Unite media release

For immediate release: Monday 21 November 2022

Unite calls on Ofgem to pull the plug on energy profiteers.

Distribution network operators (DNOS) - the ones who bring electricity and gas to the grids - guilty of ‘rampant profiteering’

Ofgem must re-open its price review and set a clear cap on distributor profits.

Sharon Graham the leader of Unite, Britain’s leading union, has written to the Ofgem CEO, Jonathan Brearley , and Chair, Martin Cave, to demand that the Regulator clamp down on excessive profiteering by energy distributors (see notes for letter).

‘Unite investigates’ - the union’s research and investigation arm - has established that last year the major energy suppliers, distributors, and generators made £15.8 billion in profits.

According to research by Common Wealth, Distribution Network Operators have higher profit margins than any other sector in the UK - with eye-watering operating profit margins of over 50% expected in 2022.

DNOs involve less well-known companies like UK Power Networks owned by CK Hutchison, the Hong-Kong based holding company that also owns Felixstowe Ports and one of the UK’s biggest water companies.

In the last four years, for example, UK Power Networks has recorded £2.4 billion profits. In the same time it handed out over £800 billion in dividends to shareholders.

Unite is calling on Ofgem to re-open its price review and set a clear cap on distributor profits. Distribution Network Operators have higher profit margins than any other energy sector.

Unite general secretary, Sharon Graham said: “Electricity distributors like UK Power Networks are milking profits during this energy crisis. The regulator is failing to properly reign them in. They’ve been holding the public to ransom for too much and for too long.

“Ofgem is a regulator that doesn’t regulate. Time for that to change. How long must the public pay for profiteering from the likes of UK Power Networks? It’s time to pull the plug on the energy profiteers.”

UK Power Networks operates a monopoly and distributes power to 1 in 4 UK homes concentrated in London and the South East. With network costs making up around a fifth of consumer bills, this is leaving bills far higher than they need to be.

 A decision of the price regulation process for the electricity distribution networks, RIIO-ED2, is due to conclude by December. The current draft determinations for RIIO-ED2 do not go far enough to clamp down on excessive profiteering by the DNOs. The regulatory process remains too heavily dominated by the energy companies with far too little role for the millions of workers and consumers who are impacted by the decisions that Ofgem makes on energy prices.

ENDS

Contact: Ciaran Naidoo on 07768 931 315 

Twitter: @unitetheunion Facebook: unitetheunion1 Instagram: unitetheunion

Web: unitetheunion.org
 

Notes to editors: 

Unite is the leading union in the UK and Ireland, dedicated to defending and improving members' jobs, pay and conditions. The general secretary is Sharon Graham.

Sharon Graham letter to Jonathan Brearly / Martin Cave

Dear Jonathan / Martin

I am writing to you as General Secretary of Unite the Union, Britain and Ireland’s biggest private sector Union with over 1.2 million members. I want to raise my concerns with you in your capacity as the Chair of Ofgem’s Gas and Electricity Markets Authority about the excessive profits of electricity Distribution Network Operators (DNOs) in the UK.

Despite the government’s intervention to cap energy bills, the cost of living crisis remains very real for millions of people around the UK. Unite is deeply concerned that a key element of consumer energy bills, the charges for the energy networks, have not received anything like the public scrutiny they deserve. In our view, the energy networks remain under-regulated and network owners continue to accumulate massive undeserved profits, and this is leaving consumer bills far higher than they need to be.

UK Power Networks (owned by Hong Kong based conglomerate CK Hutchison), the UK’s biggest electricity distributor, for example, had an average operating profit margin of over 50% between 2017 and 2021, almost five times higher than the FTSE-100 average. This means that the energy bills of 1-in-4 households in the UK are being inflated by UKPN’s excessive profits.  

Unite is aware that price regulation process for the electricity distribution networks, RIIO-ED2, is due to conclude in December. But, as Citizens Advice have repeatedly pointed out, the current draft determinations for RIIO-ED2 do not go far enough to clamp down on excessive profiteering by the DNOs. We are concerned that the regulatory process remains too heavily dominated by the energy companies with far too little role for the millions of workers and consumers who are impacted by the decisions that Ofgem makes on energy prices.

We are therefore writing to you now to ask for the following steps to be taken as a matter of urgency:

Revise the draft determinations to introduce much tighter control of the profits made by the DNOs. We believe it is time to set a clear cap on profits to help give consumers confidence that their energy bills are fair and not simply a vehicle for profiteering energy network owners.

 Reopen the public consultation on the RIIO-ED2 draft determinations to allow further public input in light of the ongoing cost of living crisis and the real risk of a recession this winter.

 Convene a new series of public hearings on the price regulation process to allow a much broader range of voices to be heard. In particular we would like to see consumers being given an opportunity to put questions directly to the senior executives of the DNOs. Unite is ready and willing to help publicise these hearings with a broad range of stakeholders.

We believe these are very reasonable steps given the scale of the cost of living crisis the UK is now enduring. We look forward to hearing back from you about these proposals at your earliest convenience.

Yours sincerely,