By Marcus Leach
After announcing last week that they will ask energy firms to explain how they calculate bills that straddle a price increase, Ofgem are now increasing their investigation of utility companies.
The regulator has enlisted the help of forensic accountants BDO to see if energy firms understated their retail profits to justify higher prices.
BDO will look at trading profits, wholesale prices and how the 'big six' firms (British Gas, E.On, EDF, Scottish Power, Npower and Scottish & Southern) hedge against price fluctuations.
Ofgem claimed that the utility companies were much quicker to increase prices due to supposed rising costs, than they were to decrease prices when costs fell.
"Ofgem has appointed accountancy firm BDO to provide recommendations on how best to improve accounting disclosures by energy suppliers," an Ofgem statement said.
"This follows Ofgem's review of the retail market earlier this year, which identified the need to improve accounting transparency to give consumers more clarity about how retail prices relate to suppliers other costs."
BDO's investigation is expected to last four months, with a report expected before the end of the year.
Join us on