Energy networks to reap up to £7bn windfall from inflation loophole, warns Citizens Advice
Higher than expected inflation, exacerbated by the Iran crisis, means total windfall profits are projected to climb to between £6.3 billion and £7 billion by 2028.
The amount network companies have seen in returns has swelled by nearly £1 billion since February 2025, when Citizens Advice last calculated the windfall.
Citizens Advice calls on energy networks to honour their social contract with consumers and voluntarily channel these profits into debt relief for their customers, or other measures to tackle unaffordable energy for people.
New analysis from Citizens Advice has revealed that energy network companies have continued to rake in massive windfalls through 2025.
The charity has previously warned that energy network companies, which provide pipes and cables to people’s homes, are able to profit from the high inflation that has driven the cost-of-living crisis.
Since its last Debt to Society report in February 2025, Citizens Advice says the amount network companies have made in windfall returns has swelled by nearly £1 billion (£904m). It means they'll have received a £5 billion windfall between 2021/22 and 2024/25, higher than the figure the charity previously reported.
It comes at a time when Citizens Advice has been supporting at least 100,000 people in England and Wales struggling with energy debt in the past year. Nearly 4 million (3.6m) people are currently in debt to their energy supplier.
With inflation remaining higher than originally forecast - made worse by ongoing geopolitical pressures such as the Iran crisis - this windfall is set to grow even larger. By the completion of the current RIIO-2 (2026) and ED2 (2028) price controls, network companies are projected to pull in a total financial windfall of between £6.3 billion and £7 billion, depending on inflation tracks.
While the regulatory loophole behind this issue has been resolved for future price controls, the financial impact is not a thing of the past. These windfalls are not paid to networks as an instant cash lump sum, they are baked into energy bills and paid out by consumers over time.
Citizens Advice is calling for action from both network companies and the regulator, Ofgem:
Network companies must honour what Citizens Advice sees as a social contract with the public. The charity is calling on networks to voluntarily use their windfalls to help tackle energy unaffordability.
Ofgem is currently developing the next price control framework for electricity distribution (ED3). The regulator must use this opportunity to ensure that company returns are fundamentally fairer, and that any future outperformance or financial rewards are strictly tied to demonstrably improved outcomes for customers.
Dame Clare Moriarty, Chief Executive of Citizens Advice, said:
"While millions have spent the last few years struggling to afford their basic energy bills, network companies have been quietly gaining billions of pounds in an unearned windfall.
"These extra profits weren’t won through stellar customer service or innovative engineering, they’re the result of a regulatory quirk that paid out hand over fist when inflation spiked.
"While it's reassuring that this loophole has been closed for the future, consumers are still stuck paying the bill. Network companies now need to do the right thing. They must honour their social contract with the public and voluntarily plough these windfall gains directly into tackling energy unaffordability, helping to make bill payers' lives a little easier when they really need it.”
Notes to editors:
The latest ‘Debt to Society’ report is available on the Citizens Advice website or by contacting the press office to request a copy.
Windfall methodology: The windfall to 2024/25 is calculated from debt performance values published in Ofgem’s 2025 RIIO-2 regulatory performance data, in 2024/2025 prices. The expected 2026 - 2028 windfall is estimated using Ofgem’s impact of high inflation model, in 2024/25 prices. The range in the expected windfall to 2028 reflects the Bank of England’s April 2026 monetary policy report low (A) and high (C) inflation forecast scenarios.
Background on Network Price Control: Energy network spending is regulated by Ofgem through multi-year price controls. As part of this mechanism, networks are allocated a baseline allowed return on equity to compensate their shareholders. Companies can earn profits in excess of this baseline (known as financial or operational outperformance) if they beat their regulatory targets.
How the Windfall Occurred: The current multibillion-pound windfall occurred because the regulator linked networks’ debt allowances directly to inflation, assuming company debt costs would rise and fall accordingly. However, a significant portion of the networks' actual debt costs were locked into fixed-rate mechanisms independent of inflation. When inflation surged well past the long-term expectations built into those fixed rates, the allowances paid to the networks heavily exceeded their actual costs, resulting in automatic, unearned profits.
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