Energy firms costing customers £140 a year by failing to pass on savings

http://www.theguardian.com/money/2015/jan/15/energy-firms-failing-to-pass-on-savings

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Households on the standard gas and electricity tariffs should have benefited from a reduction of £140 in the annual bill since the summer if energy companies had passed on the sharp falls in wholesale prices, according to price comparision websites.

The big six major suppliers have largely refused to cut prices for the 11m homes on the standard tariffs, with some blaming a threatened price freeze proposed by Labour leader Ed Miliband in 2013 as a reason why they cannot act, even though wholesale gas prices are now at a four-year low.

Ann Robinson, director of consumer policy at uSwitch.com, said: “If the energy market was functioning properly, wholesale price falls and competition would be driving down prices and improving service but prices remain unchanged for millions of households. Claims by the energy industry that they can’t cut prices because they bought their supplies far in advance are nothing more than bunkum,” she said.

Price comparison websites said wholesale gas and electricity prices had fallen by about 30% and 15% respectively since the summer. TheEnergyShop.com estimates that if the price falls had been passed on, consumers would see bills fall by £140 a year.

Only E.on has cut its standard gas tariff, but only by 3% – equal to £24 a year. British Gas, EdF, npower, Scottish Power and SSE have maintained their prices for existing customers. However, customers switching suppliers are able to take advantage of lower rates.

As a result, the differential between the cheapest deals and what standard customers pay is now the highest in a decade, according to industry observers. Customers switching can get average bills down from £1,200 to as low as £900, but relatively few households have switched supplier.

Mark Todd at the rival switching site Energyhelpline.com agreed price cuts were now long overdue. “Suppliers appear to be putting profits before their customers. Customers are being punished for loyalty and milked for profits.”

The Conservatives blame Miliband’s price freeze promise but a Labour motion calling on the regulator Ofgem to be given the power to force energy firms to pass on price cuts, was defeated in the House of Commons on Wednesday.

Caroline Flint, the shadow energy secretary, said: “The reason energy companies are not passing on falling wholesale costs is because the Tories and Lib Dems voted against giving the regulator the power to cut bills. ”

British Gas, Scottish Power and nPower said they kept prices under review. EdF and SSE did not respond. The UK’s biggest supplier, British Gas, was typical of those that responded: “Our pricing is under constant review and we always aim to keep prices as low as possible for our customers,” it said.

Robinson said that there was an argument for Labour to withdraw its threat of a freeze. She said that while there was a strong case that the plan had been “instrumental in the failure of the big six energy suppliers to reduce prices,”the Labour party should rethink the “originally well-intentioned” policy, and remove the suppliers’ “last excuse” for not cutting bills.