MPs urge transparency over energy firms’ profits

A report by the energy and climate change committee said consumers need to be reassured that high energy prices are not fuelling excessive profits.

The MPs make a series of recommendations, including making energy bills easier to understand and simpler for prices to be compared with those of other companies.

They also criticise the energy regulator Ofgem for not taking enough action to tackle the problem and restore consumer confidence.

Since 2007 average prices of gas and electricity have risen by 41 per cent and 20 per cent in the UK in real terms, according to the Department for Energy and Climate Change.

Prolonged cold weather

DECC figures suggest that a double-whammy of price rises and prolonged cold weather in winter 2012 /13 put £121 on fuel bills compared with the previous winter, taking the average bill for gas during this period to £607.

Speaking on behalf of the committee, Liberal Democrat MP Sir Robert Smith, said: “At a time when many people are struggling with the rising costs of energy, consumers need reassurance that the profits being made by the Big Six are not excessive.

Working out exactly how their profits are made requires forensic accountants Sir Robert Smith MP

“Unfortunately, the complex vertically integrated structure of these companies means that working out exactly how their profits are made requires forensic accountants.”

“Ofgem should shine a brighter light on the internal structure of these big companies.”

The report also reprimands the government for not doing enough to help the millions of low-income families living in poorly insulated homes, struggling in “fuel poverty”.

“Spending on the problem has been cut in England and some of the government’s fuel poverty programmes appear to be in “hiatus”, it says.

The MPs argues that to help protect the most vulnerable, more programmes should be funded through direct taxation rather than levies.

Which? Executive Director Richard Lloyd said: “Hard-pressed consumers consistently tell us that the spiralling cost of their energy bills is one of their top financial concerns, with energy companies trusted by fewer than a quarter of their customers.

‘Robust scrutiny’

“People will not feel confident that they are paying a fair price for their energy unless prices are simplified and the costs that make up our energy bills are open, transparent and subject to robust scrutiny.

“The government and regulator must do more to rebuild trust in the suppliers and to keep prices in check.”

Ofgem’s senior partner for markets, Rachel Fletcher, said; “Ofgem welcomes the publication of the select committee’s report on energy prices, profits and poverty. We will consider and respond to its findings as part of our ongoing work to ensure that companies’ statements are clear and accurate.

“Ofgem has made energy companies produce yearly financial statements, which have been reviewed twice by independent accountants and found to be fit for purpose.”

But Angela Knight, chief executive of industry trade association Energy UK, defended the profits the sector makes, saying they were necessary so companies could invest in infrastructure.

“Profit is necessary for employment and investment in this country so we can build the new power stations that will provide ongoing security of supply.”

But she accepted that there was more the sector could do to rebuild trust, which she said would take time: “We will continue to work with customers, government and the regulator as well as consumer groups to make things better.”