The Reason We Have High Gas Bills

Gas and electricity profit margins are rocketing, which suggests that the market is failing.

In March I wrote about high gas company profit margins: Gas Company Profit Margins Are Too High!

Now we have even more details, compliments of Florian Ritzmann from Xelector, which powers our gas and electricity comparison tool. Comparing wholesale prices (the price suppliers pay for gas) with consumer prices, we can see that customers pay, on average, exactly the same now as they did in April last year. However, wholesale prices are 70% lower for gas and 61% lower for electricity! For both, it's 65% less.

These figure are based on 'spot' prices, rather than 'forward' prices. Gas companies buy their supplies 'forward', basically meaning 'in advance'. Even so, the percent reduction in wholesale prices will be more or less the same, according to Ritzmann.

So the financial benefit of falling wholesale prices has been completely bypassed. To me, this shows that competitive forces are not doing their job properly.

However, as far as I can see, regulator Ofgem and watchdog Energywatch have been pretty impotent when it comes to influencing or regulating this. If the millions of people who never switch started to do so, this would force the market to respond. Problem is, it seems that convincing the majority of people to do this as difficult as convincing people to vote in elections.

So all we can do is attend to our own bills. Suppliers offer better deals to new customers than to existing ones, so if you haven't switched for a while, you may make substantial savings by doing so now.

> Compare gas and electricity prices to see how much you could save.
> Read Are Gas And Electricity Comparisons Accurate? | Three Tips For Cheaper Utility Bills