Ofgem is facing growing calls to refund UK households after analysis suggested energy infrastructure companies pocketed nearly £4 billion in excess profits over the past four years.
More than 40,000 people have signed a Change.org petition to return £130 to every household following soaring bills in the cost-of-living crisis, as campaigners warn fuel poverty is still “the highest it’s ever been”.
In a fresh analysis of Ofgem’s performance figures last month, consumer charity Citizens Advice said energy network companies, which provide pipes and cables to people’s homes to deliver electricity, have been profiting from the high inflation driving the cost-of-living crisis.
Ofgem sets the price control charges for the firms to prevent excessive costs. But Citizens Advice argued Ofgem overestimated borrowing costs for network companies when they set the current price control amid high inflation in 2021.
This has meant that company balance sheets have benefited from an almost £4 billion excess profit windfall, their analysis suggests, which works out to roughly £130 per household.
In light of the profits, Richard Winstone, known as the Regulator Guy who explains the basics to the public, launched a petition calling for Ofgem to return these profits to UK consumers.
He argues their reluctance to hand back the money is “unfair” on consumers, leaving many families facing yet another winter choosing between heating or eating.
“These networks have gotten massively excessive profits and Ofgem’s response is that they’ll fix it next time - but they won’t refund the money,” Mr Winstone told The Independent.
“In my opinion, Ofgem is not fit for purpose. It is focused on increasing profitability to suppliers and justification is that it makes it more investible in the future. But don’t seem to care about consumers today.”
He added: “We’re all missing £130 of our money at a time where levels of fuel poverty are still the highest they’ve ever been. Families are still having to choose between heating and eating and bills are expected to be even higher next winter.”
An Ofgem spokesperson said the issue raised by Citizens Advice arose due to extraordinary levels of inflation in 2021-2022, and that although it had “considered reopening our price controls” to correct the overpayments, “doing so retrospectively could have seriously undermined investment and been much more costly to consumers in the long term by increasing the cost of capital.”
It added that “consumers’ interests are best protected by enabling the investment needed at low cost to reduce our current dependence on imported gas” and said it had decided to adjust its price controls going forward so that “such inflation shocks do not lead to any excessive financial overperformance”.
Campaign groups have also joined calls for the sum to be refunded, with Fuel Poverty Action saying the refund would “especially help pensioners struggling after losing their £150 winter fuel payment”.
"While Ofgem has been giving excess profits to energy firms, millions of us have been suffering in cold, damp homes due to inflated energy prices. Ofgem is not doing its job to protect us,” said spokesperson Jonathan Bean.
Simon Francis, coordinator of the End Fuel Poverty Coalition, said: "When energy firms need money, Ofgem is quick to place additional costs onto our bills, but when consumers lose out, as appears to be the case here, the same doesn't seem to apply. This is clearly unfair.”
A spokesperson for Energy Networks Association, representing the UK’s electricity networks, said: "Great Britain has one of the most reliable grids in the world, delivering power to 28 million customers, supporting 26,000 jobs and 1,500 apprenticeships and trainees. Today, running and upgrading the electricity networks costs about 48p per day on the average bill.
“Citizens Advice's analysis is overly simplistic and looks at a narrow two-year period, ignoring the longer investment timeline and the balance of returns across a five-year period. Electricity networks are bringing in private investment of more than £100bn between 2021 and 2031, investing in our grid to promote growth in our economy. It's crucial to keep the regulatory environment stable during this time."
Network charges on electricity bills represent the cost of using the electricity grid to transport power from the power station to your house. They also cover the costs of maintaining and operating the crucial infrastructure. They are usually not separately itemised on a household’s bill - instead the supplier sets an overall price which reflects different costs, making up approximately 25 per cent of a typical fuel bill for gas and electricity, according to the National Energy System Operator.
