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How Much Money Are You Giving to the UK Energy Suppliers?

Written by at 17:18

You would need to have had your head well and truly in the sand not to have seen the furore surrounding the UK’s energy suppliers and their profits, particularly the Big Six.

This has been the case to such an extent that the regulator Ofgem has called for an inquiry into their profits and any malpractice that may have occurred. This is all well and good, but just how much of your money has ended up in the coffers of the major energy firms?

Forthcoming Ofgem Inquiry…

These ever increasing profits, as well more and more disgruntled domestic and business energy customers have forced Ofgem to initiate this inquiry into whether the dominance of the Big Six energy suppliers acts as a barrier to effective competition. It is something that has been debated in the Commons for some time now and the action was seen as inevitable by many areas of the industry and indeed the media.

In fact, politicians see the situation as so crucial that Ed Miliband has even promised to freeze energy bills for 20 months of Labour wins the next general election and he becomes Prime Minister. As regular Love Energy Savings readers will have seen, this then prompted one of the Big Six, SSE, to freeze their own prices until 2016, which surprised many in the energy sector.

How Much Does the UK Pay For Its Energy?

When it comes to home energy, the average household in the UK is paying roughly £1,264 on their dual-fuel bill. This will obviously vary a great deal dependent on your consumption and of course, the tariff you are on as well as method of payment. This is however, the mean annual outgoings of the average family when it comes to their domestic energy. Other than a household’s rent or mortgage payment and their council tax, this will in most cases be the largest annual outgoing for a UK family. You can read last month’s Love Energy Savings feature regarding European energy prices to see how we fare against other members of the EU.

What Proportion Of Our Payments Make Up Energy Firms’ Profits?

This question really boils down to the debate that has been raging on for some time now, and this is whether or not the profits energy suppliers are making are over the top. Ofgem has been collecting and recording data on this since 2011 now and the forthcoming inquiry is bound to give more of a definitive answer to the question.

The most up to date statistics on the issue, which are from September, indicate that the average profit margin made on the average £1,315 domestic energy bill is £65. When compared to the same time periods in 2011 and 2012, this has nearly doubled from £35, suggesting that the energy suppliers may well be taking more than their fair share of our money. These figures are pretty temperamental however, and these numbers are merely averages. There have been occasions where their profits have been in the negative and other instances where more than £100 of profit has been recorded. The regulator Ofgem has put this down to seasonality, but either way it seems that the average home energy customer in the UK is getting a raw deal.

What Happens To Rest Of The Money?

There are various other places that the money domestic energy customers pay ends up. A massive slice of the pie is the cost of buying energy on the wholesale market. There are distribution charges to be taken into account which are effectively the cables and gas pipes which bring the energy into the country and ultimately into the home or business.

There are also factors such as transmission networks, VAT, storage and even metering which will all be contributing to the high prices the UK is paying for its gas and electricity. These are referred to as green fees in the energy sector and are being blamed for the increasing bills we are being faced with, but these do not obviously explain the record profits being enjoyed by many of the more prominent energy suppliers. 


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