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22 Aug 2011
BDO HAS BEEN called in to conduct a painstaking examination of energy companies' pricing after they were accused of understating profits in order to increase customer charges.
Regulator Ofgem has asked the leading mid-tier firm to pull apart accounts at the so-called big six suppliers – British Gas, E.On, EDF, Scottish Power, Npower and Scottish & Southern.
Further reading
In March, Ofgem accused the power giants of pushing up prices in response to soaring costs more quickly than they mark them down when costs retreated, saying it would examine "the facts behind the numbers".
It has called on suppliers to improve transparency over pricing and help customers understand how retail and wholesale costs are linked.
The big six are bound to produce separate accounts for each business arm, including electricity generation, gas infrastructure and retail services. An Ofgem spokesman said BDO will look into each account area and concluded: "We feel there could be more transparency for the customer."
BDO told Accountancy Age that it does not provide any other audit or consultancy services to the six energy suppliers, meaning there should not be a conflict of interest when examining the accounts.
A spokesperson commented: "BDO is pleased to confirm its appointment by Ofgem to undertake a review to improve understanding of how the big six energy companies treat their wholesale energy transactions within their financial statements and to make recommendations on how to improve reporting in future years."
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Briefings
By looking at the reasons supplier statements became unfashionable, and the reasons why it is different today, this paper delves into the many benefits that can be obtained by automating the process.
Having a real and true view of your organisation’s current financial position, and having the right systems and processes in place, will ensure that you can make strong choices and are ready to capitalise on opportunities
AccountancyAgeInsight is a frequently updated resource centre for finance professionals, offering a free and easy-to-use digital library of briefings, white papers and other information resources. 
Visitor comments Add your comment
What does this mean to domestic users
does this mean there is a chance that energy prices for domestic users will stay the same if they find that they are being unfair?
Posted by: david edwards, 22 Aug 2011 | 16:51
Energy Supply and Private Blocks of Flats
The companies that manage blocks of flats wish to obtain the best rates for the supply of gas and electricity to communal areas but they are being prevented from doing so. Why? Because the utility companies treat them as small businesses and run credit checks on them as businesses and find they have no assets; often they will have filed dormant accounts with Companies House. Remember these are not trading companies running a business.
This approach by the utility companies is wrong because these flat management companies are receiving domestic energy supply-see below re VAT. They are not supplied as commercial customers but the utility companies are applying commercial rules to them.
VAT and Domestic or Commercial Tariffs
Under VAT guidance it is quite clear that the supply of electricity and gas to common parts of blocks of flats is a domestic supply- see
Item 3.2 of Fuel and power notice produced by HMRC which defines what is domestic use.
The following are treated as part of the same residential unit:
• buildings such as garages used with houses;
• subsidiary buildings situated a short distance away, such as a garage in a block located away from a house; and
• corridors, lifts, hallways and stairways in a residential unit.
Despite this advice we still find utility companies refusing to acknowledge that a supply to flat management companies is a domestic supply and even if they finally do refusing to backdate the necessary repayment of wrongly charged VAT.
Finally Disconnection
The utility companies have put in place a safety net to prevent unnecessary disconnection of vulnerable customers who receive domestic supplies but there is no protocol regarding disconnection of communal areas of blocks of flats. Disconnection of supplies to communal areas of blocks of flats immediately puts at risk the safety of those who live in those flats. The fire alarm and emergency lighting will not be operational and the block should not be occupied in these circumstances. In high rise flats the water supply to flats will normally be pumped and require power to supply.
We do not condone flat management companies that refuse to pay their debts but this is not usually the case. In order to pay bills the companies and their agents have to collect service charges from lessees who may or may not be in funds to pay. To pursue debtors through the courts and leasehold tribunals is costly and takes time.
What we need is a protocol that utility companies will adopt before any disconnection would take place. A recent case we were aware of had court papers served to the block of flats and left in the communal hallway, rather than to the billing address provided with the managing agent. In another case the local authority had to step in or otherwise many families would have had to be found emergency accommodation.
Posted by: Bob Smythernan , 24 Aug 2011 | 21:05
British Gas
The energy industry is so large if they are found guilty in some will probably just lead to some hefty penalty. I think there should be some laws on how much energy companies can increase charges. It's just ethical practice because when joe public like the pensioners, single parent families and disabled people have to take big 20% hikes it can really hit hard!
Posted by: Gasboiler-buyability, 01 Sep 2011 | 06:03