Energy bills: the £1.7bn annual rip-off
Average household should pay £74 less a year, consumer group claims
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Independent Minds
Energy companies are over-charging customers by failing to pass on £1.66 billion of savings they have made on falling wholesale gas and electricity prices.
Gas prices should be 7.4 per cent cheaper and electricity bills 3.1 per cent cheaper, saving an average household £74 a year, research obtained by The Independent suggests.
Consumer Focus, the publicly funded watchdog which calculated the figures using the energy regulator's own model, described them as "conservative". It suggested that further predicted falls in wholesale prices should reduce gas bills by a further 8 per cent and electricity by 4 per cent by the end of 2009. This would knock a total of £157 off average bills.
The research will increase calls for an inquiry into the £25bn-a year-energy sector, which is dominated by six firms: British Gas, E.ON, EDF, npower, ScottishPower and Scottish & Southern.
Last year, they raised bills by 42 per cent to household average of £1,293 for the year as the oil price soared to $140 a barrel. Oil then fell to $40 (before hitting $70 this week) but standard tariffs have fallen by only 3.2 per cent, or £41, to an average of £1,252 a year.
The Department for Energy and Climate Change said it wanted to discuss the findings but it was surprised they did not match research by Ofgem, the regulator, which cleared companies of failing to pass on falls in wholesale prices.
Philip Cullum, the Consumer Focus deputy chief executive, said: "Consumers have feared for months that the big six suppliers might not have passed on the full cuts in wholesale prices, but the companies claimed to have acted fairly.
"Our new research for the first time shows the reality. The companies are pocketing £1.6bn extra while millions of households struggle to make ends meet.
"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. After a slew of price rises at the start of last year, Ofgem refused to launch an investigation into the energy market. On 21 February, when British Gas's parent company, Centrica, reported a 500 per cent rise in profits, it announced a full-scale market inquiry. In October, the inquiry found that companies had been overcharging pre-payment and electricity-only customers by more than £500m.
Garry Felgate, the chief executive of the Energy Retail Association which represents the industry, accused Consumer Focus of making basic mistakes in its analysis. "The amount of gas and electricity a customer uses can form as little as half their annual bill," he said.
"The remainder includes other costs, such as transporting gas and power and meeting the Government's carbon emissions reduction targets – all these costs have risen sharply in recent years."
Consumer Focus said it had used hedging strategies outlined by Ofgem – which had "shown a clear gap between wholesale and retail costs over recent months". Mr Cullum said: "The fact that wholesale costs do not make up the whole of consumers' bills and the additional costs passed on by suppliers, such as for energy efficiency investment, have also been factored into our calculations."
Ofgem, often criticised for being too soft on the industry, said the research was inadequate and accused its fellow public body of "misleading consumers".
"We are entirely confident in our analysis of wholesale and retail energy prices. Although Consumer Focus has borrowed some of our methodology for calculating wholesale costs they appear to have made assumptions that are simply wrong. And we are concerned that they are misleading consumers," it said.
The shadow Energy and Climate Change secretary, Greg Clark, demanded an investigation by the Competition Commission. "This report confirms what Conservatives have been saying for months," he said.
50%
The fall in oil prices since last year – while energy bills have fallen by just 3.2%.
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Comments
Your only have to look at your gas and electricity bill to realise you are being fleeced. With the big drop in oil prices over a long period now, why haven't Ofgem or this useless Government done something to protect the consumer.
Where is that investment in green energy? It looks like most of the money is going in dividends rather than any reinvestment.
The original proposal was that there would be an energy windfall tax, but with a tax exemption for money re-invested in green energy. That would have brought tens of thousands of jobs, and reduced our dependence on energy sources of rising cost, e.g. oil.
It is false comfort to blame the tories, labour or maybe one day the lib dems, it is the divide and rule party politics which has and is so successfully used to fleece us in our own names where it is guaranteed that a deluded portion of us take glee in all our loss because it wasn t my party that did it, quite right, it was your system that did it... commonly known as cutting off your nose to spite your face.
Which party is going to introduce legislation or measures to effectively stop the profiteering ?
We as a society can make choices about how the means by which we live our lives are divided up, yet when the political class is hypocritically corrupt, greedy and simply ignores the realities of our daily lives we will do well to think of alternate means to regain control of our resources.
The party system at Westminster is finished as a credible means of government for the people in Britain.
The first 'hit' was over 35 trillion worth of N Sea assets, followed by assisted looting of the family silver.
In Iraq President Hussain et al put up a stiff fight (and are still doing so). In Britain, quisling snouts in high ofice assisted.
Hey nickiuk,
Hope this post makes it to you.. fair goes, anarchy in the common use of the word is not pleasant for most, but I didn t for a moment mean that, there are multiple other ways for us to organise our own government or to put it better, charge a government with delivering a framework in which individuals can prosper to the benefit of all not just themselves.
check out wikipedia as a starting point for a way that did work for a long while even here.. the social market economy, it still functions to a large extent in the Scandinavian nations, what is the result for the people ?
or check out free market capitalism as it works in the U.S.A. Russia or Japan but where from the start a very small percentage of the populus owns nearly all of the resources, whats the result ?
or a hybrid of socialism, dictatorship, markets and a load of other stuff such as in China or Cuba again whats the result ?
There are a lot of ways for people to govern themselves and even anarchy after defining the word we find it has many varied forms which in some respects are tory in their way of thinking!
I have no idea which way is best, but I would like a choice. The article outlining what is going on in the energy supply business here and now highlights that our system is no longer capable of acting for the benefit of people in Britain, our partial democracy is undone, the agenda appears to be one of exploitation to gratify the few. Is that a present and future we want for our families, our friends, our neighbours, or our society?
Some long dead men from this island pointed out that luxury and greed keep on undoing democracy so it needs to be continually repaired and rebuilt or in anothers mind that some benign force in poetry or music creates civilisation which is then uncreated by commercial publicity swamping and manipulating intelligence with trivial ideas and details so that all falls back to chaos.
Given what we see day by day it is hard to argue with this stuff the humans who wrote in our language had already figured out,.