Ofgem stats cast doubt on Big Six’s price rise defence

A fresh spat between energy regulator Ofgem and the Big Six energy suppliers is brewing over who and what to blame for price hikes. The regulator has released figures which […]

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By Vicky Ellis

A fresh spat between energy regulator Ofgem and the Big Six energy suppliers is brewing over who and what to blame for price hikes.

The regulator has released figures which cast doubt on the suppliers’ claims that most of their price hikes are due to the cost of buying energy in bulk on the wholesale market and other charges.

MPs have summoned the bosses of suppliers to Parliament tomorrow to explain why power prices rises have gone up so much.

Four of the biggest energy companies to raise prices so far – npower, British Gas, SSE and ScottishPower – have all blamed higher power market prices, ScottishPower, so far is the only one to release a specific figure: the energy company said it had seen a 7% increase in wholesale costs.

Ofgem’s figures show over the course of the last year wholesale costs have remained remarkably steady, with an average rise of 1.7% – or £10 – between October 2012 and October 2013. In contrast Ofgem calculates the average rolling net margin a supplier has made is £95.

However suppliers have suggested Ofgem’s methodology can’t be relied upon as the regulator doesn’t know exactly what their energy buying strategy is.

The owner of British Gas, Centrica said: “The Ofgem methodology is at best an approximation of what companies’ hedging profile is,” reported the FT.

Ofgem’s Supply Market Indicators (SMI) show two things: an up-to-date estimate of the annual bill for an average dual fuel customer on a standard tariff; and the annual costs – per customer – to a supplier for delivering the electricity and gas.

They show in the last ten years wholesale electricity costs have risen by around 140% and gas costs by 240%. Over the last ten years environmental and social costs have risen from £10 to more than £100.