Ofgem is facing renewed scrutiny after Unite union called on the energy regulator to implement a profit cap on distribution network operators (DNOs).
According to the union, the DNOs are set to earn the highest profit margins in the UK this year.
Ofgem has been targeted recently by ministers who accused the regulator of not doing enough to prevent the collapse of 29 energy suppliers since July 2021, ultimately causing the average energy bill to increase by £94.
However, it now faces renewed criticism as energy distributors are seeing record profits.
“Electricity distributors […] are milking profits during this energy crisis,” said Sharon Graham, Unite general secretary.
“The regulator is failing to properly reign them in. They’ve been holding the public to ransom for too much and for too long.”
Unite referenced research by thinktank Common Wealth, which suggests DNOs, including the likes of National Grid PLC (LSE:NG.) and UK Power Networks, will see profit margins of over 50% this year, higher than in any other sector.
DNOs’ revenue comes from distribution charges included in customers’ energy bills, and despite not being influenced by the rise in gas prices this year, higher operating costs have seen companies charging more for the use of their infrastructure.
According to Ofgem, customers paid £214.35 on average for gas and electricity distribution in 2021, with the regulator set to determine distribution prices for the next five years by 30 November after consultations with the industry.
Graham called for Ofgem to reopen its consultation with DNOs in an attempt to bring prices down.
UK Power Networks owner CK Infrastructure Holdings Ltd also owns Felixstowe Port where members of Unite have recently been involved in strike action as part of disputes over pay.
National Grid PLC (LSE:NG.) shares are up 0.9% to £1.26.