Power Company Profits Rise 74% in 4 Years
Profits from the big six have increased by 74% in 48 months, blowing inflation, currently at 13%, out of the water.
The big six are British Gas, EDF, Eon, npower, Scottish Power and SSE. They’ve seen profits rise by £3.3 billion while home energy rates have gone up by 29%.
The six utility suppliers provide 98% of houses in Britain with gas and electricity, leaving only 2% for companies such as Ecotricity, Spark, or EBI Co.
Profits from the big six were reported at £2.15billion in 2009, £2.22bn in 2010, £3.87bn in 2011 and £3.74bn in 2013.
Ofgem have said the average home energy bill is now £1,420 up from £1,100 in 2010.
There has been a lot of discussion on the issue already. Executive Director of Which?, Richard Lloyd said: “With news of multi-million-pound profits, and spiralling energy prices consistently one of people’s top concerns, it’s no surprise that just a quarter of us trust energy companies”
Angela Knight, Chief Executive of Energy UK which represents the industry said it was unfair ‘bashing’ of power companies claiming: “If a company is to stay in business it has to make a profit. And the more a company has to invest then the more it has to make in profit to do so.”
The Energy Minister Michael Fallon took the opportunity to reassure the public that the government is doing everything it can to keep gas and electrity bills down. “We are pressing the big six to make sure that households aren’t stuck on expensive tariffs, to simplify their rates and make it easier to switch.”
With the information at hand clearly this isn’t the case. Mr Lloyd raised possibly the most important issue at hand; that utility suppliers should be far more open with information about the costs behind bills in order to rebuild trust in and industry that to many, has joined banking as the ‘wild west’ industry of the modern world.
In this scenario, with more open access to information the public could easily justify or debunk Ms Knight’s claims of using profit for investments. There are many new investments going on in the powerindustry at the moment, including modernising the power grid, exploratory drilling for shale gas as well as a number of renewable projects.
The question is, considering gas and electrity is a necessity and bearing in mind the future of energy generation, is it fair for suppliers to make the public pay for investments? Isn’t it effectively passing the cost of a sustainable business model onto the taxpayer and customers? It would be interesting to see what proportion of investment in new infrastructure comes from the government, suppliers, and customers in order to see to what degree Ms Knight is justified.
You may argue that any money a company invests comes from customers as it’s their money the business has earned in the first place True, however the energy industry is in a somewhat unique position as they are at the heart of modern society and can, to a large degree (with government backing of course), influence how the country generates its energy. Without completely transparent operations how is it possible for widespread public trust a profit-driven machine to be looking out for their best interests?
With smaller companies coming through this should start to change as people are given more choice of suppliers; however they still occupy just 2% of the gas and electricity market and are a long way from becoming big players.
For now, Mr Lloyd seems determined to fight for consumers on this matter: “The National Audit Office has a key role to play here, building on the useful work it has already started we’d like to see them apply the same sort of rigour to all policy costs, as soon as is practically possible, to ensure Ministers are accountable for securing the best value for consumers at all times.”