Energy firms 'failing to pass on price cuts'Study calls for £100 a year off customer bills

02 September 2009


Gas prices have risen by 33.8% in the last 12 months

As wholesale energy prices hit their lowest level for almost three years, two studies have suggested that energy suppliers aren't fully passing on the savings to their customers.

Separate research from Icis Heren and Consumer Focus suggests that energy companies should be cutting customer prices in line with the drop in wholesale energy prices, with the latter calling for a cut in domestic prices of around £100 a year to redress the imbalance.

But the Energy Retail Association (ERA), which represents energy suppliers - including British Gas, Eon, Npower, Scottish & Southern Energy, Scottish Power and EDF Energy - rejected claims of making unfair profits from customers.

Wholesale energy prices

Icis Heren's figures showed that the wholesale price of gas averaged 25.5p per therm during the period from 1 April to 24 August, while the value during the same period of 2008 was well over double this at 58.47p.

But, despite some energy suppliers lowering gas prices, the changing wholesale market outlook hasn't been comparably reflected in gas pricing for energy customers. British Gas lowered its gas prices by 10% in February 2009, while March saw Scottish and Southern Energy reduce gas prices by 4% and Scottish Power by 7.5%.

Cutting energy costs

Meanwhile Consumer Focus has suggested that energy suppliers are overcharging customers by nearly £100 a year after failing to pass on price reductions, and are calling for 'immediate price cuts.'

Robert Hammond, energy expert for Consumer Focus, said: 'The fact that wholesale prices are at a three-year low adds further to the already heavy weight of evidence that greater energy price cuts are needed.'

Alistair Buchanan, chief executive of energy regulator Ofgem, has also contacted each of the 'Big 6' energy companies to ask for an explanation of their prices, writing: 'wholesale costs have fallen from last year’s peak and look set to fall further as we head into the winter. In a strong competitive market, we would expect prices to respond to such falls.'

Energy suppliers respond

However, Garry Felgate, chief executive of the ERA said: 'Energy prices have come down for most customers this year following falls on the wholesale market.

'However, despite recent decreases, prices are still volatile going into this winter. Much of the energy we are all using now was bought last year when prices were at their highest, and there is always a time lag between when prices change on the wholesale market and when these feed through to domestic bills.'