Energy companies should make a profit margin of just 1.25pc on household bills, a fifth of the level made by the two biggest suppliers last year. The Competition and Markets Authority has said this margin was was appropriate for suppliers  since "they don't make the stuff". Energy companies have long argued that a profit margin of about 5pc is fair. and some have made more. The CMA inquiry concluded  UK households had collectively been paying an average of £1.4bn year too much for their energy, rising to £2bn last year, due to a combination of inefficiency and excess profits. Most of the costs are a straight pass-through. The retail activity is acquiring the energy, buying in the wholesale market and then marketing and metering and billing with no capital in this market.