Big Six could cut tariffs and still make big profits

There seem to be few who think that the energy market is working well for consumers. But finding a solution that ensures fairer prices for all has eluded the Coalition Government.

Forcing Ofgem to review prices and giving the energy watchdog powers to cut bills sounds like a great idea. Is it practical?

Cutting bills for everyone on a variable standard tariff by, say, £100 would hit the profits of the Big Six but they would still make profits.

Because the firms buy energy often years ahead through the futures markets, by the time they are forced to cut rates by any future Labour government, the firms will have already benefited from the lower prices negotiated in recent months and so won’t suffer much hit to profits.

Meanwhile the move wouldn’t reduce all households to the lowest-possible deals.

Those will remain the fixed-rates which, in some instances, are more than £200 less than the standard tariffs. But it could lead to the energy giants making their fixed-rate deals less competitive to boost their profits.

That would penalise those who carefully switch to get the best rate each year and would further reduce the unacceptably wide difference between the best rates – enjoyed by a few – and the worst rates, endured by most.