Firms urged to lower energy bills after dip in wholesale prices
14 January 2016
Energy companies are facing fresh calls to lower bills as figures claim wholesale prices for the UK are at a five-year low.
The mild winter and lower commodity prices have led to further drops in wholesale gas and electricity costs, according to the ICIS Power Index, which analyses energy markets.
The report said UK power prices finished the year at five-year lows, and were down 23% over the year.
Gas prices for delivery in the next year lost more value, down by 34% over the same period to finish 2015 at the lowest levels in six years.
ICIS said the milder winter temperatures had helped to keep prices down, and more gas from around the world in the form of liquefied natural gas (LNG) was expected to come to the UK as production capacity increases this year.
Zoe Double, head of power at ICIS, said: “Current market prices for delivery two to three years ahead show that participants expect UK wholesale energy prices to remain low.”
Shadow energy secretary Lisa Nandy said: “The big energy companies are benefiting from falling gas prices and still too many families are paying massive energy bills.
“There could be no clearer evidence of why the energy market is broken and needs to be overhauled.”
Separate research by comparison website energyhelpline.com claims loyal UK energy consumers are being short changed by £3 billion on their energy bills.
It said a 51% drop in wholesale gas prices had been followed by a 5% average price cut passed on to customers.
Energyhelpline co-founder Mark Todd said: “Energy companies could be doing much more to slash prices for consumers.
“Over the last two years, wholesale gas prices have come down 51% and electricity has come down 33%.
“This could have been passed through as price cuts of around 25% on gas and 11% on electricity for UK households, yet all loyal customers have seen is an average of 5% off gas bills and nothing off electricity bills.”
He added: “It’s an absolute scandal that larger price cuts have not been passed on. Standard tariff customers are getting ripped off. Loyalty does not pay. The only way to get a proper energy price cut is to switch.”
A survey released on Wednesday found that three in five elderly people will ration their heating this winter amid fears over high energy bills.
As many as two in five (42%) said they would also consider cutting back on food to meet the cost of heating their homes, the poll for comparison website comparethemarket.com found.
The Met Office has warned of plummeting temperatures which could cause blasts of snow, frost and ice in parts of the UK, following an unseasonably warm December.
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.
Lawrence Slade, chief executive of industry body Energy UK, 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 30 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.”
Which? executive director Richard Lloyd said: “It’s extremely disappointing millions of us are still paying way over the odds for our energy. Consumers will rightly ask why their bills haven’t been cut dramatically when wholesale costs have dropped.
“The Government needs to protect vulnerable customers from being ripped off and make people feel confident about switching supplier.”
A Department of Energy and Climate Change spokesman said: “Keeping bills down for hardworking families is a priority and we are taking action to support vulnerable groups who need the most help through discounts and payments in colder months.
“But energy companies need to put their customers first and with wholesale costs coming down we expect savings to be passed on to them. The Government will keep pushing for a fairer deal by increasing competition in the market, encouraging people to switch and getting smart meters into every home by 2020.”