Ofgem calls on suppliers to explain prices to consumers
11 Jun 2014 11:44 AM
Energy regulator Ofgem
has called on the Big Six energy suppliers to explain to their customers what
impact falling wholesale costs will have on their energy prices. In a letter to
the large suppliers, Ofgem outlined that failure to engage with consumers on
this issue further risks undermining public confidence in the energy market if
wholesale costs continue to fall.
In recent months, both wholesale
gas and electricity prices have been falling significantly. In early June 2014,
gas prices for next day delivery reached their lowest level since September
2010 and are now around 38% below this time last year. The trend has been
similar in electricity, with prices reaching their lowest level since April
2010 at the beginning of June. They are currently around 23% lower than this
time last year. While there are upward pressures on energy costs resulting from
government schemes to support environmental objectives as well as energy
network renewal, the costs of wholesale power and gas cost dwarf these and
make up just under half the total household bill.
Forward prices for gas and
electricity have also fallen. Compared with last winter, gas and electricity
prices for the coming winter are around 16% and 9% lower respectively than last
year. This trend has been driven by the mild temperatures across GB and Europe
last winter, leaving gas storage at record levels. In a competitive market the
threat of losing market share would encourage suppliers to reduce their
customers’ bills whenever there are sustained reductions in costs.
Suppliers are yet to reduce their prices for existing customers to reflect the
wholesale cost changes.
Ofgem Chief Executive,
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. Therefore if suppliers are going to start rebuilding that
relationship they need to take the initiative and explain clearly what impact
falling wholesale energy costs will have on their pricing
policies.
“If any of the companies
fail to do this, consumers can vote with their feet. Independent suppliers are
currently offering some of the cheapest tariffs on the market. Impartial and
independent advice on getting a better deal on your energy is available from
the ‘Be an energy shopper’ campaign atwww.goenergyshopping.co.uk.”
Ofgem is currently proposing
referring the retail market to the CMA after a joint report with the OFT and
CMA confirmed that competition is not working as well as it
could.
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Notes to
editors
1. Wholesale costs: view our
monthly update on pricing trends in the energy market.
2. View our letter issued to the
large energy suppliers.
For further press
information contact:
Lisa O’Brien: 020
7901 7426
Dafydd Wyn: 020 3263 9943
Chris Lock: 0207 901 7225
Out of hours media contact number: 07766 511470