Energy customers ‘overcharged’Report claims suppliers have not passed savings on

25 June 2009

A couple looking at some bills

An informal agreement may be a good starting point

Hard-pressed households could be paying on average £74 more for their gas and electricity than they should be – according to a report published today by independent watchdog, Consumer Focus.

The report accuses power giants like British Gas, EDF Energy, Scottish & Southern, Scottish Power, Eon and Npower of failing to pass on savings from falling wholesale costs to customers. The price of crude oil, which is directly linked to gas and electricity prices, has fallen from $147 a barrel to around $70 in the last 12 months.

Fears confirmed

All of the big suppliers reduced their prices in the spring, but Consumer Focus says its research confirms consumers’ fears that the suppliers may not have passed on the full cuts in wholesale prices.
Deputy chief executive Phillip Cullum claimed that the companies could be overcharging customers by as much as £1.6bn. ‘Energy firms should take immediate action to put things right. A failure to act, and to ensure that people pay a fair price for energy, could have serious consequences for the sector,’ he said.

However, both industry regulator Ofgem and the Energy Retail Association (ERA), which represents energy suppliers, have hit back at the watchdog’s claims.

‘Entirely wrong’

Ofgem, which concluded an investigation into the energy market last year, said it was ‘entirely confident’ in its analysis of wholesale and retail energy prices. It said that Consumer Focus had made some assumptions in its research that are ‘entirely wrong’.

Other costs

The ERA’s chief executive Gerry Felgate said it was ‘misleading’ of Consumer Focus to suggest consumers were being overcharged. Mr Felgate said that the gas and electricity used by customers can form as little as half of their annual bill.

‘The remainder includes other costs, such as transporting gas and power around the country and meeting the Government's carbon emissions reductions targets - all these costs have risen sharply in recent years. Consumer Focus has ignored these facts during its research,’ he claimed.

Energy bills soared by 42% last year, pushing bills for the average household to almost £1,300 a year.

Clearer accounts

Which policy advisor Dr Fiona Cochrane said that energy companies' accounts were 'opaque', which made it easy for them refute allegations of overcharging. 'A simple solution would be for Ofgem to force companies to present clearer accounts. Ofgem has suggested this as a possible recommendation, and we'd encourage them to adopt this as we need a more ‘open books’ approach,' Dr Cochrane explained.

Which? Switch

People switching their gas and electricity to a dual fuel tariff through Which? Switch saved on average £257 on their annual energy bills last year. 

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