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Ofgem Getting Tough

By 28th March 2011February 15th, 2022No Comments

 

 

Posted by: Adrian Burton

As reported by Robert Preston of the BBC, Ofgem chief executive Alistair Buchanan is getting tough having declared ‘’There is a ‘profound loss of confidence in energy companies’’

Mr Buchanan believes that energy companies need to make the tariffs being offered easier to understand so that consumers are able to make comparisons.

Apparently since 2008 the number of tariffs available has grown from 180 to over 300 now currently in the market.

Ofgem further added The “big six” suppliers should also face more competition, this would be great but it is not easy for new suppliers to enter the market and actually be competitive against the main suppliers.

Ofgem has said it would force the main suppliers to auction off up to a fifth of the electricity they generate, making room for new companies. However, only a few years ago we saw independent companies such as Bizz Energy and E4B go to the wall as they could not compete on a cost basis even though in their final set of accounts Bizz Energy had a turnover of £175 million. So whilst OFGEM must be applauded for the idea they have to realise without government incentives small independents will struggle to enter the market and compete against the major players.

Ofgem also commented that the “big six” energy firms “have adjusted prices in response to rising costs more quickly than they reduced them when costs fell”.

In the same piece it also made reference to British Gas operating profits having risen by 24% in 2010 to £742m, it will be interesting to see what profits they declare for 2011 against the back drop of rising costs for consumers. Also when reported in the papers this weekend that 5 British Gas senior managers shared in salaries and bonus’s of over £3 million pounds last year.

The reason Ofgem have launched this enquiry is because it is felt suppliers are making excessive profits.

In November, Ofgem said that energy supplier’s net profit margin per typical customer rose from £65 in September to £90 in November, a 38% rise.

At a time when energy prices are increasing dramatically affecting everyone it is disappointing to think that one or two senior managers might be being paid excessive salaries and bonus’s.