Fuel poverty campaigners have strongly criticized energy watchdog Ofgem for its recent decision to allow increased energy bills, resulting in British Gas reporting bumper profits that are costing each customer an extra £66 in the first half of 2023.
During this period, British Gas shocked the nation with a staggering 900% increase in profits, amounting to an impressive £969 million. Ofgem’s decision to maintain the price cap on domestic energy bills enabled energy supply companies to rake in higher revenues.
Almost half of these bumper profits, totaling £500 million, can be attributed to the changes in the price cap, which directly impacted the 7.52 million households supplied by British Gas. As a result, each customer had to bear an additional £66.40, with British Gas customers constituting a quarter of all UK households.
Ofgem has defended these results, not only for British Gas but also for other domestic energy suppliers experiencing similar profit surges. The regulator claims that this is a “one-off” opportunity for companies to recover losses incurred during and after the pandemic when they were unable to pass on the rising global energy costs to consumers.
However, campaigners vehemently dispute Ofgem’s rationale, arguing that the current price cap, set at £2,074 per year, fails to protect households from the crippling burden of soaring energy costs amidst the ongoing cost of living crisis.
Fuel Poverty Action, an organisation dedicated to advocating affordable energy, has called for a fresh windfall tax on supplier profits to alleviate the debt burden faced by struggling households struggling to pay their energy bills. Shockingly, National Energy Action, another campaign group, reveals that approximately 6.6 million UK households are still grappling with fuel poverty, forced to allocate an unfairly large share of their income to keep their homes adequately heated.
Jonathan Bean, head of policy for Fuel Poverty Action, firmly asserts, “Ofgem has gifted British Gas an extra £500m by inflating our bills. Instead, the billions gifted to energy firms should be reclaimed by a windfall tax used to write off energy debts.”
In response, Ofgem justifies the increased profits recorded by energy firms, stating that this represents a one-time opportunity for operators to recover “significant costs” incurred during the pandemic and the Ukrainian invasion. They reassure the public that future profits will “fall back significantly.”
Chris O’Shea, CEO of Centrica, British Gas’ parent company, clarifies that the bumper profits are not indicative of a new norm. He emphasizes, “We would not expect to see profits anywhere near this level [in the future], it really is a one-off… It’s important that people understand that it’s simply a recovery of costs that we incurred in the past.”
