The price of wholesale energy is said to have dropped to its lowest ever since September 2010, and governments are now urging major energy companies to explain why their consumer costs don’t reflect the cost of production.
Ofcom reported that the six main suppliers in the UK – SSE, EDF Energy, eOn, EDF, British & Scottish Gas, and nPower – have showed no sign of lowering their prices or even willingly providing an open explanation of their prices to customers.
A spokeswoman from Energy UK however, which represents the big suppliers, claimed that wholesale energy is just “one of a number of costs outside of an energy company’s control”, which make up a household bill. She explained that suppliers often buy gas and electricity months and sometimes years in advance in order to reduce price swings in the market.
When wholesale prices fall, it can take time for bills to catch up as the gas and power may have been bought at a higher price some time ago,”
Nevertheless, experts have made the observation that when wholesale prices go up, energy suppliers are quick to boost their consumer prices. However the opposite is true when the wholesale prices drop.
Chief executive of Ofcom, Dermot Nolan, said:
The big six suppliers tell us that they think the market is competitive, but our research shows that consumer trust is low.”
Indeed, it was recently reported that customer complaints issued to the independent energy ombudsman have more than doubled in the first half of 2014 alone, compared with the previous six months. In 2013, overall complaints accumulated to just 17,960. This number has risen to 22,671 in 2014.
84% of complaints so far this year have been to do with billing issues, followed by switching and transfer issues, which accounted for 13%.
Mr. Nolan added that if suppliers wanted to start rebuilding relationships with their customers, they would need to clearly explain how falling wholesale energy costs would affect customers’ bills.
Prices for gas and electricity are expected to be around 16% and 9% lower respectively for the coming winter, thanks to unexpectedly warm weather last winter and healthy gas imports. Dual-fuel suppliers however are set to make an average profit of £96 per home over the next 12 months.