Big Six domestic profits increase but overall profits suffer a drop

(Ofgem)

Ofgem has reported that the Big Six energy suppliers saw domestic profits jump 75 per cent last year. However, the report shows that total profits across supply and generation fell by £133m, or 3.4 per cent, on the previous year. This was a result of generation profits falling more than supply profits rose. Profits increased in the domestic supply market, providing an average profit margin of 4.3 per cent.

Overall profits for energy supply and generation fell from 2011 to 2012, from £3.9bn to £3.7bn. The average margin the six largest suppliers made in generation in 2012 was 20 per cent compared with 24 per cent in 2011.

Aggregated profits across the residential supply businesses of British Gas, SSE, Scottish Power, EDF Energy, Npower and E.ON increaed to £1.19bn from £681m in 2011, but rise was in part from higher household consumption (due to cold weather) and higher prices, said Ofgem.

The report says that the profit accounted for £53 of a consumer bill of £1174, from £30 in 2011 (customer bill £1006), £35 in 2010 (bill £1063) and £8 in 2009 (bill £1043).

Ofgem's claims that "the way in which the whole retail market worked meant there was not as much competitive pressure on suppliers as there should be." Which is why, it said, its introduced the reforms it has, including the obligation that the Big Six publish the price at which they will trade wholesale power for up to two years in advance.

British Gas, says the regulator, saw profit margins of 6.6 per cent:

(Ofgem)

Ofgem added that, whilst there is "some evidence of rising profit margins", owing to a mix of higher prices and volumes (i.e. revenues), rather than lower costs. "It is not yet possible to assess whether this is a sustained trend or the result of unusual weather over the past three years."