Energy Bills Should Be Much Less Say ëWhich?í

The consumer group ëWhich?í have released a report saying energy companies could have cut prices for their consumers by a lot more and much sooner.

In an attack on the energy suppliers that is bound to cause upset, ëWhich?í argued that big energy corporations have not managed to offer standard variable energy rates that are proportionate with the wholesale energy costs that have plummeted over the past two years.

The figures they have released show that homes operating on a standard energy rate were on average £145 worse off last year- this amounts to a grand total of £2.9 billion extra.

Energy UK has responded to these allegations by arguing that the energy suppliers passed on reduced prices to their customers as soon as they could. This follows a similar argument that has been taking place in recent weeks within the energy industry.

The executive director at ëWhich?í followed up the report by stating: ìOur analysis places a massive question mark over how suppliers have been setting prices over the last two years. They now need to explain to their customers why bills donít fall further in response to dropping wholesale prices.î

These accusations are levelled at the ëbig sixí suppliers who account for roughly 95% of the UKís energy supply industry. They are Npower, SSE, British Gas, E.D.F, E.ON and Scottish Power. In recent weeks they have made cuts to their gas prices, ranging from the 1.3% to be implemented by EDF to the 5.1% that will be introduced by Npower on 16 February.

However, ëWhich?í argues that this is simply not enough and the far better prices offered by a number of smaller, independent energy providers are demonstrably not enough to create a competitive market where the ëbig sixí have to drive their prices down.

The consumer group stated: ìIn a genuinely competitive market suppliers would be forced to be more efficient and to keep their prices in check as wholesale costs fall.î

The response by Energy UK is that the big suppliers purchase their wholesale gas on the futures market. They say that the gas being supplied to customers today has already been paid for and was bought at a price different to the current one. They purchase for the future in order to protect themselves and their customers against uncertainty and fluctuations in the market place.

The chief executive of Energy UK, Lawrence Slade, stated: ì’ The ëWhich?í calculations are based on very many assumptions and do not reflect the cheaper deals we are seeing. ëWhich?í points out that each company allocates their costs differently and this makes it difficult to estimate wholesale costs and hedging strategies.î

He went on to say that although companies can eventually pass on falling wholesale costs, it is not possible to ìsuddenly pass the savings in one chunk.î Furthermore, he said: ìItís only as your buying strategy unwinds and as you can take advantage of those new lower wholesale prices that you can pass these on to your customers.î

The energy industry also argues that the report by ëWhich?í ignores charges other than wholesale ones, such as network costs and government imposed green taxes that they have to include when budgeting.

Despite the staunch defence by the energy industry, there is evidence to show the bad publicity and purported high prices are having an effect on their customersí behaviour. Energy UK has released figures showing that 1.3 million consumers have moved from a large to small supplier in the last year.

Meanwhile, ëWhich?í have submitted their findings to the Competition and Markets Authority who are due to release the findings of their investigation in the coming year.

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