- Energy companies have made £3.9bn in excess profits, says Citizens Advice
- 700,000 people in England and Wales are struggling to pay their energy bills
- Energy bills will rise 6.4% in April
Energy network companies, which provide pipes and cables to people’s homes, have pocketed a windfall of nearly £4bn from household bills over the past four years of the cost of living crisis, according to Citizens Advice.
An analysis by Citizens Advice argued that energy network owners made £3.9bn in excess profits after Ofgem misjudged their costs – something the charity warned them about in 2020.
According to The Guardian, the companies may have made up to £3.9bn more because Ofgem overestimated their borrowing costs as interest rates began to climb.
This flaw, which applies from 2021 to 2028, has seen households forced to pay billions in undeserved profits to companies during the cost of living crisis, while racking up £3.9bn of debt, according to Citizens Advice.
Dame Clare Moriarty, chief executive, Citizens Advice, said: “With average bills now over two-thirds higher than they were in 2021, the charity wants network companies to use the money to support those struggling within rising costs, through targeted energy bill support and debt write-off schemes.”
The charges paid to various energy networks, including UK Power Network, Scottish Power and National Grid are all controlled by the regulator through different sets of calculations.
The Guardian reported that these are meant to allow the network to recover their costs, while offering an incentive to boost their profits by “overperforming” against the regulator’s targets.
During this time, the charity has helped nearly 700,000 people in England and Wales who were struggling to pay their energy bills, with 5 million currently living in debt to their supplier.
Moriarty said: “We’ve called out the billions of pounds of excess profits made by these companies before, and Ofgem said it would get tougher in subsequent price controls. The measures it puts in place have clearly failed.”
Energy network firms are monopoly companies with no competitors, so Moriarty said people rely on Ofgem to set fair network charges through ‘price control’ regulation. These charges are then added to people’s bills.
Energy bills will rise 6.4% from April, Ofgem confirmed on 25 February, which will see bills raise £111 a year for the typical dual-fuel household, and Moriarty said energy debt households already owe suppliers a record £3.8bn.
“Networks should now do the right thing and give this money to those billpayers still struggling by funding much-needed debt relief and targeted energy bill support.”
