Energy networks’ windfall should be returned to consumers

12th July 2017 | Residential Energy

Energy networks have been accused of exploiting UK consumers to enjoy a £7.5bn windfall of unjustified “sky high” profits, and urged to return the money in the form of a one-off £285 rebate to every household.

Citizen’s Advice said the companies that transmit electricity and gas around the UK, including National Grid, were reaping “eye-watering” average profit margins of 19% from their monopolies. That compares with the 4% margin that big six suppliers, such as British Gas, make selling power and gas to householders.

The consumers group said Ofgem, which regulates the networks and sets limits on how much profit they can make, had allowed the firms to overinflate their projected costs of building pipes and wires.

The energy regulator had also overestimated the business risks faced by the companies, and did not foresee an unprecedented period of low interest rates and bond returns, the charity said in a report published on Wednesday.

Gillian Guy, chief executive of Citizens Advice, said, “Energy network firms are enjoying a multibillion pound windfall at the expense of consumers. Decisions made by Ofgem have allowed gas and electricity network companies to make sky-high profits that we’ve found are not justified by their performance.”

Ofgem rejected the claim it had failed consumers and said it had cut the costs of transmission, which account for nearly a quarter of the average household energy bill.

Dermot Nolan, chief executive, said, “While we don’t agree with its modelling and the figures it has produced, the Citizens Advice report raises some important issues about network regulation which will be addressed in the next control.”

The industry is halfway through an eight-year period of price controls that started in 2013 for gas distributors, electricity and gas transmission firms, and 2015 for electricity distributors.

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