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Can Ofgem investigation restore faith in energy companies?

Hand opening blinds

Energy bills are on the up and so are suppliers’ profits. Ofgem’s now investigating the ‘big six’ energy companies and their rising margins, but there needs to be more than just talk.

British Gas, Scottish Power and Scottish and Southern Energy are all putting their energy prices up – the first price increases from the ‘big six’ to hit existing customers for two years. They say it’s due to higher wholesale energy charges.

Yet, it doesn’t seem like these companies are struggling at all. In fact, energy suppliers appear to have made an impressive 38% increase in their profits over the last three months. All on the back of rising costs to us.

Why don’t they pass on price drops?

So when wholesale energy prices go up, costs increase for us, but when they drop we don’t see the benefits. This is a subject that many commenters raised when we asked the question ‘Can British Gas justify 7% price increases?

Marjie C was very clear with her answer. ‘No they can’t. If they had passed on the full 40% price drop of wholesale gas to their customers over the last few years then it would be reasonable. But they didn’t,’ she complained. ‘But the moment prices start to move upwards they become very vocal about what it’s costing them.’

Ofgem to investigate

Finally, someone’s starting to take notice. Ofgem, the industry’s watchdog, has announced that it will investigate these energy giants in order to make sure they’re not greedily lining their pockets.

This is especially good news, since energy prices are the number one financial concern for consumers, according to our recent survey, which also showed that we now think energy suppliers as less trustworthy than banks. Only a fifth of the 2,000 people we asked said they thought energy suppliers were trustworthy.

However, let’s hope the investigation won’t be all talk and no action. Ofgem must identify what needs to be done and do it. Only then will it be protecting all of us. Sadly, even if changes are made, they’re unlikely to be until well after the winter period when bills are at their highest.

Energy suppliers have clearly got a lot of work to do to get back in our good books – will this investigation do enough to improve standards or do you still feel like they’re ripping you off?

Comments
Member

Can Ofgem investigation restore faith in energy companies?

In a word, no. This toothless organisation is set up to protect the energy companies’ interest. Isn’t it?!

It should be broken up and replaced by strict legislation dictating how the energy suppliers can operate in a much fairer way with consumers. But those consumers who never switch and continue to pay higher prices than they need to probably have no right to complain. The more that switch the greater the effects of competition on keeping prices down. Without any influence of any cartel of course. Allegedly.

Member

Until our utilities are re- nationalised – then the purpose of a business is to make a profit for the shareholders – that’s why I objected to Thatcher selling off our ******** the first place.

There is no point in complaining that a business is making a profit – that is it’s purpose. Nationalise them and plough the over sell back into infrastructure – so that our country is at the forefront of efficiency – not lagging behind as it is now. It is one reason for our poor internet service – nothing to do with technology but all to do with no investment. Profit is king!

Member

Ofgem has no any impressive power or energy to restore faith in energy suppliers.Our fuel bills rocketing last few years. They make massive profit from us
What ofgem or government has done about rising energy bills for last few years ? Nothing.
In their dictionary,we will find investigation,talk and at the end, they cant do anything about increase !….

Member
Which? Member says:
9 December 2010

It seems the goverment is doing nothing about the rising prices is because it is reaping the benefit
of VAT. The higher the bill, more money is collected through VAT by the goverment. Either strict legislation from the goverment or abolition of VAT on gas & electricity is the only answer.

As far as Ofgem is concerned, I agree with the two reports that are posted here.

Member

I am surprised that we havent seen a cooperative or “not for profit” organisation entering the energy supplier market.

Or, as with mortgages, a tariff linked to the wholesale energy market prices.

Member

The question is backwards.

Can we have faith in OFGEM to start doing its job?

Member
Mark Williams says:
23 December 2010

I agree with the other comments. It’s just like so many other crucial industries where the regulator is unable or unwilling to do their job. Either give the regulators the framework and resources to carry out their task or preferably renationalise the compaines.

All we have seen since privitisation is the fat cats getting richer and now we have to contend with ever increasing complexity with tariffs. I mean they are only selling two products: electricity and gas. There should be no need for 100s of different price stuctures which are only there to obfuscate the true cost. And now we keep having to waste time switching because tariffs are short-term and you will be automatically placed on a more expensive one if you don’t keep checking.