Soaring profits fires fair energy debate

Customers of British Gas, UK's biggest energy company, yesterday woke up to higher bills.

Its latest increase in prices will add an average £80 to the cost of heating for the 9 million households who use the firm, pushing annual costs up to a record £1,346.

Customers will be warmed, no doubt, by the latest positive profit figures issued by Centrica, the global company which owns British Gas. The multi-national expects to make profits of £1.4bn this year. Analysts reckon British Gas will contribute some £575m to the pre-tax profit total.

That works out at around £67 per household customer. Is that too much profit? Many think so. There's growing anger at the bumper earnings posted by the energy companies while millions face soaring bills which leave them unable to afford to heat their homes.

Labour's shadow energy and climate change secretary, Caroline Flint, said: "People will not understand how the energy giants can get away with inflation-busting price rises this winter when they are making huge profits.

"Energy companies always blame price rises on wholesale costs, but with prices and profits both up, customers have 1.4 billion reasons to ask whether British Gas is really playing fair."

Earlier this week the UK's second-biggest supplier, Scottish and Southern Energy, announced a profits hike of 38 per cent. SSE was the first of the "Big Six" energy firms to increase prices in the recent round of hikes.

It increased charges by an average of 9 per cent in October, putting about 5 million electricity customers and 3.4 million gas customers a step closer to fuel poverty, when the cost of heating their home takes up a tenth of their income.

Npower is increasing prices from 26 November, while customers of EDF and Scottish Power will face higher bills from December. E.ON is set to raise prices by 11 per cent in January, according to some newspaper reports this week.

So are the big energy companies playing being fair with their customers? Are the prices they charge reasonable? How can tiddler Co-operative Energy – which only has around 60,000 customers – afford to CUT charges by 2 per cent next month, as it announced yesterday?

Audrey Gallacher, director of energy at Consumer Focus, said: "Consumers will be sceptical over supplier profits given questions over how justified recent price rises have been.

"We need profitable companies for our economy and to invest in energy infrastructure.

"But customers need to know that the relationship between costs, pricing and profits is fair."

The Independent – in conjunction with Policy Review Intelligence – will quiz energy firm bosses at a "fair energy summit" next month. It will bring together consumer groups, charities and other experts to look at how to give customers the confidence that they are paying a fair price for tenergy.

"What is needed now more than ever is for all the stakeholders to work together and discuss tangible ideas and solutions that would constitute a fair energy deal for consumers," said Gavin Hayes of Policy Review Intelligence.

The summit – supported by British Gas, Co-operative Energy and E.ON – will be held in London on 17 December, and readers are invited to send in their questions and comments to yourmoney@independent.co.uk as well as during a live internet broadcast.