Energy Supplier Profits and Margins Explained

When a household asks how much profit an energy supplier makes, the honest answer has two parts. The first is that the profit earned from selling gas and electricity to homes is a specific, measurable line in the price cap, called earnings before interest and tax, or EBIT¹. The second is that the last time the regulator published a full official breakdown of the largest suppliers' domestic retail earnings, the six biggest suppliers made £973.8m in total from supplying homes in 2015, down from £1,159.7m the year before². Since then the market has been transformed by the energy supplier failures of 2021 and 2022, so current profit figures come from each company's own published accounts rather than one official number.

The reason the question matters is that supplier profit is not some hidden extra on a bill. It is one of a fixed list of cost components that Ofgem builds into the price cap every three months: wholesale costs, network costs, policy costs, the supplier's operating, debt and industry costs, an EBIT allowance, headroom, a levelisation allowance and VAT at 5%³. A supplier's margin is therefore visible in principle, but it is only one slice of a bill whose largest parts, the wholesale cost of energy and the cost of the wires and pipes, are outside the supplier's control.

Official numbers and the reasons they differ

The most complete official picture of supplier profits comes from Ofgem's review of the retail energy markets, which tracked the six large suppliers that then dominated the market: British Gas, EDF Energy, E.ON, npower, ScottishPower and SSE⁶. In 2015 those six earned £128.7m from domestic electricity supply, a sharp fall from £544.0m in 2014, while profits on domestic gas supply rose from £615.7m to £845.0m. Across both fuels, total domestic supply profit fell from £1,159.7m to £973.8m. In the non-domestic market, the average electricity profit margin fell from 2.0% to 1.0%².

Those figures are now more than a decade old, and the market they describe has gone. The six suppliers named in that data no longer hold the market between them in the way they once did, as the big six energy suppliers have been joined and in places overtaken by challengers, and several of the original six have changed hands entirely. That is the first reason profit figures disagree: the set of companies being measured keeps changing.

The second reason is the data itself. When Ofgem reviewed the wholesale cost assumptions behind the price cap, it received data from 11 suppliers⁷, while the National Audit Office counted 30 suppliers on the Energy Price Guarantee scheme in its 2024 update on energy bills support⁸. Any figure for "supplier profits" depends on which of those companies are included, whether their generation businesses are counted alongside their retail supply businesses, and whether the measure is EBIT or profit after interest and tax. A company that both generates electricity and sells it to households reports two very different profit lines, and headlines frequently blur them.

The third reason is timing. The price cap is revised each quarter⁹, and wholesale costs move underneath it, so a margin measured in one quarter can look nothing like the next. During the crisis period, rapid increases in wholesale energy prices from mid-2021 onwards led to a 54% increase in the price cap in April 2022¹⁰, and the October to December 2022 cap level reached £3,371⁵. Suppliers holding fixed-price commitments through that period faced losses on retail even as generation businesses earned heavily, which is exactly why a single "energy company profit" number rarely means what a headline implies.

EBIT: the earnings measure within the cap

The profit measure used in the price cap is deliberately simple. Ofgem describes it as "how much the supplier makes before interest or tax, known as 'earnings before interest and tax' or EBIT"¹. Stripping out interest and tax allows the regulator to compare the underlying profitability of supplying energy without the distortions of each company's borrowing arrangements and tax position.

Inside the cap, EBIT sits alongside the other cost components Ofgem must allow for. A household's bill is built from wholesale costs, the cost a supplier pays to buy energy; network costs for the pipes and wires; operating, debt and industry costs, which are the costs a supplier pays to run their business; policy costs; the EBIT allowance; and VAT¹. The cap sets the maximum a supplier can charge for a unit of energy and the standing charge together, and it does not limit the total bill: the more energy used, the higher the bill⁴.

