Energy Consumers’ Missing Billions

Energy Consumers’ Missing Billions [ 0.88 mb]

Our research finds that consumers are overpaying for energy networks by £7.5bn [1] over the course of the current 8-year price control. This report explains how this has happened, what must be done to return this money to consumers, and how to avoid these problems in the future.

Our modelling is based on revisiting several key decisions Ofgem, the energy regulator, made in its latest price negotiations with energy networks. Our modelling shows how, in each of five key decisions, the numbers went considerably in networks’ financial favour. It is hard to see how the companies could have failed to make large profits.

We recommend that:

1. Network companies should voluntarily return money to consumers through a rebate on their bills. There is precedent, particularly in the water industry, for returning overpayments to consumers. Companies have a chance to do the right thing and recognise that much of the profit they are earning is not in consumers’ best interests. Ofgem should work with network companies to make sure this happens.

2. If network companies fail to act, the government must act to make sure consumers get their money back. At a time when many consumers are struggling to pay their bills, it is unacceptable for companies to be gifted billions in excess profits. If companies do not voluntarily return this money, the government should implement a mandatory rebate.

We also propose a series of improvements to regulation, to ensure that this never happens again.

[1] Our model finds a low estimate of £3.5bn and a high estimate of £11.1bn.