Debt to society update: network company windfalls increase

Debt to society update: network company windfalls increase 1.62 MB

Citizens Advice has updated its review of the RIIO-2 price controls to include 2024/25. Our key findings are: 

• Network companies remain able to systematically outperform the level of shareholder returns that Ofgem determined was appropriate.

• The vast majority of excess returns to network companies since 2021 are a windfall, with financial performance worth around £5 billion up to 2025. 

• Our analysis shows the windfall is expected to increase to almost £6 billion by 2026, and between £6.3 and £7 billion by 2028, depending on what happens to inflation. 

• The windfall has arisen due to inflation being higher than long-term expectations, which has led to a mis-match between allowances networks are given to cover debt costs and their actual debt costs. 

At the same time as high inflation has been handing network companies unearned profits, it has put many households into the red. Energy debt owed by households to their suppliers has now also reached around £5 billion, similar to the unearned windfall that inflation has handed to the energy network companies. As network companies have been the inadvertent beneficiaries of the cost of living crisis, we believe they have an obligation to support those still suffering the worst effects of it through voluntary commitments.