Hey guys,
I know that this is an obviously atrocious title, but it is what I was told today. The video below goes through all of the updates I heard today, the description of whats happened with this £4bn excess profit starts at 06:43 in the video, but I’ve done some more research and written down more information below the video.
Click here, go to Uswitch, compare and switch to save up to £200 on your energy bills
The £4bn energy customers have been overcharged
Effectively, their profits are determined by a formula that Ofgem manages, they then charge these costs to energy suppliers and then Ofgem puts these costs onto our bills, these are the Network costs that have forced our standing charges to be so high over recent years.
I won’t bore you with the technical features of the formula, effectively the amount of profit they get is partially linked to inflation, with the expectation that it’ll be slightly higher on years with bigger inflation and slightly lower on years with lower inflation, but it was expected that it would balance out around 2%.
In 2022, inflation was insane. June 2022 reported a peak of 15.2% inflation, with it coming down to 10.9% by december that year. But the formula was not designed to take these sort of unprecedented levels of inflation into account, and the end result is that the formula gave network operates almost £4bn more profit than they should have had over the l. That’s not £4bn total, that’s £4bn excess.
Cut your bills:
Energy Price Comparison* with Uswitch – Compare, Switch and Save up to £200 per year
Car Insurance Price Comparison* with Uswitch – Save up to £523 per year
Home Insurance Price Comparison* with Confused.com – Savings can be made by reveiwing your home insurance premiums annually
Broadband Price Comparison* with Uswitch – Broadband from as cheap as £19 per month
Boiler Insurance* with Home Emergency Assist – 35% off – Use code: REGULATORGUY
What did Ofgem say about it?
I attended a meeting with Ofgem this afternoon, with dozens of other consumer groups and charities, and they gave an update on this issue. Effectively, Ofgem are going to do nothing about it. I kicked off (as described in the video above) because Ofgem does not treat consumers as well as they treat businesses.
Their justification for not clawing back the excess profits is that they do not want to undermine investor confidence in the energy industry. Effectively, they are worried about angering rich people and businesses. They claimed that it would be unprecedented for Ofgem to claw back money when an allowance hasn’t been applied correctly and they even had the audacity to say they wouldn’t have clawed money back from consumers if inflation had gone down an excessive amount and the network companies had received miniscule profits!
I called them out on this and reminded them that this isn’t unprecedented, that actually Ofgem did the opposite in 2023 when they clawed back supplier profits from consumers by charging us all £150 extra on our energy bills so suppliers could recoup lost revenue from the year before. This was called the backwardation allowance, and Ofgem themselves used this allowance as an explanation for why British Gas managed TEN TIMES as much profit in 2023 compared to 2022, because of this one-off cost clawing back expenses from the previous year.
So it is not unprecedented, it is simply that they haven’t done it to businesses, only to consumers. I explicitly told them that it is obvious they care more about business confidence in Ofgem’s ability to regulate the market than they care in consumer’s confidence. I told them that they are not treating consumers fairly and they are clearly prioritising keeping investors happy rather than being fair to consumers.
This won’t go anywhere, they won’t give us the money back and there is nothing we can do except send them a bunch of complaints that they’ll produce standardised responses for and send back to you, which will not result in us getting our money back.
In case you can’t tell, I am outraged by Ofgem’s callous nature toward fairness for consumers.
In their slight defense, they have decided to change that formula so this doesn’t happen again. Once again, Ofgem closing the barn door after the horses have bolted. Annoying, frustrating and bloody useless in the short-to-medium term as it is highly unlikely inflation is going to hit 15% again any time soon!
Cut your bills:
Energy Price Comparison* with Uswitch – Compare, Switch and Save up to £200 per year
Car Insurance Price Comparison* with Uswitch – Save up to £523 per year
Home Insurance Price Comparison* with Confused.com – Savings can be made by reveiwing your home insurance premiums annually
Broadband Price Comparison* with Uswitch – Broadband from as cheap as £19 per month
Boiler Insurance* with Home Emergency Assist – 35% off – Use code: REGULATORGUY
Anyway, that’s everything from me on this topic. More rubbish news coming out of Ofgem.
Please do have a look at the movey saving options above, April is a dangerous time for our finances and we’re all going to feel the pinch more this year than we did last. Try to take some control and switch to cheaperr deals that are locked in for a year at least, because it looks like the cost-of-living crisis and energy crisis are both going to be here for a while.
Don’t forget to share this article around if you found it interesting/informative and subscribe to my blog post to get immediate notifications on my latest content.
Thanks everyone
Richard Winstone
The Regulator Guy.
