Citizens Advice has recommended that every household in the UK should get a one-off £285 rebate on fuel bills after energy networks claim £7.5 billion in “unjustified” profits over the past eight years.
The independent charity says the network of firms had enjoyed a multi-billion pound windfall at the expense of consumers, blaming regulator Ofgem for “errors in judgement”.
According to their research National Grid made an operating profit of more than £4 billion in 2015/16, although the company’s annual accounts show that around a quarter of that profit was made in the US or on other activities.
Gillian Guy, head of Citizens Advice, said: “Decisions made by Ofgem have allowed gas and electricity network companies to make sky-high profits that we’ve found are not justified by their performance.
“Through their energy bills, it is consumers who have to pay the £7.5bn price for the regulator’s errors of judgment. We think it is right that energy network companies return this money to consumers through a rebate.”
Ofgem sets the charges that network companies like National Grid, SSE and Cadent – which distributes gas – can levy in any eight-year period.
That is because they are monopoly operators.
But in the current period, lasting from 2013 to 2021, Citizens Advice says Ofgem has been too favourable to the companies’ interests.
It claims that Ofgem overestimated the risks for investors in the networks (costing consumers £3bn), assumed interest rates would be higher than they turned out to be (costing consumers £3.4bn) and rewarded companies that inflated cost estimates for projects (costing consumers £1.1bn).