Energy Secretary Tells "Big Six" That They Have To Pass On 20% Cuts In Gas and Electricity
The Energy Secretary has fired a warning at the bosses of the Big Six energy suppliers telling them that they must make sure that they pass on a fall in energy prices to their customers. The wholesale cost of energy has dropped by 20% and now Amber Rudd is demanding that this saving must be passed on to the British public.
In the run up to the general election, energy companies had stated that they could not commit to price cuts because they could then be crippled by Labour's plans to make them freeze prices. However even though the Conservatives won a majority in the general election, these companies are still yet to pass on these savings to their customers.
Market experts have stated that companies could have the ability to pass on more than £100 a year's worth of savings to households around the UK. This news comes as SSE, last week, announced a 50% rise in profits - equal to £396 million. This trends is expected to be mirrored across the other companies; British Gas, Npower, EDF, E.on and Scottish Power.
These providers did offer their customers a slight reduction a few weeks back but this fell well short of the mark when compared to the decrease in wholesale costs. These reductions also came after the winter months meaning that the amount of consumption by users had dropped.
Amber Rudd has written to the heads of all these companies telling them that they must allow the public to see some of the savings that they are making on the cost of this energy. Forecasts have also recently warned of a particularly cold winter this year, meaning that many families will have to pay more to keep their homes warm.
The Energy Secretary stated:
"Labourís price freeze was a theme for why they were unable to reduce prices before the election. Now that threat is no longer there, I intend to keep up the pressure on them to act."
"My focus is to get the best deal for consumers and the department is working hard to keep energy bills as low as possible."
"That is why I have written to energy companies asking them what their plans are to lower bills for hardworking British bill payers."
Many watchdog bodies are already investigating these companies amid accusations of profiteering. The Competition and Markets Authority has already stated that it believes many users are already being switched to more expensive rates and are therefore being charged for their loyalty.
Ofgem, the regulator of the gas and electricity markets in the UK, has stated that the average profit of each supplier has shot up by 32% over the last year - now equalling £120 per household.
Citizens Advice has stated that:
"Energy suppliers can no longer make excuses about prices being high due to the prospect of a price freeze."
"Firms need to make sure consumers get the benefit of a drop in wholesale prices by passing on savings to customers."
"Weíve been calling on energy companies to pass on the savings from the drop in wholesale prices so it is good to see the Government putting extra pressure on suppliers."
Paul Massara, the CEO of Npower, has previously used Labour's plans for a price freeze to justify the company's prices. Speaking prior to the general election he said:
"We are acutely aware that if the Labour party were to implement their proposed price freeze, we will be living with the consequences of our standard rate tariff price for a very long time and beyond the level of risk that we could manage in the wholesale market."
But the company, which is notorious for its appalling levels of customer service and inaccurate bills, now claims that it barely profits off of each household.
"We constantly monitor all costs, not just wholesale, to ensure customers receive a fair deal. We balance changes in wholesale prices against increases in the other costs the industry are charged."
"Wholesale costs represent less than half of a typical household energy bill. Npower recently published its annual consolidated segmental statement for the year 2014 which showed a profit of £31 per dual fuel customer."
The other energy companies have also shown no desire to lower their bills, despite the government's demands. An SSE spokesman said:
ëProviding this peace of mind for customers requires a long-term approach to pricing; however, as ever, if we can cut them again, we will.í
EDF claimed that they constantly review their prices:
ëEDF Energy buys the majority of the energy that its customers need well in advance ñ in some cases years ahead ñ so the majority of the energy that customers are using today does not reflect current movements in wholesale prices.í
The firms are represented by Energy UK, who have denied claims of profiteering:
ëEnergy suppliers work hard to provide good service and value for money to their customers.
'By shopping around customers can find deals that are both cheaper than this time last year and which match individual circumstances.
ëOur members will be replying to the Secretary of State in due course and the industry as a whole is keen to work constructively with the new government to ensure energy security at a price everyone can afford.í
British Gas have refused to answer questions on this topic and have previously stated that they do not allow politics to govern their prices.
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