E.ON, npower, EDF, SSE and Scottish Power snub Government call to cut energy bills

Major energy suppliers dragging their heels on price cuts, despite wholesale costs plummeting to five-year low.

The UK’s biggest energy suppliers have snubbed the Government’s call to pass on savings from the dramatic drop in wholesale gas and electricity prices.

The ‘Big Six’ – British Gas, SSE, EDF, E.ON, Scottish Power and npower – are under pressure to cut tariffs, as market price reporting agency ICIS revealed wholesale costs had hit a five-year low.

The ICIS quarterly index showed electricity prices were 19% down on the same time last year, while gas prices had fallen 29%. They now stand at the lowest quarterly averages since 2010.

Energy price cuts

Each of the Big Six firms did take part in a round of gas price cuts at the end of 2014 on their standard tariffs, which took effect between January and April earlier this year, the biggest of which was a paltry 5.1%.

None have reduced standard electricity prices.

Consumer champions Which? estimated UK households should have received cuts of between 8.8% and 10.3% on gas and up to 10% on electricity to align with wholesale price falls.

Which? said households could have saved £145 on their annual bill if wholesale costs had been passed on fairly.

At the time, suppliers blamed the uncertainty of the May general election and Labour’s pledge to freeze energy bills for the modest cuts and failure to pass on savings, keeping prices artificially high.

But with the country back to business as usual following the Conservative election win, suppliers show no signs of adjusting prices.

Government snubbed

In June newly-appointed energy secretary Amber Rudd wrote to British Gas, Scottish Power, SSE, npower, E.ON and EDF to call on them to pass on the 20% reduction in gas and electricity costs in the form of lower prices.

The letter stated: "In light of the greater regulatory stability we are providing and continued stability in wholesale gas prices, I believe that energy suppliers should be seeking to regain the trust of consumers by reflecting this in their pricing decisions."

But while all of the energy firms say they’ve either met with Ms Rudd or responded to the letter, only British Gas has actually taken action by bringing down standard prices for households.

In July British Gas announced it would cut gas prices by 5% for those on its Standard and Fix and Fall tariffs from 27^th August. It claims the cut will save the average household £35 a year and will benefit 6.9 million customers.

But this single digit cut falls well short of the double digit drop in wholesale energy prices.

What the energy companies say

We quizzed the other five big energy providers on why they had not acted on the Government’s call to cut bills.

All assured us that wholesale costs and standard variable prices were constantly reviewed and price cuts passed on wherever possible, while some SSE and npower also pointed out other costs that make up a bill had not fallen.

A spokesperson for npower said: “Network costs, distribution costs smart metering are offsetting any falls in the wholesale market. The wholesale portion of a typical electricity bill is around 34% – gas, over the next five years will be around the same.”

A spokesperson for SSE said: “We constantly review prices but it is very important to note that wholesale costs are not the only cost on customer bills. That’s reflected in the fact that we expect our profit margin in energy supply to fall this year.”

‘It’s not over yet’

We asked Ms Rudd whether the Government was still keeping the pressure up on the suppliers, despite energy companies dragging their feet.

She said: “It is my top priority to keep bills as low as possible for hardworking families and businesses across the country.

“I will continue to press energy suppliers to deliver on the energy cuts I asked for. It’s not over yet. This is an ongoing conversation I am having with suppliers, and of course I would like to see more progress.”

However, Energy UK defended the actions of energy firms and pointed out that ultimately pricing decisions were up to individual suppliers.

In a statement a spokesperson said: “Energy companies are bringing down prices and competition is forcing tariffs to new lows practically every week. Companies keep in contact with DECC but, in a highly competitive market, decisions about prices are a matter for individual suppliers. Some suppliers bought their energy supplies many months in advance and it takes time for cuts to work through to bills.”

Switch and save

It’s not clear how the disconnect between wholesale costs and standard prices will be resolved. The Government appears to be powerless, while the regulator Ofgem seems unable to force firms to make changes.

Though it seems like the Big Six energy firms have all the power, you don’t have to pay over the odds.

While standard prices have remained high, the cost of fixed and variable energy deals have plummeted around £160 over the last year

With forecasters warning this winter could be one of the coldest in 50 years, you should act now to ensure you are not paying over the odds.

If you are on a standard tariff you are probably paying more than you need to for your energy.

Today the cheapest deal available is the GB Energy Supply Premium Energy Saver, a variable tariff which will cost the typical household £799 year. Meanwhile the cheapest Big Six standard tariff from British Gas costs an average household £1,075.

So you could save £276 compared to the cheapest Big Six standard tariff right now.

Below are the cheapest deals available on the market right now.

Source: loveMONEY

*Average UK price is for dual fuel paid by monthly direct debit including VAT

Prices based on average consumption as measured by Ofgem of 13,500kWh of gas and 3,200kWh of electricity and a customer paying by monthly direct debit including VAT.

Compare energy deals with loveMONEY

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