October 14, 2011

Ofgem has revealed that the big six utility companies are making £125 a year out of each of their dual fuel customers. This figure has risen by 733% in just four months.

The energy regulator put simple tariffs and clearer bills at the centre of proposals for “radical reform” of the energy market this morning as it warned a lack of transparency is stifling competition in the market, apparently underlined by a profit margin that has risen from 1.3% on the average bill in June to 9% in October, following a wave of tariff increases.

Ofgem said its plans would make it easier for consumers – currently faced with more than 400 tariffs to choose from – to compare prices. The watchdog will set a fixed standing charge on top of which the companies will have to offer a variable price per unit, making bills clearer and price comparison easier. This means there will be no complicating factors such as discounts, with the only changeable element on a bill the price per unit of gas or electricity. “So the lower the price the smaller the bill – with no exceptions,” Ofgem said.

The regulator also revealed that the average household energy bill now stands at £1,345 a year on a rolling 12-month average, compared with £1,170 in June. In news that will outrage consumer groups who have long argued that energy companies make too much money from cash-strapped customers, Ofgem also revealed that over the same period, the net margin for a typical standard tariff dual fuel customer has risen from £15 a year, as measured in June, to £125 in October.

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