British energy companies asked to reduce prices after windfall profits

Five of UK's biggest energy companies have come under mounting pressure to reduce prices after figures from Ofgem, the industry regulator, revealed the companies made £105 in profits this year from each household. This is the highest level of average profits the companies made in five years.

According to Ofgem the net profit margins earned by the so-called Big Six companies – British Gas, ScottishPower, EDF Energy, N-Power, Scottish & Southern Energy (SSE) and E.ON were up from £75 per average dual fuel customer last November to £105 at the start of this month.
The figure, is the highest average margin earned by the industry since 2004, however Ofgem says the increase would likely be short-lived with by British Gas' decision to pare its gas prices by 7 per cent. The move is likely to lead to further cuts from rivals.

The report has however, sparked a bout of angry criticism of the industry for withholding the wholesale price cuts with
Centrica, the owner of British Gas, expected to report an estimated 50 per cent increase in 2009 profits to £550 million on Thursday.

According to Mike O'Connor, chief executive of Consumer Focus, the industry watchdog, householders would no doubt wonder why margins have increased for the fifth consecutive quarter even as wholesale costs continue to fall.

Meanwhile, energy and climate change secretary, Ed Miliband has called on the remaining companies to reduce prices. He said householders facing high winter fuel bills deserved to see the benefits as soon as possible. He added that British Gas's cut was a welcome first move that needed to be emulated by suppliers passing on the benefits of lower wholesale prices.

According to industry watchers, between 2007 and 2010, the average UK energy bill for a dual fuel customer surged from £912 to £1,223.
Though Andrew Wright, Ofgem's senior partner for markets, acknowledged that there was a case for pricing commensurate with the demands of the huge infrastructure investments, estimated at £200 billion by 2020 he added that Ofgem ''would also expect recent falls in wholesale energy costs to be passed on to consumers''.