In the past week it's been announced that the big six energy companies have reaped a satisfying 38% drop in energy wholesale costs. Meanwhile, customer bills remain unaffected or continue to rise. Why isn't anything being done to correct the balance and pass savings on to the consumer?
At the beginning of June it was revealed that energy wholesale prices were at a four year low, and electricity costs were at their lowest level since 2010 (23% below what they were at last year). With this is mind, it's understandable that some are finding the vast increase in consumer bills a bit of a mystery. Since June 2013, our bills have increased from an average of £1,307 to £1,346, and you look back further they've been on a steady increase for a number of years.
Of course, our energy suppliers have to pay their bills too. They must source their gas and electricity before distributing to our homes and this needs to be accounted for. It's around this time of year when gas and energy giants are looking to source energy for their winter months and putting pricing calendars together - and gas is around 16% cheaper than it was this time of year, with electricty being around 9% cheaper. That's a fact which Ofgem, the energy regulators have confirmed, so why are these savings not happily being passed to the consumer? After a stark rise in our energy bills last year it only seems fitting that this market reversal should benefit bill-payers, surely? There are certainly some quetions being asked of the 'big six'.
Ofgem have written individual letters to the big six energy companies; E.On, British Gas, Npower, SSE, EDF and Scottish Power. In the letters, Ofgem have demanded that the companies give their customers a full explanation as to why wholesale energy savings aren't being passed onto them. Public confidence in the energy sector is already at an all-time low (as we report here, over half the UK don't trust their energy suppliers), and if wholesale costs continue to fall and consumers don't see any benefit, they risk making this situation even worse.
When this commotion over energy prices first made the news back in late 2013, when prices were first bumped up, the big six cited Government schemes and levies such as the Green Deal as being the main reasons for the price increases. They described them as being a 'burden' which they had to pass onto bill-payers and urged the Government to rethink its stance on the levies. Rather than put their foot down and take control, the Government yielded and Mr Cameron all but abandoned the pursuit of green subsidies from energy companies, slowing the scheme to crawl. Not only did this have a negative impact on the country's pursuit of greener, better insulated homes, but the energy companies responded with some measely reductions in prices, some of which would not come into effect until months down the line. Since then, not a lot has been done.
The green levy costs that once inconvenienced the energy companies are dwarfed by wholesale energy costs, so it would be reasonable to assume that any fluctuation in price here could be passed onto the consumer with minimum fuss, particularly for a commodities as essential as light and heat.
Once more, Ofgem have urged customers to not simply sit back and take it on the chin. They've made a public statement encouraging people to look at alternatives such as First Utility, Ovo Energy and Extra Energy who are currently offering much better value and some of the cheapest and fairest tariffs on the market today. People are often reluctant to change energy suppliers as they see it as a long, drawn out process which can take a few weeks to complete - they're not wrong, and the process can be a rather drawn out affair, but all it takes is a few clicks of the mouse and the companies take care of the rest. There's no reason we shouldn't all be assessing the market for the best deal, like we would with purchasing a new car or home, and the sooner we hop to it the sooner the big six will hopefully get the message that they need to be more flexible in passing on savings.
The cheaper wholesale costs this year are largely due to a milder than average winter last year. If we had a particularly cold winter instead, there'd be less energy in storage and wholesale prices would be on the rise. In this instance we would be bracing ourselves for higher energy bills and the big six would jump to their defense by citing a rise in wholesale energy costs. Turn the tables however, so that wholesale costs are falling, and they're not so quick to defend themselves for passing on the reduction.
Eco Stores Direct are here to bring you the very latest in energy news, views and opinions from across the UK. They are also suppliers of energy efficient electric heating solutions and are constantly assessing the market for the best products and the latest ground-breaking technology which they think will make a real difference to their customer's homes. Eco Stores Direct are devoted to helping you reduce your carbon footprint and bring down your energy bills and they work hard to raise awareness of energy efficient products that can make all the difference. For more information on their range of far infrared wall panel heaters or designer electric radiators, call one of their friendly team today on 0330 300 4444 for a free assessment.