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Ofgem to Scrutinise Energy Firms

By Katie Anderson on August 22, 2011

Regulator Ofgem has piled pressure on the leading energy suppliers in Britain by demanding an explanation of how bills straddling a price increase are calculated.

The regulator has also commissioned a forensic accountancy firm to assess whether profits have been understated to justify the higher tariffs.

Ofgem is aiming to ensure that customers are not unfairly billed following the latest round of price increases. Earlier this month, British Gas put up gas prices by 18 per cent, whilst electricity rose by 16 per cent. With the exception of EDF, all of the other leading energy firms have increased prices ahead of the winter period.

A spokesperson for Ofgem said: “We have written to suppliers yesterday asking each of them to provide details of the approach they take to apportioning price increases and an explanation of the checks they employ to ensure accuracy.

“We also want to understand the way in which estimated and actual bills are reconciled. We want suppliers to explain what mechanisms they use when prices are raised to ensure that consumers pay the higher price only for units consumed following the price increase”.

Shortly after Ofgem promised to investigate how energy firms calculate bills this month, the regulator announced: “Ofgem has appointed accountancy firm BDO to provide recommendations on how best to improve accounting disclosures by energy suppliers.

“This follows Ofgem’s review of the retail market earlier this year, which identified the need to improve accounting transparency to give consumers more clarity about how retail prices relate to suppliers’ other costs”.

BDO has been brought in to scrutinise the accounts of energy firms such as British Gas, E.ON and Scottish Power. It is suspected in some quarters that energy firms might have hidden the true extent of profits to justify relatively high price increases at a time when many households are struggling to cope financially.

No matter what Ofgem and BDO discover, consumers are able to control the cost of energy bills to a certain extent by employing energy saving measures throughout the home. Installing the latest condensing central heating boilers, double glazing and loft insulation are just some of the ways in which customers can save energy.