Energy companies accused of 'profiteering'

Energy companies were last night accused of "profiteering" after new figures revealed the price of average household bills has soared by 37 per cent over the last three years - as wholesale prices for energy has fallen substantially.

Politicians and watchdogs called on the Government to force energy companies to open their books and explain what price they were paying for their gas and electricity and what price they were charging customers.

The figures were published just a day after the fifth of the big six energy companies, E.on, announced it was increasing its customers' bills, adding £63 to average annual bill.

It became the latest bill increase to hit families after the rise in VAT to 20 per cent at the start of the year, along with petrol climbing towards £6 a gallon and stubbornly high food prices.

In total, 24.6 million customers across the five companies have been hit by price rises.

E.on, along with its rivals, blamed rising wholesale energy prices, which have climbed by 35 per cent since last Spring.

However, experts pointed out that this was a selective use of data and that over a longer period it appeared that customer bills had risen much faster than prices on the wholesale market, from companies buy their energy.

Figures, supplied to The Daily Telegraph by ICIS Heren, the leading energy research company, showed that exactly three years ago, the wholesale price for gas was 58p a therm. Since then it has fluctuated, going up, down and then slowly rising since the summer of last year, to reach 55p a therm at the start of this week. So, gas prices are 5 per cent lower.

A similar pattern has occurred in the wholesale electricity market with prices three years ago £77 a Megawatt hour. This week it was £58, a full 25 per cent lower.

In this period the average household has had to find an extra £338 a year to pay their annual energy bills. According to uSwitch, the price comparison site, the average bill for dual fuel – gas and electricity – has gone from £912 a year to £1,250.

Consumer Focus, the official watchdog, said it was imperative that the Government made use of powers, coming into force as part of European legislation in March, to insist energy companies opened their books for inspection.

Audrey Gallacher, head of energy at Consumer Focus, said: "Consumers will feel they haven’t received the benefits of low wholesale prices for the last two years but suppliers have been quick to up prices as wholesale costs have begun to rise.

"The big profits firms are set to achieve from higher use over the cold winter, and their healthy margins on pricing, will also raise burning questions from customers.

"Customers need to have confidence in the price they’re being asked to pay and this simply isn’t the case. The Government must use new EU legislation to get more information on the prices the big six pay for energy and require detailed breakdowns of profits and margins from all firms."

Ann Robinson, the head of consumer policy at uSwitch, said: "The problem is we just don't know what energy companies are paying for their gas and electricity. I was really quite surprised by all the bill increases this winter, I thought we could have been due for some bill cuts."

The only company not to have raised customer bills is EDF, which late last year made a promise not to increase its tariffs until at least March 2011.

Michael Meacher, the Labour MP, said: "What happens is utility companies, understandably, put up their customer bills when wholesale prices are rising, but are very 'sticky' about lowering bills when wholesale prices fall.

"My impression is the gap between and wholesale and retail has got far too wide. And frankly, it is a scam; it is profiteering. I'd like to see Ofgem be far tougher and sharper with the companies."

Ofgem, the industry regulator, at the end of last year announced an investigation into the major gas and electricity suppliers, after it calculated that companies were making £90 per profit from each customer on an annual basis, a jump of 38 per cent over the previous three months. It said it wanted to check if firms were "being straight" with its customers. It is due to report in a few months' time.

The energy industry has disputed Ofgem's figures, adding that the price of wholesale energy makes up less than half a customer's bill, with transport, distribution, metering costs and VAT contributing a large chunk. Also, green taxes, which the energy companies have to pay and pass on to customers – a levy that did not exist a few years ago – make up 9 per cent of electricity and 5 per cent of gas bills.

Christine McGourty, Director of Energy UK said: “On top of that are a range of other costs which have been rising year after year. These include the cost of getting the energy to customer, providing meters, and paying for social and environmental programmes."

Some energy companies, notably British Gas, have put aside far more money to help vulnerable customers pay their bills compared with three years ago.

However, according the most recent figures from the Department for Energy and Climate Change there were 4.5 million households in fuel poverty, meaning they had to spend 10 per cent or more of their income to heat and light their homes.