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Energy watchdog 'failing consumers'

Source BBC News@

UK energy billMPs say energy bills need to be much more transparent

The energy regulator Ofgem is not doing enough to ensure that energy company profits are transparent, according to a group of MPs.

The Energy and Climate Change Committee (ECCC) report said the watchdog was "failing consumers by not taking all possible steps to improve openness".

The Committee said that "working out exactly how their profits are made requires forensic accountants".

The big six are E.ON, SSE, British Gas, npower, EDF and Scottish Power.

"At a time when many people are struggling with the rising costs of energy, consumers need reassurance that the profits being made by the Big Six are not excessive," said Sir Robert Smith MP, on behalf of the committee.

The six companies have different divisions to deal with the different functions of their businesses: generation, trading and supply. The committee said that the divisions sometimes bought and sold services and energy from each other, making it difficult to work out how much money was being made overall.

"Greater transparency is urgently needed to reassure consumers that high energy prices are not fuelling excessive profits," the committee said.

Poor communication

The MPs criticised Ofgem for having a "relatively light touch approach and for not fully implementing the recommendations of the accountants it commissioned to improve how energy companies report their profits".

"Ofgem needs to use its teeth a bit more and force the energy companies to do everything they can to prove that they are squeaky clean when it comes to making and reporting their profits," said committee member John Robertson MP.

Ofgem agreed that the energy suppliers had been "poor at communicating with their customers".

"Ofgem has made energy companies produce yearly financial statements, which have been reviewed twice by independent accountants and found to be fit for purpose," said Ofgem's senior partner for markets, Rachel Fletcher.

Which? executive director Richard Lloyd said that the public would not feel that they were paying a fair price for energy until prices were simplified and the costs that went into generating them were as transparent as possible.

"We want the Government to introduce simple energy pricing and a clear ring-fence between generation and supply businesses, so consumers can see exactly what they're paying for and be more confident that there is effective competition in the energy market," he said.

Fuel poverty

The Energy and Climate Change Committee also reprimanded the government for not doing enough to help low-income families struggling with fuel poverty.

The committee argued that the use of levies on fuel bills to raise funds for social and environmental programmes could end up hitting those on low incomes.

Instead, they recommended such funding be raised through direct taxation.

Sir Robert Smith MP said: "Tax-funded public spending is a less regressive mechanism than levies on energy bills, which can hit some of the poorest hardest. Shifting the emphasis from levies to taxation would help protect vulnerable households."

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