Ofgem’s soaring energy bill highlights wider issue

Both regulators for the energy and water sectors paid more for their electricity last year than the vast majority of other government departments, new research has revealed.

Ofwat forked out the most of any department, paying almost 39p/kwh on average, while Ofgem came in third place at 32.4p/kwh.

The figures, published by energy consultancy Box Power CIC, reveal that the energy regulator, which sets the default tariff cap for consumers, paid almost three times as much per kwh for its electricity than the Vehicle Certification Agency which paid just 12p/kwh – the lowest of any government body listed.

In total Ofgem paid £338,710 for its power between April 2022 and March 2023, an almost 164% increase compared to the previous year when it paid £128,417.

In response to the figures an Ofgem spokesperson explained that energy charges for its offices are included as part of the tenancy agreement for those premises.

“Ofgem does not regulate energy prices for business customers, including public sector organisations,” they added.

Yet the research has prompted calls from the Federation of Small Businesses (FSB) for a review into the relationship businesses have with their landlords to help with energy costs.

Martin McTague, national chair of the FSB, told Utility Week: “Our most recent research shows one in five small businesses have no control over who provides their energy.

“As some of these firms have their energy tariffs tied to their lease, new tariffs negotiated by landlords may result in rent increases. There’s also no obligation for landlords to prove that a rise in rent is due to increased energy costs. Many tenants in this position may never see the negotiated rate during a rent review.

“A comprehensive review of the landlord-tenant relationship is needed to help small businesses cut energy costs and carbon emissions. Action is also needed to address the imbalance of power and information between landlords and their commercial tenants. Banning upwards-only rent reviews would be the right first step.”

McTague added that while domestic customers have standing charges capped, business customers are seeing a second year of standing charge hikes.

He added: “We’ve recently received fresh complaints from members about surging standing charges, from 70p to £9 per day.

“We welcome Ofgem’s on-going consultation on the standing charges system and would like to see a cut in the charge and more transparency from energy suppliers on the calculations of standing charges.”

Other high spending government departments include the Environment Agency which paid 26.7p/kwh.

Organisations listed in the findings that are related to the utilities sector include:

• The Department for Environment, Food and Rural Affairs (DEFRA) – 21.1p/kwh
• UK Atomic Energy Authority – 23.6p/kwh
• Nuclear Decommissioning Authority – 18p/kwh
• Coal Authority – 17.1p/kwh