The U.K.’s energy regulator may allow household suppliers to boost their profit margins by 27% as the industry seeks stability during its emergence from the past year’s crisis.
Ofgem is proposing to let those energy companies increase the amount they can make before interest and tax to about £47 ($58.16) per customer a year from about £37, according to a consultation published May 25. The effects on household bills would vary. The plan is open for comments until June 28.
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The move would improve conditions for the energy retail sector, where about 30 suppliers went bust during the energy crisis and firms like Shell Plc are trying to exit. Unlike producers, suppliers endured loss-making conditions as they struggled to hedge in line with Ofgem’s price cap.
If implemented, Ofgem’s reform would be a boon for companies such as Centrica Plc, according to analysts at Jefferies Financial Group Inc. and Citigroup Inc. Centrica — which owns the largest household supplier, British Gas — rose 4.8% in London, the most since February 2023 in intraday trading.
The announcement comes the same day the regulator dropped its energy bill cap starting in July 2023 as natural gas prices decline steadily. A typical annualized household bill would be about £2,074 — almost £500 lower than the current level guaranteed by government subsidies.