Energy network companies pocket £4 billion in excess profits from cost-of-living crisis, says Citizens Advice

  • Citizens Advice has been helping more people than ever who can’t afford energy bills while network companies enjoy excessive profits

  • The charity previously warned Ofgem of loophole that led to windfall, which is linked to inflation 

  • It says network companies should give the money to struggling billpayers

Citizens Advice says energy network companies, which provide pipes and cables to people’s homes, have pocketed nearly £4 billion in excess profits over the last four years.

During this time, the charity has helped a record nearly 700,000 people in England and Wales struggling to afford their energy bills, and five million currently live in households in debt to their supplier.

In its analysis of new Ofgem company performance figures, Citizens Advice says a misjudgment by the regulator has allowed energy networks to profit from the high inflation that drove the cost-of-living crisis. 

Energy network firms are monopoly companies with no competitors, so people rely on Ofgem to set fair network charges through ‘price control’ regulation. These charges are then added to people’s bills. 

Citizens Advice says a flaw in the current price control, which it warned the regulator about in 2020, has rewarded companies with billions in undeserved profits, instead of getting customers a fair deal. These profits are over and above what Ofgem believes is reasonable.

With average bills now over two-thirds higher than they were in 2021, the charity wants network companies to use the money to support those struggling with rising costs, through targeted energy bill support and debt write-off schemes. This is a genuine windfall profit and, as customers are already funding grid investment through their bills, it won’t be used to upgrade infrastructure.

Profits dropped into companies’ laps

Citizens Advice says network companies benefited from borrowing costs being overestimated in the current price control, due to high inflation. This has boosted company balance sheets, dropping a near £4 billion windfall into their laps, years after the charity warned Ofgem that companies could benefit from lower than estimated borrowing costs.

Millions struggling to afford bills

While network companies have enjoyed this windfall, household budgets have been decimated by high inflation and soaring energy costs. 

Bills are expected to rise again from April and remain historically high for years to come. The total energy debt households owe suppliers has reached a record £3.8 billion - around the same as the windfall made by network companies.

Dame Clare Moriarty, Chief Executive of Citizens Advice, said: 

“We now know that while households have struggled with sky-high energy bills, network companies have been making astronomical profits.  

“We’ve called out the billions of pounds of excess profits made by these companies before, and Ofgem said it would get tougher in subsequent price controls. The measures it put in place have clearly failed.

“Networks should now do the right thing and give this money to those billpayers still struggling, by funding much-needed debt relief and targeted energy bill support.”

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Notes to editors:

  • Our report, Debt to society: what the network companies should do with their windfall profits, is available on the Citizens Advice website.

  • Network company outperformance figures are taken from the company reporting to Ofgem. Total debt outperformance reported to date from the current price control is £3.9bn (adjusted to 2023/4 prices). Company performance data is available on the Ofgem website.

  • In practice, the outperformance highlighted by Ofgem results in additional Regulated Asset Value (RAV) growth, paid for by consumers through depreciation allowances over the regulated asset life. However, companies are able to leverage the additional RAV to raise money, meaning the benefit to companies is immediate.

  • In 2020, Citizens Advice warned Ofgem that companies could benefit from lower than estimated borrowing costs under the current price control. See: Citizens Advice, Response to Ofgem RIIO-ED2 Methodology consultation Annex 3 Finance Section, October 2020; and Response to Ofgem consultation on RIIO-2 Draft Determinations Finance Section, September 2020.

  • Our 2019 report Monopoly Money found that energy consumers in Great Britain had overpaid by billions between 2004 and 2019. This work updated and extended our report Energy Consumers’ Missing Billions, which was published in 2017.

  • Citizens Advice has helped 691,000 people with energy affordability issues since January 2021, and we've helped 6.22 million people with all energy issues since January 2021. Our Fixing the Foundations report found that five million people are currently living in a household in debt to their supplier. 

  • Citizens Advice is made up of the national charity Citizens Advice; the network of independent local Citizens Advice charities across England and Wales; the Citizens Advice consumer service; and the Witness Service.

  • Our network of charities offers impartial advice online, over the phone, and in person, for free. 

  • Citizens Advice helped 2.68 million people face to face, over the phone, by email and webchat in 2023-24. And we had 51.7 million visits to our website. For full service statistics see our monthly publication Advice trends.

  • Citizens Advice service staff are supported by more than 19,000 trained volunteers, working at over 1,900 service outlets across England and Wales.

  • Citizens Advice is the statutory consumer advocate for energy and postal markets. We provide supplier performance information to consumers and policy analysis to decision makers. 

You can get consumer advice from the Citizens Advice consumer service on 0808 223 1133 or 0808 223 1144 for Welsh language speakers.