Energy companies often blame rising wholesale prices and increasing cost of government environmental policies when they announce price rises, and they also claim they don't make much profit from supplying consumers with energy.
Since 2008, there have been 91 price changes of which 77% were increases. Were these driven by a thirst for profit? Or a reluctant step in the face of rising costs for the companies concerned? The answer lays partly in the relationship between the company that sends your bills and the one it buys 'wholesale' energy from in the first place. In the case of the big six companies [named] the retail and wholesale operations are linked by a single parent company. These 'vertically integrated' companies can sell electricity to themselves. However, this is carried out behind closed doors and the price the supply arm of the company pays to the generation arm isn't made public.
The companies often claim they buy and sell their energy on the wholesale markets, but their own accounts show they sell internally. And most of the trading they do externally just isn't transparent - there are no details of how much electricity is sold or what prices were paid. It's nearly impossible to find out how much your company paid for the energy it sells, and therefore impossible to work out if you're paying a fair price as an end user.
According to our analysis of the companies' financial information, the major suppliers' retail arms make average profits of about 2% to 4%. But the generation arms of these companies made average profits of about 20% in 2012. Between them, the big six made about £3.7bn profits last year from their electricity generation, gas supply and electricity supply.
