Energy companies are making higher profits while increasing bills to consumers. That’s the conclusion that has been drawn by industry regulator Ofgem who is continuing an inquiry into the profits and pricing of the so-called ‘big six’ energy providers.

After two recent price increases, net margins at the energy giants have now increased by 49 per cent to make up £97 per year of the average customer bill.

Ofgem investigation continues as profits rise

Ofgem’s chief executive, Alistair Buchanan, recently addressed the Energy and Climate Change Select Committee about the rising profits. He said: “We need to make sure that energy companies are not abusing their position.

“I think the consumer has become slightly jaded and cynical perhaps because of some of the behaviour we have seen from the companies.”

All but one of the six major energy companies has recently increased their gas and electric prices. November saw dual fuel bill rises from both Scottish Power and SSE; December brought an increase from British Gas and this month, Npower and Eon have both lifted prices. Only EDF has promised a price freeze until March.

Vital that consumers compare energy prices

About 24.6 million consumers have seen their bills increase over the last two months, and so it is increasingly important that you regularly compare gas and electric prices to make sure you get the best deal.

The best way to compare energy prices is to head online and use a specialist website to compare gas and electric tariffs from a range of providers.

Although Ofgem has said “If we find evidence that the market is failing consumers, we won’t hesitate to act”, you can take matters into your own hands and save money on your gas and electric bills today.

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Prepayment meters are chosen by some gas and electric customers as a way to have more control over their finances and, in other cases, utility providers hook up prepayment meters in homes where there have been problems with the bills being paid promptly. While prepayment meters in theory are a great way to track energy spending, some gas and electric providers charge higher rates for prepayment customers, though there are some, like Sainsbury’s Energy, that charge the same rate for prepayment as for other payment types.

Alternatives to prepayment are available to many people. They include monthly direct debits (where you pay a monthly payment of a set, agreed-upon amount throughout the whole year) and third-party deduction plans for those who are claiming Income Support, Pension Credit, or other state benefits.

With the troubled economy causing many to have trouble paying their utility bills, consumer pressure groups are trying to encourage utility providers to make prepay energy rates more competitive with non-prepay tariffs.

Regardless of how you pay for your energy, it definitely pays to compare gas and electric because prepay customers can switch providers. Some energy providers, including Npower, Scottish Power, and E.ON are absorbing the extra costs associated with managing prepayment accounts, though the National Housing Federation says that much more can be done to bring rates in line with those of non-prepay customers.

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