ONE of the “big six” energy companies appears to have structured its accounts to minimise profits and therefore reduce its tax liabilities, according to an investigation by Channel 4’s Dispatches programme.
An analysis of accounts filed in 2012 by German-owned Eon showed that it borrowed more than £6.4bn from other Eon companies at a higher rate of interest than it charged on the £5bn that it lent to other firms in the group.
Richard Murphy, a forensic accountant who was asked to examine the accounts by Dispatches, claims the practice — which is legal — has helped Eon to reduce both its British profits and therefore its tax payments.
“My estimate is that if they simply charged the same rate of interest on the money going out as they were charged on the money coming in, they would increase their profits by 50% and therefore have a weaker case for arguing that they had to increase prices because they weren’t as profitable,” he says.
Eon, which unlike several of the other energy giants has not announced prices rises this autumn, challenged Murphy’s interpretation.
It insisted that it aimed to lend money at a higher rate than that at which it borrowed and argued that the Dispatches research “ignores the fact we run our businesses separately”.
In a statement, Eon said: “The research is based upon the company that contains our [power] generation activities, which are not pertinent to our supply activities, that is, providing households with the energy they need.”
In the programme, Murphy also claims that, while the energy firms are acting legally, their accounting practices lack transparency. “These companies are using smoke and mirrors to hide from us — from regulators, from the public — the view of what is really going in their UK businesses,” he says.
His conclusion, disputed by the energy giants, comes as households prepare for higher bills after four of the big six raised their prices for gas and electricity by up to 10.4%.
There are 19 energy providers in the UK, but the big six — British Gas, Npower, SSE, Scottish Power, Eon and EDF — supply 98% of consumers.
The companies say they have been forced to raise bills because of higher wholesale costs and the government’s green taxes.
Energy UK, which represents the industry, says profits equate to just “four or five pence in the pound”.
The Dispatches programme, which will be broadcast tomorrow, also says the share dividends paid out by energy companies have risen significantly in the past four years.
It says that EDF has almost tripled its payouts to £677m since 2009 while those paid by Centrica, which owns British Gas, have risen by £200m to £816m over the same period.
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