Ofgem probe confirms UNISON prediction of 'golden hole' in flawed energy market

Press release: Mon 6 October 2008


Leading Scottish energy union UNISON Scotland responded to the Ofgem Energy Supply Probe by roundly criticising the failed energy market for which the regulator is responsible.

UNISON Scottish Organiser Dave Watson called for an end to the “market madness” overseen by Ofgem which has seen consumers pour billions into a “golden hole” of energy company profits.

Ofgem’s report fails to address the problems faced by consumers, or to propose any realistic solutions in the face of blatant profiteering by energy companies. But amongst the discredited and increasingly desperate Ofgem recommendations that customers try to make ends meet by switching amongst suppliers, the report reveals the ugly truth about price discrimination against the poor. The average annual bill for households on pre-payment meters is £118 higher than those better off customers who were able to pay by direct debit.

UNISON is calling for immediate windfall taxes on energy profits, and in the long term, wider intervention in the failed energy market to ensure that consumers stop funding company profits.

UNISON Scottish Organiser Dave Watson said: “In January of this year UNISON published a research report highlighting the huge increase in energy company profits at the expense of household consumers. We showed that companies made £2.5bn more than the increase in costs of producing and selling the electricity and gas. That is £100 a year extra for the average family. We called on Ofgem to take action to address the obvious failings of the competitive market. And we predicted that Ofgem would resist such an investigation because it undermines their ideological commitment to market solutions.

“We also predicted that when the facts and noise became irresistible they would produce a very long report that would say the market was working well. Sadly in today’s report they have done just that!”

Dave Watson added:

“No serious observer is claiming the companies act as a cartel. But equally it is clear that the market is not working and the report fails to address this ‘golden hole’ of energy profits. At a time when consumers are facing even higher energy bills, today’s report simply avoids the big issue. In the short term there needs to be a windfall tax on these profits to fund some much needed relief for consumers. In the longer term we need to end this market madness and ensure that consumers stop funding company profits.”

UNISON Scotland is also concerned at the wider impact of energy on public services. Increased energy costs are a major factor cited by the local government employers body CoSLA for their below inflation pay offer to council workers.

ENDS

For Further Information Please Contact: Dave Watson (Scottish Organiser)- 07958 122 409 (m) Chris Bartter (Communications Officer) – 07715 583 729 (m)

NOTES TO EDITORS

UNISON Scotland: UNISON is one of Scotland’s largest trade unions representing over 160,000 members,and is the biggest union in the Scottish power industry. Our members in other sectors including local government also have an interest in energy, particularly fuel poverty.


Fuel Poverty: The Scottish Government Review of Fuel Poverty in May 2008 showed that 543,000 households (comprising over a million people) were in fuel poverty - which means they have to spend more than 10% of household income on energy bills. And the sharp rises in fuel costs are making the situation worse: the Scottish House Condition Survey in March 2008 estimated that for every 1% rise in average annual fuel price, around 8,000 more households go into fuel poverty. See also http://www.unison-scotland.org.uk/response/povertyresponse.html

UNISON report on ‘Golden Hole’: Report Exposes Golden Hole in Energy Firms' Accounts - Inquiry Demanded into Missing billions UNISON Press Release 22/01/2008 on the publication of ‘Gas and electricity costs to householders’, produced by Cornwall Energy Associates and commissioned by UNISON and the National Right to Fuel Campaign, January 2008 http://www.unison.org.uk/asppresspack/pressrelease_view.asp?id=1087