MPs blame energy regulator Ofgem for allegedly failing consumers
Energy regulator Ofgem is not taking all the necessary steps in order to ensure that the energy suppliers’ profits are transparent enough, a new report by the Energy and Climate Change Committee (ECCC) has revealed.
As part of the report, the MPs criticise the regulator for its relatively light touch approach and for not fully implementing the recommendations of the accountants it commissioned to improve how energy companies report their profits.
Considering consumers’ lack of confidence in energy companies, the MPs argue, Ofgem should reconsider whether the transparency to be gained by implementing more of BDO’s recommendations outweighs the costs involved.
The six largest energy companies are complex with several different arms – generating, trading and supplying energy – that sometimes sell energy and services to other parts of the same company. When reporting their overall profits they include all these different business arms making it difficult to determine the precise profits of the energy supply side of the business and how this impacts upon energy prices. Greater transparency is urgently needed to reassure consumers that high energy prices are not fuelling excessive profits, according to the MPs.
On behalf of the Committee, Sir Robert Smith MP commented that “ At a time when many people are struggling with the rising costs of energy, consumers need reassurance that the profits being made by the Big Six are not excessive. Unfortunately, the complex vertically-integrated structure of these companies means that working out exactly how their profits are made requires forensic accountants.”
“Ofgem should shine a brighter light on the internal structure of these big companies,” Sir Rober Smith concluded.
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