Ofgem’s monthly SMI, Supply Market Indicators, are a controversial beast, pilloried and championed in seemingly equal measure. The regulator consistently claims healthy profit margins on behalf of the suppliers, the suppliers consistently accuse the regulator of wilful and inconsistent data manipulation, only then for the regulator to claim sleight of hand in suppliers’ transfer of profit between their retail (supply) and generation arms.
It was then an eagerly anticipated topic in the CMA, Competition and Markets Authority, investigation into the workings of the energy market.
The CMA didn’t disappoint the suppliers, one can imagine however that Ofgem is crestfallen.
This is because the CMA found no evidence of profit let alone profiteering amongst the Big 6 energy suppliers.
Instead they revealed that from their detailed analysis, the profit margin for energy suppliers was a paltry 3.3%.
Ofgem’s regular retort of suppliers’ shifting profit to other business arms was also given short shrift by the CMA who actually found that there were no “excessive profits” amongst the generation businesses and that the Big 6 actually make returns on their generation at or below their cost of capital.
That the energy suppliers have consistently played this line in their defence doesn’t reduce its truthfulness, though many had been led to believe this is exactly what it did.
The CMA also revealed that there was no evidence whatsoever that any tacit co-ordination had at any point taken place between energy suppliers in order to drive price upwards for customers.
The CMA, in publishing these initial findings, have critically laid waste to Ofgem’s most fervent accusations against the Big 6. No wonder they could be excused for being crestfallen.