Energy Firms Urged To Slash Prices As Wholesale Costs Reach Near-Decade Low

Energy Firms Urged To Slash Prices As Wholesale Costs Reach Near-Decade Low
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UK gas and electricity wholesale prices have dropped to their lowest level in almost a decade, sparking calls for suppliers to cut bills by 10%.

Prices have averaged at nine-year lows over the first quarter of this year, according to the ICIS Power Index, which analyses energy markets.

Ben Wetherall, head of gas at ICIS, said: "UK gas demand was affected by a mild winter, but more gas-fired generation helped to keep prices stable.

"Cheaper gas prices, the additional emissions costs for burning coal, and less wind generation than a year earlier all helped to boost demand."

Power prices fell less than gas as traditional generation was squeezed by more renewable capacity.

Zoe Double, head of power at ICIS, said: "Some older coal-fired plants closed during Q1 2016, so with less flexible supply available to the market, market participants are reluctant to sell power for winter delivery at lower prices because of the risk of shortages."

Comparison website uSwitch called on suppliers to reduce standard tariffs by a further 10% in light of the new figures.

Ann Robinson, director of consumer policy at uSwitch.com, said: "Today's figures prove, yet again, that consumers have been short-changed by token gesture price cuts.

"Whilst any reduction is welcome, the fact remains that the average Big Six dual fuel bill has fallen a mere 5.7% since the start of last year.

"Given record-low wholesale costs, suppliers must do the right thing and reduce standard tariffs by a further 10%."

Energy and Climate Change Secretary Amber Rudd wrote to energy firms in the middle of last year asking them to pass on a fall in wholesale costs to consumers.

But recently announced price cuts by the Big Six, which all came into effect last month, are calculated to save customers on standard tariffs just £30 a year.

Which? executive director Richard Lloyd said: "Customers will question why energy prices remain high and suppliers have only cut gas prices by a measly amount, when wholesale prices continue to fall.

"The Competition and Markets Authority (CMA) found that customers collectively are overpaying on their energy by £1.7 billion and our own research shows that customers could be saving up to £400 by moving away from the Big Six."

An Ofgem spokesman said: "With wholesale prices continuing to fall, energy suppliers need to justify their prices to you otherwise they risk losing your business. Increasingly, we are voting with our feet with switching up by 15% last year and over 40% of switchers moving to independent suppliers.

"Ofgem is working with the CMA to further increase competition and will be looking to introduce the CMA's reforms as soon as possible. Help is available to get a better deal from www.goenergyshopping.co.uk and savings of over £200 are possible."

Energy UK, which represents suppliers, said: "Energy companies are bringing down their prices with cheaper tariffs launched almost every week. Since January 2014 the cheapest tariffs have fallen by around £200. There are now over 50 deals under £1,000 being offered by 37 suppliers operating in the market.

"Wholesale prices make up less than half of the average bill and the majority of the rest falls outside suppliers' control so there will always be a difference between wholesale price falls and what customers actually pay.

"Suppliers are also making it quicker and easier for customers to find the tariff right for them. Almost four million customers switched supplier in 2015 and, currently, around 400,000 households are signing up to new deals every month."

Amber Rudd said: "I've spoken to bosses at the Big Six to make crystal clear that the Government expects suppliers to pass on cost reductions to the families and businesses paying the bills. The cuts in tariffs by the Big Six are a good start but there's more to do.

"This Government is playing its part - committing to take forward recommendations from the biggest ever investigation into the energy market and pushing ahead with plans so people can switch supplier within 24 hours. This will help keep bills as low as possible."