Energy Network Companies Accused of Pocketing £4 Billion Windfall Amid Cost-Of-Living Crisis by Citizens Advice
Energy network companies pocket £4 billion in excess profits from cost-of-living crisis, says Citizens Advice
Citizens Advice says energy network companies, which provide pipes and cables to people’s homes, have pocketed nearly £4 billion in excess profits over the last four years
Citizens Advice has been helping more people than ever who can’t afford energy bills while network companies enjoy excessive profits
The charity previously warned Ofgem of loophole that led to windfall, which is linked to inflation
It says network companies should give the money to struggling billpayers
During this time, the charity has helped a record nearly 700,000 people in England and Wales struggling to afford their energy bills, and five million currently live in households in debt to their supplier.
In its analysis of new Ofgem company performance figures, Citizens Advice says a misjudgment by the regulator has allowed energy networks to profit from the high inflation that drove the cost-of-living crisis.
Energy network firms are monopoly companies with no competitors, so people rely on Ofgem to set fair network charges through ‘price control’ regulation. These charges are then added to people’s bills.
Citizens Advice says a flaw in the current price control, which it warned the regulator about in 2020, has rewarded companies with billions in undeserved profits, instead of getting customers a fair deal. These profits are over and above what Ofgem believes is reasonable.
With average bills now over two-thirds higher than they were in 2021, the charity wants network companies to use the money to support those struggling with rising costs, through targeted energy bill support and debt write-off schemes. This is a genuine windfall profit and, as customers are already funding grid investment through their bills, it won’t be used to upgrade infrastructure.
Profits dropped into companies’ laps
Citizens Advice says network companies benefited from borrowing costs being overestimated in the current price control, due to high inflation. This has boosted company balance sheets, dropping a near £4 billion windfall into their laps, years after the charity warned Ofgem that companies could benefit from lower than estimated borrowing costs.
Millions struggling to afford bills
While network companies have enjoyed this windfall, household budgets have been decimated by high inflation and soaring energy costs.
Bills are expected to rise again from April and remain historically high for years to come. The total energy debt households owe suppliers has reached a record £3.8 billion - around the same as the windfall made by network companies.
Dame Clare Moriarty, Chief Executive of Citizens Advice, said:
“We now know that while households have struggled with sky-high energy bills, network companies have been making astronomical profits.
“We’ve called out the billions of pounds of excess profits made by these companies before, and Ofgem said it would get tougher in subsequent price controls. The measures it put in place have clearly failed.
“Networks should now do the right thing and give this money to those billpayers still struggling, by funding much-needed debt relief and targeted energy bill support.”