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Energy firms set to double profit margins


Energy providers look set to double their profit margins over the next 12 months, according to Ofgem.

The regulator said that the ‘big six’ energy providers currently make a pre-tax profit margin of 4% on each ‘dual-fuel’ customer, which is equal to £53 a year. However, over the next 12 months, this is set to double to around 8%, or £106 per year.

These claims have been refuted by Energy UK, a representative of the industry, as they stated that the figures released by Ofgem were “inaccurate”.


Ofgem suggested the reason for the increased profit margins is because the energy market lacks competition.

They said: "Consumers need a clear explanation from suppliers as to why, when costs are falling, they are not seeing cuts in energy prices as we would expect in a competitive market."

"Concerns that savings weren't being passed on to customers when wholesale prices fall, was one of the reasons we have proposed a referral of the energy market to the Competition and Markets Authority for investigation."

However, Angela Wright, chief executive of Energy UK dismissed claims about the industries profit margins, by arguing: "Using estimates that are as inaccurate as these, and which often result in misconceptions and misunderstandings, gets us nowhere."

Falling energy prices

Whilst profit margins are increasing, Ofgem did concede that dual-fuel prices will actually fall by around £18 a year, but this is largely down to improving energy efficient measures.

In a separate announcement, the regulator also announced that as a result of restrictions being placed on the ‘big six’ energy suppliers, annual electricity bills will fall by around £12 from April 2015.

Speaking about the price reductions, Dermot Nolan, chief executive of Ofgem said: "Today's announcement is all part of Ofgem's consistent drive to get the best deal for consumers, while maintaining a stable regulatory regime which attracts investment as cheaply as possible."

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