Scottish Gas Hits Back at Ofgem Profit Analysis

Scottish Gas chief executive Sam Laidlaw hit back at energy regulator Ofgem this week, after it claimed that household margins were set to double.

The company dismissed the claims and said there were “deficiencies” in the analysis, which prevented the data from being construed as accurate. In turn it showed no sign or suggestion of reducing its current energy tariffs for customers.

Mr. Laidlaw, chief executive of British Gas (operating as scottish-gas-profit-analysisScottish Gas in Scotland), said that the energy regulator’s figures were merely “theoretical”, reporting household margins that were double those estimated by British Gas itself.

He said:

The Ofgem analysis is a theoretical analysis. What we are publishing today is the actual facts. We have been in discussions with Ofgem for a number of years about this methodology, which has its deficiencies and they recognise that it needs to be changed.”

The latest analysis from Ofgem suggests that energy suppliers will make a pre-tax profit of around £106 per household over the next year – up from £53 last year.

The predicted profit increase is thought to be down to British Gas customers paying higher tariffs than they were last year, thanks to a 9.2 percent price hike introduced in Autumn 2013. The rise was pushed back by a government shake-up of green levies on bills, but is expected to become a source for increased household profits later this year.

However, British Gas parent company Centrica argued that Ofgem’s figures were over-generalised, and that it would only make £40 per household this year due to a warmer winter and effective energy-efficient measures. It said that this is a 20 percent fall from last year.

Centrica also went on to say that the average household bill is expected to be £90 – seven percent less than last year. It reiterated that tariffs are not expected to change during 2014; however it showed no sign of reducing tariffs for customers, despite the recent drop in wholesale energy costs.

Richard Lloyd, executive director of consumer watchdog Which?, said:

British Gas profits are down because of a warm winter, not lower prices.

Energy companies must do everything they can to pass on any savings to their customers, including falling wholesale and network costs.”

Centrica chairman Rick Haythornthwaite, on the other hand, argued otherwise. He commended Mr. Laidlaw on his “exceptional leadership” and insisted there had been “challenges, both as a result of the weather and reflecting the wider political environment.”

Shadow energy and climate change minister added that the forecasts shown by Ofgem for the next 12 months are “just the latest example of an energy market that is not working”.

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