Two things follow from this structure. First, the EBIT allowance is an assumption about what an efficiently run supplier needs to earn, not a guarantee of what any supplier will earn. A supplier whose operating costs are higher than the allowance earns less; one that buys energy more cheaply can earn more. Second, the allowance is small relative to the costs around it. Network costs alone make up almost 30% of the price cap⁵, and wholesale costs are larger still, so even a generous profit allowance moves the bill far less than a swing in wholesale markets.

The scale of the cap's headline figures shows how much the surrounding costs dominate. For the period from 1 January to 31 March 2026, the cap made a typical annual bill around £1,758 for a dual-fuel home with typical usage in Great Britain paying by direct debit, with electricity charged at 27.69p per kWh and a 54.75p daily standing charge⁹. Ofgem confirmed that the cap for 1 April to June 2026 would fall by 7%⁹. Typical consumption for cap purposes is assumed to be 2,500 kWh for electricity and 9,500 kWh for gas⁵.

Factors that push the margin higher or lower

The single biggest driver of a supplier's margin is the wholesale market. Wholesale costs are the cost a supplier pays to buy energy¹, and the supplier sells at rates set, for default tariffs, by a cap that is recalculated every three months from forward wholesale prices⁴. When wholesale prices fall after a supplier has bought its energy, the supplier's margin widens; when they rise, it narrows. The 54% cap increase of April 2022¹⁰ and the £3,371 level reached in October to December 2022⁵ show the scale of the swings suppliers were managing through that period.

The second driver is the supplier's own cost base. Operating, debt and industry costs cover everything from call centres to billing systems to the cost of carrying customer debt, and Ofgem has made the treatment of debt a regulatory priority: it expects suppliers to demonstrate excellent customer service as part of their strategies for driving down consumer energy debt¹¹. A supplier that collects its bills efficiently and keeps customers out of arrears spends less on debt management, which flows straight into margin.

The third driver is competition for customers. Saving money was the main motivation for switching in research into the lived experience of fuel poverty in Scotland¹², and suppliers respond to that by cutting margins to win or keep households. Under the Energy Price Guarantee, suppliers could also charge less than the published rates¹³, and the same principle holds under the cap: the cap is a ceiling, not a target. The price cap protects people on standard variable tariffs, where the unit rate can go up or down depending on the energy market⁴, and it applies where a customer has not signed up for a fixed-term contract⁹. Fixed tariffs, business energy contracts, heat networks and heating oil sit outside it⁴.

Policy costs are the fourth driver, and they move with government decisions. The government cut policy costs in April 2026 by ending a levy-funded energy efficiency scheme and shifting the largest renewable generation support scheme to general taxation⁵, which changes what the cap must collect through bills. The cap's calculation also includes headroom, a buffer for uncertainty, and a levelisation allowance making sure prepayment and direct debit customers pay the same standing charge⁴.

The picture across Great Britain, Northern Ireland and the regions

The price cap is a Great Britain instrument. It sets maximum prices for a unit of energy and daily standing charges for customers in each energy supply region of Great Britain⁹, and a separate cap is set for each of the 14 regions, applying throughout the region with no breakdown below regional level⁵. The cap came into force at the beginning of 2019 and was introduced across all payment types in January 2019¹⁰. Where a household lives, its payment method, fuel type and meter type all affect the exact cap that applies⁴.

Payment method matters as much as region. For the October to December 2025 cap, the total typical cost was £1,755 for direct debit customers, £1,890 for standard credit customers and £1,707 for prepayment customers, each up £35 on the previous quarter¹⁴. The differences reflect the real costs of each payment channel, and the levelisation allowance exists to keep standing charges aligned between prepayment and direct debit⁴.

Northern Ireland is a separate market with its own suppliers and its own regulation. Energy prices were not capped in Northern Ireland in the way Great Britain's were, and energy suppliers there have the flexibility to set their tariffs independently to reflect their costs of operating¹⁵. The practical effect is that profit and margin questions in Northern Ireland are answered by each supplier's tariff filings rather than by a GB-style cap, and households there can compare tariffs through the Consumer Council. Recent examples show the difference this makes: firmus energy raised gas prices by 8.9% in its Ten Towns area² and 12.5% in Greater Belfast¹⁶ from October 2026, with tariff changes also scheduled for SSE Airtricity and Share Energy on 1 October 2026. More detail is in our guides to energy suppliers in Northern Ireland and Northern Ireland gas tariffs.

