Want the top news headlines sent to your inbox daily? Sign up to our FREE newsletter below Subscribe Thank you for subscribing We have more newsletters Show me See our privacy notice Invalid Email

Fuel poverty campaigners and a North East MP have joined the simmering row over claims the ‘Big Six’ energy suppliers are making larger profits than they have admitted to.

Business Secretary Greg Clark is to investigate the claims made today that gas and electricity firms may be making six times more than they publicly state.

The trade body Energy UK claimed the report was “a misrepresentation of the facts”.

Peter Smith, Director of Policy of the National Energy Action which has offices in Newcastle, said the claims highlighted ongoing issues over tariffs in the energy market.

He said a separate report last week revealed that 58% of all energy customers are stuck on standard variable tariffs with a Big Six provider, the default and usually most expensive tariff, four months since the Competition and Markets Authority (CMA) concluded its two year market investigation.

It said energy companies are failing to help their customers off these more expensive tariffs and the inquiry found consumers are collectively overpaying by more than £1bn.

Mr Smith said: “The CMA analysis demonstrated consumers could have paid £1.7bn a year less for their gas and electricity bills had the market been working effectively.

“NEA’s particular focus is on vulnerable energy consumers and in particular those on the lowest incomes who struggle to pay for this essential service.”

The ‘Big Six’ are British Gas, EDF Energy, E.ON UK, npower, ScottishPower and SSE.

Mr Smith added: “In the short-term, the regulator Ofgem, the UK Government and energy industry must work together to ensure vulnerable consumers do not continue to be bamboozled by confusing and difficult-to-compare tariff choices.”

The allegations today were based on a report commissioned by Energy UK from accountancy firm PwC.

According to the regulator, Ofgem, UK energy firms make a 4% profit margin on the price of a typical dual fuel bill.

But using figures in the PwC report, a national newspaper said that suppliers could actually be making a 24% profit margin.

In the report, PwC said the average cost of supplying energy to a household - covering the cost of wholesale energy and sending bills - was £844 a year.

The report said 70% of customers are on standard variable tariffs, and pay up to £1,172 a year.

Assuming the costs are £844 a year, that would leave them with a profit of up to £272, or 24%, after VAT is removed.

The report accused Energy UK of cherry-picking parts of the report to put on its website that failed to include details of the profits.

However in a statement Energy UK said: “It is not possible to use the information in the report to calculate the actual margin achieved by individual suppliers against their various tariffs. For that reason, Energy UK used Ofgem data on margins drawn from the publicly available Consolidated Segmental Accounts of major energy suppliers. Ofgem shows actual average supplier margins of 4 %. That is the figure that appears on the Energy UK website.

“The numbers presented in the PwC report and on the Energy UK website represent averages across all tariff types. It is not possible to use this data to calculate, accurately, supplier margins on either the most expensive tariff or the cheapest tariff.

“The cost of buying energy for Standard Variable Tariffs (SVTs) will be higher than for a fixed term deal where you know more about usage and volume so can buy specifically for them. None of this is reflected in the article.”

Despite its denials, the issue still raises serious concerns, according to Newcastle North MP Catherine McKinnell.

She said: “This report is very worrying, and mirrors the serious concerns the Labour Party has been raising for some time now about the way our energy market clearly isn’t working for its customers.

“I am particularly unhappy about this level of profit when we know that millions of British households are living in fuel poverty – and the North East has the highest rate of fuel poverty of anywhere in the country.

“Until the Government starts taking real action on this issue, far too many people will continue to spend the winter months making the awful choice between heating or eating.”