decision to now consider action to protect consumers, but ask why it has taken the authorities so long to face up to the problem.

Hunter added: "For years, OFGEM has claimed the market is working when it is glaringly obvious that people are simply paying too much to light and heat their homes. The dominant energy giants continue to pull in big profits because of a stranglehold over both production and supply which leaves no room for competition to flourish. The regulator created the market, and has defended it for too long.

"We welcome plans for increased liquidity in the wholesale markets to give independent suppliers a fighting chance of competing with the dominating ‘Big 6’, whether through new routes to market, forced energy auctions or restrictions on self-supply. What we need is competition and transparency, not smoke and mirrors".

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