Cheaper Gas At Last?

Lower wholesale gas prices over summer and an additional pipeline supplying gas from Norway should reduce prices. But will it really happen? And when?

Because of a new gas pipeline from Norway that opened a few days ago, we have seen wholesale suppliers giving their gas away to importers! If only the energy companies would be so generous to us, we would have cheaper fuel bills.

Centrica said that the price dip occurred because lots of gas has been forced through in order to test the new pipeline. As a result, the price dipped to minus 5p a therm, according to The Telegraph. Considering prices averaged 60p per therm last winter, this is an extraordinary low.

But does this mean cheaper energy for us? You'd think so, but, unfortunately, perhaps not. Centrica believes that, despite the temporary drop, prices will average 70p per therm this winter.

Still, since April the wholesale gas price has come down by about 20%. Plus the new Norway pipeline is expected to supply 20% of our needs. With the lower wholesale prices over the past months, and with the extra downward pressure on prices caused by the new pipeline, we should see our gas bills come down.

However, we can't expect instant gratification. Ofgem, the energy regulator, has made fairly strong statements recently about its expectations for the price we pay for gas. It wants the consumer to benefit from lower wholesale prices. However, it could be six months before we see reductions, as energy companies tend to buy their gas supplies up to a year in advance. This means, of course, that the energy companies have already bought their current gas supplies at higher prices.

Also, it's unlikely the reductions will come close to matching the price hikes we've seen in the past few years. I'll get no argument from Allan Asher, Chief Executive of independent watchdog Energywatch, either. He said: "Despite reports that the wholesale price of gas is starting to fall, cheaper domestic energy bills will not follow this year and the market generally shows few signs of genuine competition."

By which he means that there is little reason for producers and providers to lower their prices, especially as it's so difficult for new companies to compete with the big six.

Asher also said that: "Energywatch remains convinced that only a Competition Commission inquiry into the.energy market will tell consumers whether punishing energy prices in Britain are unavoidable or whether they can be explained, largely, by a market structure that inhibits vigorous competition."

If that just reads like gobbledygook to you, Energywatch provided three Foolish tips in plain English that will help to take the sting out of energy prices:

• "Check your price against other suppliers." - don't forget that you can compare utility prices through The Fool.
• "Check you are paying by the cheapest payment method" - usually this will be by monthly direct debit.
• "Get advice on energy savings" - see our recent article on Seventeen Ways To Cut Your Fuel Bills.

> Don't wait six months for lower prices! Save over the winter months by comparing utility prices and switching now!