Energy Watchdog demands suppliers act on falling gas and electricity prices

 

Personal Finance Editor

The energy watchdog has demanded that the Big Six energy firms explain to customers why the price of gas and electricity hasn’t fallen.

Ofgem contacted the companies last week ahead of last Friday's news that wholesale gas prices had reached their lowest level since September 2010, leading to growing anger among consumers.

Energy companies have refused to cut bills despite the slump in prices, which has helped boost their profits to near-record highs.

In fact the price the energy giants pay for gas is now around 38 per cent less than it was this time last year, Ofgem said.

Meanwhile electricity prices reached their lowest level since April 2010 and are currently around 23 per cent lower than this time last year.

But that reduction in cost has not been passed on to customers who are still paying an average £1,237 a year to heat and light their homes.

The watchdog wrote to the big energy firms and warned them to act or lose customers.

Ofgem chief executive, Dermot Nolan, said: “Consumer trust is low. If suppliers are going to start rebuilding that relationship they need to take the initiative and explain clearly what impact falling wholesale energy costs will have on their pricing policies.”

Forward prices for gas and electricity have also fallen. Compared with last winter, prices for the coming winter are around 16 per cent lower for gas and nine per cent lower for electricity.

Last winter’s mild weather has left gas storage at record levels. Ofgem said that in a competitive market the threat of losing market share would encourage suppliers to reduce their customers’ bills when there are sustained reductions in costs.

The lack of price cuts or explanations has also angered consumer groups.

Citizens Advice chief executive Gillian Guy said: “It does not add up for consumers when the wholesale price drops yet they see no difference in their bills. Energy companies need to make sure they pass on the savings they make when wholesale prices reduce. This would help relieve the pressure on stretched household budgets and send a signal to consumers that suppliers are treating them fairly.”

Ann Robinson, director of uSwitch, said: "Consumers are not going to understand why they are not benefiting from lower energy costs — when costs go up they are the first to suffer.

"It would be great if one of the Big Six companies could now take the lead and cut prices, laying down the gauntlet to the other energy companies to do the same."

Ofgem is currently proposing referring the retail market to the Competition and Management Authority after a joint report with the Office of Fair Trading and CMA confirmed that competition is not working as well as it could.

“Consumers need to know where they stand in the energy market, that’s why the outcome of the proposed competition investigation must deliver reforms to ensure it works for all consumers,” said Ms Guy.

Analysis published by price comparison site energyhelpline suggested suppliers could pass on a price reduction of £77 – six per cent - to a typical household bill.

“For too long energy customers have got a rough deal from suppliers with prices rising rapidly when wholesale prices go up but coming down very slowly when wholesale prices drop,” said Mark Todd, director of energyhelpline. “Now is the chance for the suppliers to show that they have changed and to pass on the savings that they are getting.”

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss