Debt to society: what the network companies should do with their windfall profits

Debt to society: what the network companies should do with their windfall profits 1.81 MB

Citizens Advice has completed a review of the current set of price controls that apply to energy network companies. Our key findings are:

• Despite improvements in many aspects of the price control, network companies are continuing to make significant returns.

• Our analysis shows that the vast majority of the excess returns to network companies since 2021 are a windfall, with financial outperformance worth around £4 billion. That is £4 billion of profit that is not associated with improved consumer outcomes or company performance.

• This windfall has come about due to a flaw in the way the current price control accounts for inflation, meaning that the spike in inflation has allowed companies to recover costs for borrowing that significantly exceeded the actual cost of borrowing. 

At the same time as high inflation has been handing network companies unearned profits, it has put many households into the red. Our advice services have seen record levels of people who cannot afford their energy bills, and our research shows that 5 million people live in a household that is in energy debt. 

Energy debt owed by households to their suppliers stands at £3.8 billion, similar to the unearned windfall that inflation has handed to the energy network companies. As network companies have been the inadvertent beneficiaries of the cost of living crisis, we believe they have an obligation to support those still suffering the worst effects of it.