Broken energy system ‘rewarding suppliers and inflicting misery on households’

Britain’s broken energy system is inflicting misery “on homes across the country with increased standing charges and profits hurting consumers while rewarding the energy firms,” it has been claimed.

The comment from Simon Francis of the End Fuel Poverty Coalition was made in response to a new report revealing energy companies are predicted to make £1.88bn in profit in the next 12 months – up £140m on previous estimates.

The report from the Warm this Winter Coalition explained that changes to the Ofgem price cap that came into force on 1 October mean suppliers now make an average profit per customer per year of £64.70. This is up £4.70 per customer.

Unrealistic operating costs

According to the research energy companies operating costs on average make up 13% of customers’ bills. This is £242 a year.

Ofgem allows suppliers to increase these costs with inflation. As a result, they have risen 37.5% in just six years – from £176 in April 217 to £242 now.

Dylan Johnson from Future Energy Associates said Ofgem’s method of adjusting operating costs was out of date.

He explained costs for energy companies could actually be falling due to technological developments, including:

• the wider use of smart meters
• digital customer service innovations
• AI powered chatbots

Subsidising fancy headquarters

The report also found energy firms may be spending almost as much on marketing (about 11% of operating costs) as they do on running customer support call centres (about 12% of operating costs).

Francis said:

“It’s galling to think that our energy bills are so high because energy firms spend as much on sponsoring Premier League football teams and expensive TV adverts as they do on customer service.”

Fi Waters from Warm this Winter agreed that high operating costs for customers “adds insult to injury”. She said:

“Customers should not be subsidising fancy headquarters, entertaining and marketing when these companies are making billions. That money should be used to end energy debt and lower bills.”