Saturday, 2 August 2014


The news that the ‘Big Six’ energy cartel members are set to double their profit margins over the next year (and this is according to estimates by the regulator, Ofgem) probably won’t surprise anyone. Back in 2013, Ofgem estimated that suppliers would make an average pre-tax profit of £53 per dual fuel customer (a margin of 4%). Now, in the year ahead Ofgem expects the energy firms to make £106 per customer (increasing their margin to 8%). Naturally the cartel members have accused Ofgem of releasing inaccurate figures.

Ofgem has said that it was further evidence that the market was not working as well as it should. The big six (and the profits they make) have already been referred to the Competition and Markets Authority (CMA). Ofgem has also written to the suppliers asking why the falls in wholesale prices last winter have not resulted in lower bills for hard-pressed energy customers.

As part of the on-going struggle with the ‘Big Six’, Ofgem has also announced that electricity customers will see an average reduction of £12 a year on their bills, from April 2015. This follows plans to limit the prices that can be charged by Britain's six distribution companies, which carry power to homes and businesses. The price curbs could affect 29 million English, Scottish and Welsh energy customers. Ofgem's plans will also see the distribution companies spend £ 17 billion pounds to upgrade their networks. The distribution element makes up about 8% of a typical dual-fuel bill and is the only part controlled directly by Ofgem.

Five out of the six network companies (UK Power Networks, Northern Power Grid, SP Energy Networks, SSE Power Distribution and Electricity North West) were ordered by Ofgem to cut their prices. So far, only Western Power Distribution had its pricing and investment plans approved by Ofgem. The new energy prices will apply for eight years, from April 2015 until 2023. Ofgem will announce a final decision on the proposals in November 2014 after carrying out a consultation.

While this may bring a crumb of comfort to hard-pressed customers, it fails to address the fundamental problem with the so-called energy free market. The ‘Big Six’ can do because they are pretty much free from any meaningful and effective regulation. Any criticisms that may periodically emanate from Westminster can be pretty much ignored as the Westminster based political parties have little appetite to reform the deeply flawed energy market and even less inclination to curb the excesses of the ‘Big Six’ energy cartel members.

Meanwhile, in Wales, Plaid has been argued the case for the establishment of a ‘not for dividend profit’ company, simular to Glas Cymru which works within our water industry. This would firmly ensure that customers come before shareholders dividends and the City of London. An all Wales ‘not for dividend profit’ energy company would mean that all the profits would be reinvested back into the energy sector in our country. This would also ensure that Welsh families, households and small and larger businesses get a good deal on their energy and our country will end up with secure sustainable energy supplies.

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