McKinnon & Clarke, one of the UK’s largest purchaser of energy, has described ScottishPower’s rising profits (up 7.9% to £1.29 billion) as “indefensible” as people struggle to heat their homes.
The consultancy’s energy analyst, David Hunter said: “Despite wholesale prices going into freefall, ScottishPower hasn’t cut domestic standard tariffs in almost a year. Failure of the "Big 6" suppliers to pass on to customers the massive reductions in wholesale energy prices, which they have been enjoying since 2008, is scandalous.
”This is an impossible position to defend, and they are not alone. Centrica, owners of British Gas, will announce their profits tomorrow which are expected to show, if anything, even stronger growth.”
Since Summer 2008, wholesale gas prices have dropped from a peak of over £1 per therm to around 38p - electricity from £90 per MWh to around £37 - falls in the region of 60%. Meanwhile costs to homes are as much as 35-40% higher for gas and 10-15% more for electricity than before the huge price rises of 2008.
Hunter added: “Competition just isn't working for the consumer - they have a choice of high prices or high prices. The "Big 6" energy companies have a stranglehold on both energy generation and supply. The small and insufficient reductions they will probably make over the coming weeks are a case of 'follow my leader' - the regulator OFGEM has already indicated that the others often wait for British Gas as first mover.
“Energy UK, the "Big 6" suppliers' body, has tried to defend their members' pricing structures with a series of smoke and mirrors, however the profits announcements really tell us what is going on - and no amount of spin will get away from the fact that these companies are enjoying huge and increasing profits paid for by homes and businesses in the UK. Energy companies are cashing in on market conditions - they win from production when wholesale prices go up, and when they come down they win by delaying retail price cuts.
Hunter added: "For years, OFGEM has claimed the market is working when it is glaringly obvious that people are simply paying too much to light and heat their homes. The regulator created the market, and has defended it for too long. We welcome plans for increased liquidity in the wholesale markets to give independent suppliers a fighting chance of competing with the dominating 'Big 6', whether through new routes to market, forced energy auctions or restrictions on self-supply. What we need is competition and transparency, not smoke and mirrors".
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