Ofgem is to investigate Britain’s energy companies over possible profiteering after noting a sharp increase in family bills. Analysis by the Watchdog, which regulates gas and electricity markets, said net profit margins of £65 per typical customer in September was now £90, which was the equivalent to a 38 per cent rise.
The fast-track review, which will investigate whether consumers could be better protected, will take into account the recent price rises announced by three of the “big six” suppliers in recent weeks.
British Gas, Scottish & Southern and Scottish Power have all recently landed customers with higher annual bills.
They blamed the increase on the cost of wholesale energy prices, which have risen more than 25 per cent.
Alistair Buchanan, Ofgem’s chief executive, said: “With Britain facing an investment bill of £20bn over the next 10 years, consumers have the right to expect that the energy retail market is providing them with value for money. Our analysis published today shows an increase in company margins from £65 to £90 at a time of rising energy prices, which causes Ofgem to rightly ask if companies are playing it straight with consumers.”
“The energy retail market can only be fully effective if consumers have confidence that the market is transparent and easy to take part in,” he said.
“So we will go beyond our usual quarterly reports on prices and do a comprehensive review of the retail market and our recent reforms from the consumers’ perspective.
“Greater transparency in the market is good for consumers, investors and for the energy industry as a whole.”
Last week ScottishPower became the latest energy giant to up its prices, landing some customers with an annual increase of £138. The company, which has 2.5 million customers, said it was putting up its gas and electricity prices, which came into effect on Thursday.
It was raising gas prices by 2 per cent, and electricity prices by nearly 9 per cent, adding £54 a year to a customer buying both. This will take those paying the standard tariff to £1,357 a year, the most expensive on the market.
Earlier this month British Gas announced that its eight million customers also face higher fuel bills after the power giant announced it is increasing its prices.
Households will see their gas and electricity bills climb by an average of 7 per cent from December 10. It will add an additional £1.50 on a typical weekly dual fuel bill, which equates to £78 a year.
Scottish and Southern Energy said it would put up its domestic gas tariffs by 9.4 per cent from next month.
EDF has promised it will freeze its prices until after the winter. The remaining major suppliers, npower and E. ON have not commented on their plans, but are widely expected to follow suit.
The Ofgem inquiry will be completed by March next year.
The regulator’s last major investigation into the retail market in October 2008 found no evidence of anti-competitive behaviour but found 4.3 million customers without gas who had no access to the best deals on offer from providers. However, Ofgem did implement new guidelines at the time to prevent unjustified price differences, set out new standards of conduct on the level of service for consumers and tougher rules on sales and marketing as well as new rules to allow more people who are in debt to switch supplier.