Times are good for the Big 6 energy companies at the moment, according to a recent report released by Ofgem, as profits hit the highest level on record.
The report from the energy watchdog was based on information provided by the energy suppliers themselves, and is used to show the difference between reported profits and revenues.
The new report shows that average pre-tax profit among the big 6 increased to 4.48%, up from 4.15% in 2016, the figures also reveal which of the big 6 are excelling and where. Centrica, who own British Gas, was seen to running the highest margins, profiting at 7.18% with SSE and E. ON following closely behind at 6.95%.
SSE is doing particularly well, as the only company who have managed to grow pre-tax profits every year since 2013. The consistent growth has greatly increased SSE’s profit generated from 3.94% in 2013 to a staggering 6.95% last year. This figure has gone far beyond the 4.48% average increase that the big 6 achieved last year.
Although Centrica has been doing well securing profits, they were the subject of outrage recently when they announced a price hike for 3 million of their customers. Chief executive of consumer business Mark Hodges put the price increase down to an “underlying increase in policy and transmission costs”.
Hodges’ concerns have been echoed by many energy companies, with complaints about the increasing burden of environmental costs being commonly cited as a reason for price increases. The Ofgem data seem to contradict these statements, however, with figures indicating that the cost of environmental obligations fell from £109 in 2009 to £86 in 2015, with a small increase to £91 in 2016.
The Big 6 are currently facing criticism from the UK’s competition authorities as well as political bodies to put a cap on the increasing bills. British gas and SSE especially are expected to come under fire from Ofgem after the energy watchdog said it would hasten their efforts to prevent rising energy bills for the most vulnerable customers.
The good news is that Ofgem’s latest figures show that more people are shopping around for better deal than ever. In June, the number of consumers switching their electricity tariff reached its highest level ever and gas switching reached its highest level since 2009.
“In a competitive market, we expect suppliers to drive down costs and the prices they charge their customers; if they don’t, their customers will switch to rivals who do.” A spokesperson for the energy watchdog said.
They added: “We want many more customers who remain on standard variable tariffs in particular to get a better deal and are stepping up our efforts to make sure that competition works for everyone, whilst also putting in place protections for the vulnerable.”
Despite their rising profits, SSE were the hardest hit by consumers switching to better energy deals, they’re share of the electricity market falling by 5% from 2011 to today.
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