For Great Britain households, the regional structure means two neighbours in different supply regions can face slightly different caps for the same usage, but no supplier earns a regional premium by choice: the regional differences reflect network costs, not margin.

Rules limiting how much a supplier can earn

No rule caps a supplier's profit directly. What the rules constrain is the price a supplier may charge, and the behaviour expected of the company around it. The core obligation is blunt: "Suppliers must cut their prices to the level or below the caps we set."¹⁷ Suppliers can charge less than the cap's rates if they choose¹³, and Ofgem has stated it will be closely monitoring supplier compliance and will continue to take firm action against suppliers who fall short of their requirements¹⁴.

Beyond pricing, the licence conditions and codes of practice shape how a supplier treats the households that generate its revenue:

• Disconnection. All fuel suppliers, electricity and gas, follow a code of practice that means they will not cut off a household's supply if the customer agrees a payment plan with them and then keeps to it¹⁸.
• Resold energy. A landlord or site owner cannot profit from the energy they resell to a tenant: they can only charge the same price they paid¹⁹.
• VAT. Suppliers account for VAT under the normal rules, as payments are made for a taxable supply of energy²⁰, with VAT charged at 5% on gas for the period 1 October 2026 to 31 March 2027⁴.
• Obligation sizing. For schemes such as ECO4, whether a licence-holder is an obligated supplier is determined using the sum of the customer numbers and supply of all licence-holders in that group company¹⁶, which ties a group's obligations to its true scale.
• Customer data. Suppliers can access daily, or less granular, energy consumption data for any purpose except marketing, with a clear opportunity for the customer to opt out²¹.

When a supplier gets something wrong, the remedy runs through its complaints process and then the Energy Ombudsman, which is independent of the energy company and free of charge²². Outcomes can include financial compensation, an apology, agreeing to fix the problem, a refund, or providing an affordable payment plan²³. Our guide to complaining about an energy supplier sets out the process in full.

How supplier profit affects a household that generates its own power

A supplier is responsible for providing energy to homes and businesses²³, and the profit it earns is the margin on being that intermediary: buying energy wholesale, paying network and policy costs, billing the household and carrying the risk in between. For a household aiming at energy independence, the significance of supplier profit is that it is the part of the bill that a self-sufficient home progressively stops paying.

Every unit of electricity a household generates itself is a unit it does not buy through a supplier, and every unit of demand removed by efficiency and insulation cuts the wholesale, network and policy costs as well as the supplier's margin. The relationship does not end there, though. A home with solar panels remains connected to the grid, and under the Smart Export Guarantee electricity suppliers pay small-scale producers for excess electricity from homes and businesses being put back into the energy grid²⁴. The supplier becomes a buyer as well as a seller, and the export rate it offers is one of the terms worth comparing, because it is set by each supplier rather than by the cap.

The dependence that remains is real. A self-sufficient household still relies on the grid when generation falls short, still pays standing charges that recover network and policy costs regardless of usage, and still depends on a supplier's solvency and service. The supplier failures of recent years showed that the company behind a tariff matters as much as the tariff itself, which is why our pages on supplier of last resort and the energy suppliers market as a whole are worth reading alongside this one.

For households that cannot yet generate their own energy, the profit question is more immediate: the margin a supplier earns is one of the few parts of a bill that competition can compress. Suppliers can charge below the cap¹³, saving money is the main motivation for switching¹², and the cap's quarterly reset⁴ means the gap between the cap and the cheapest available tariff is worth checking each quarter. Supplier profit is not the largest cost on a bill, but it is the one a household has the most direct influence over.