Energy company profits

MTDD

If the big energy companies are passing on higher wholesale prices to the consumer how are they making such huge profits.
 My energy provider Octopus tried to raise my direct debit from £127/month to £270 when my account was slightly in credit in March. I contacted them and they said "we appear to have over estimated your payment" an asked what would I like to pay. I said if the average rise is 54% I will raise that much and adjust my direct debit as required. Since then they have tried to change my DD to £270 but changed it back to the previous value, because on the variable rate the DD can be charged by the customer. 
Any comments on similar experiences?

pochase

The companies that supply your energy don't make huge profits, you mean the companies some of them belong to like Shell. Shell makes huge profits for example in whole sale, but they don't make much profit in the sector that supplies energy to the households. And suppliers that don't belong to a big company just make something like 3% profit that Ofgem allocates to them in the cap. And that is if they are lucky and the market prices for energy don't get to high and they make losses on selling you energy.

That is the reason hardly any supplier will take you on as a company, you are likely to create a loss for them. If they would earn a lot of money on customers they would look at getting as many new customers as possible, wouldn't they?

You have fallen for the average 54% increase that was promoted by Ofgem and was in all headlines. Reality is that the 54% is an average for a very special scenario of a gas and electricity use. If your usage pattern is different, your increase will be different. The increase for gas was 75% while electricity was more like 35%.

If you can give us your usage for the last 12 months we will be able to tell you what your current DD should be.

Next is that there is another huge increase coming up in October, currently estimated at 40% to 45%. So your energy cost will more than double from what you paid in March to October. £1277 cap in March to an estimated £2800 to £2900 cap in October.

macman

Profit margins are normally as a percentage of turnover. If their turnover is up 54% as a result of increase, then so is their GP.
Similarly, the Treasury's 5% VAT take is now worth 54% more in cash terms.
But, as pointed out above, there is currently no profit in the retail domestic market, suppliers are making a loss on every new customer they take on under the capped SVT.

MattMattMattUK

MTDD said:

If the big energy companies are passing on higher wholesale prices to the consumer how are they making such huge profits.

It depends how you define "energy companies". The companies that supply your home buy energy on the markets an sell it to you, they were and are being forced to sell at or below cost and so are making a loss. The distribution network that forms the backbone of the domestic system is making the same profit as before as they are there to transport the energy from the ports/points of generation/extraction to your home. The exploration, extraction and in some cases generation companies are the ones making higher profits, that is because the value of their product on the open market has risen considerably. 

MTDD said:

 My energy provider Octopus tried to raise my direct debit from £127/month to £270 when my account was slightly in credit in March. I contacted them and they said "we appear to have over estimated your payment" an asked what would I like to pay. I said if the average rise is 54% I will raise that much and adjust my direct debit as required. Since then they have tried to change my DD to £270 but changed it back to the previous value, because on the variable rate the DD can be charged by the customer. 

How much it rises is not really connected to the 54%, that was average rise for those on the standard variable tariff with average usage, for individuals it can vary considerably based on usage and for those coming off of a previous fixed deal it can rise much more, even more again if someone chooses to go onto a new fix.

What is your annual usage of gas and electricity in kWh? That figure will be on your bills. 

Xbigman

Its impossible to tell from the limited amount of information you have supplied but if you are paying £127 on a cheap fix and you go onto the April SVT your DD may need to double, so Octopus could be about right. 
You're also complaining about Octopus,  the most flexible company on DD's out there.

Darren