UK households are overpaying for their electricity following Ofgem-set price controls that have resulted in excess profits for distribution companies, a charity has said.
Citizens Advice said households are “footing the bill for billions of pounds in excess profits” made by electricity distribution companies – the firms that own and operate the system of cables and towers that bring electricity from the national transmission network into homes.
Last year the charity said that decisions by the regulator in the way it calculated price controls across the gas and electricity networks had cost consumers a total of £7.5 billion,or an average of £285 per household over the eight-year price control.
According to Citizens Advice, electricity networks alone are set to make excess profits averaging £75 per household across the eight years in even the least affected regions of London, Southern and South East England, the North West and Eastern England.
It has calculated that households in Merseyside and North Wales are entitled to a rebate of £125, while those in South West England and Northern Scotland should be given £110 back.
It is calling on networks to return the money to their customers.
The charity is also calling on Ofgem to ensure that its next set of price controls deliver a better deal for consumers.
Citizens Advice chief executive Gillian Guy said: “People across the country are overpaying on their energy bills because some network companies are making unjustified profits.
“Ofgem has signalled its intention to deliver a tougher settlement on the network companies and a better deal for consumers.
“The regulator will undoubtedly face strong and sustained opposition as the networks try to protect the status quo. Ofgem must hold its nerve and make sure that the next price control delivers much better value for consumers.
“But rather than wait for the next price control to be in place, firms which haven’t already should return these unjustified profits to consumers as a matter of priority.”
An Energy Networks Association (ENA) spokesman said: “The calculations underpinning this analysis are plucked out of thin air and run directly counter to the conclusions of the independent regulator and the Competition and Markets Authority.
“Network costs are down 17% under the current ownership model, delivering £9 billion of savings for consumers by running a world-class system of energy networks more efficiently.”
An Ofgem spokesman said: “We have already set out proposals to address the issues Citizens Advice raise by setting tougher price controls for networks from 2021, with lower expected returns for the companies. Our proposals could save consumers more than £5 billion.
“We want to work with Citizens Advice and other key stakeholders to deliver the next price control.
“We are closely monitoring the performance of all network companies and we will keep up the pressure on them to get the best possible deal for consumers in the current price control.