Why aren’t energy bills falling, asks watchdog

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"It's only right that people should expect to see their energy bills reduce just as swiftly when wholesale costs come down - but this doesn't always happen," Jeremy Cryer, Gocompare.com
  • | by Emily Bater

Energy regulator Ofgem is piling pressure on suppliers to cut its prices after a fall in the wholesale cost of gas and electricity.

In a letter to suppliers, the watchdog issued calls for the market to explain how these savings will be passed on to customers' bills.

The price of gas has fallen to its lowest since September 2010, while electricity now costs the same as it did in April 2010. Failure by the big six to reduce their prices will be seen as evidence that they're not competitive, something we've long suspected.

Wholesale gas prices are now 38% cheaper than they were this time last year, with a similar trend in electricity, which is 23% more now than it was in June 2013.

Gocompare.com's energy expert Jeremy Cryer said: "Wholesale gas and electricity prices make up the biggest chunk of people's energy bills, and any upward movement in their costs inevitably result in 'necessary' price rises being imposed on households.

"It's only right, then, that people should expect to see their energy bills reduce just as swiftly when wholesale costs come down - but this doesn't always happen.

"Now's the time for the big energy companies to prove how committed they are to their customers by either passing on the savings that they are making, or explaining why bills won't be falling."

Trust in energy companies has taken a hammering in recent months, and Ofgem is considering taking the industry to the Competition and Markets Authority to find out why competition isn't working for consumers.  

Ofgem's chief executive, Dermot Nolan, said: "The big six suppliers tell us that they think the market is competitive, but our research shows that consumer trust is low. Therefore 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.

"If any of the companies fail to do this, consumers can vote with their feet. Independent suppliers are currently offering some of the cheapest tariffs on the market."

Research from Gocompare.com earlier this year found that 30% of households expect to make a switch from the big six in the next three years to alternative providers.

Ofgem recently launched its 'Be a Smarter Energy Shopper' initiative, to encourage people to get informed about energy and consider switching. This came as the industry itself committed to making switching speedier, aiming to reduce the time it takes to move suppliers to two weeks.

Jeremy Cryer said: "People needn't wait to see if they will benefit from wholesale prices falling while languishing on their current energy tariffs. Instead, they should shop around carefully and compare their existing plan with the deals available from the UK's other energy suppliers - large and small - and if they find a better price, switch."