ENERGY regulator Ofgem has stepped up its investigation into the big six energy suppliers by appointing a specialist team of accountants to investigate how they calculate their profits.
Forensic accounting specialists from BDO have been tasked to look at the trading profits, wholesale prices and hedging practices of the firms – British Gas, E.ON Energy, EDF Energy, Scottish Power, Npower and Scottish & Southern Energy – to determine if profits at their retail arms have been underestimated to justify higher prices.
The appointment is part of an investigation launched by Ofgem in March, when it stated it had evidence that the big six had pushed up prices in response to rising costs more quickly than they reduced them when costs fell and promised to look into the “facts behind the numbers”.
The regulator yesterday said it wanted an independent accountant’s view to improve transparency over the pricing decisions made by the power companies.
BDO’s appointment comes just days after another round of huge price hikes started to kick in for customers following increases by five of the suppliers.
Scottish Power increased its bills on August 1, meaning that a dual fuel customer paying by direct debit saw prices rise by £173 to £1,206.
Scottish & Southern Energy has said its gas prices will rise by an average of 18% and electricity prices by 11% from September 14.
British Gas raised its gas and electricity prices by an average of 18% and 16% respectively from last week.
E.ON said the average dual fuel bill for a customer paying with direct debit will rise by 15.2% to £1,190 from next month, while Npower has just announced average tariffs for gas will increase by 15.7% and electricity by 7.2% from October 1.
BDO’s investigation is expected to last four months, with a report expected before the end of the year.
The Scottish Government has calculated that up 170,000 more Scots would be pushed into fuel poverty if recent fuel price increases were replicated across all suppliers.
It welcomed the news that Ofgem was stepping up its investigation.
Housing and Transport Minister Keith Brown said: “It is a disgrace that in energy-rich Scotland people should be facing fuel poverty.”
“Recent increases could see an average of £190 a year added to the dual fuel bill of an average customer – more than many can afford.
“Although we have welcomed the offers made by energy companies to maximise support for energy efficiency they give to households, we are still urging power companies to do all they can to mitigate the impacts on the most vulnerable in our society.
“Electricity and gas markets are not working for consumers and it is vital that regulators ensure that customers’ interests are safeguarded.”
Finance Secretary John Swinney has already met with Ofgem to voice the Scottish Government’s concerns, especially the impact on vulnerable customers.
The Scottish Government said it also supported Ofgem’s intention to simplify complex tariffs in order to allow consumers to easily compare prices.