Energy firms accused over prices

http://news.bbc.co.uk/go/rss/-/1/hi/business/6558947.stm

Version 0 of 1.

Energy consumers could be losing out on about £200 a year because power firms are failing to pass on cuts in wholesale prices, a report has claimed.

Price comparison website uSwitch.com said firms are holding off price cuts.

But the Energy Retail Association (ERA) said that when wholesale prices went up sharply in 2005 and 2006, power firms did not pass it all on to customers.

Last year, energy regulator Ofgem warned firms not to be slow to pass on wholesale price reductions.

Wholesale falls

uSwitch calculated that household energy bills rose by £277 on average during 2006.

It's not unreasonable to expect some generous reductions now that wholesale costs have fallen Ann Robinson, uSwitch

However, increasing supply has led to a fall in wholesale energy prices - the price at which firms buy their power which they then sell on to customers - to levels last seen in late 2005.

But in recent times energy firms have only moved to cut prices by an average of £76, the price comparison site added.

In effect, this means that much of the increase in consumer bills in 2006 is being held onto by suppliers, even though wholesale prices have fallen to pre-2006 levels, uSwitch said.

"It's not unreasonable to expect some generous reductions now that wholesale costs have fallen," said uSwitch spokeswoman Ann Robinson.

"Instead, suppliers are handing back a derisory £78 and are using smoke and mirrors to obscure the fact that they are still pocketing an extra £200 per household," she added.

But the ERA vigorously denied that firms were treating customers unfairly.

"The huge increases in the wholesale price over the last three years still haven't been passed on to customers, which is why there is this delay in any decrease," said ERA chief executive Duncan Sedgwick.

Last September, when wholesale prices had been falling for a few months, the regulator, Ofgem, said it would take tough action on any energy company not passing on these price cuts.