Ofgem says the Big Six energy companies are "undermining public confidence" by failing to explain why wholesale savings haven’t been passed on in bills.
Regulator Ofgem has called on the Big Six energy companies (British Gas, npower, SSE, Scottish Power, E.ON and EDF) to explain why, despite the cost of wholesale energy falling, customers haven’t been paying less for their supply.
Gas prices reached their lowest level since September 2010 earlier this month, and are around 38% less than this time last year. Meanwhile, electricity prices also reached their lowest level since April 2014 at the beginning of the month – and are around 23% lower than this time last year.
Forward prices – the prices applicable when companies buy energy in advance – have also fallen. Gas and electricity prices for the coming winter are down approximately 16% and 9% respectively.
But suppliers are yet to reduce prices for customers.
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Public confidence ‘undermined’
Ofgem Chief Executive Officer Demot Nolan issued an open letter to each of the Big Six suppliers, in which he stated that he would expect that a competitive market would drive suppliers to pass on reductions in wholesale costs to customers.
[SPOTLIGHT]He later commented that suppliers need to take the initiative and “explain clearly” the impact falling wholesale energy costs will have on customer prices, and that “consumers can vote with their feet” if suppliers fail to rebuild their relationships with customers. His comments come at a time when research shows that consumer trust for the industry is low.
Ofgem also released a statement saying that public confidence in the market had been ‘undermined’ and the fact that savings weren’t being passed on in the form of price reductions was one of the reasons behind their referral of the energy market to the newly-formed Competition and Markets Authority for investigation.
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British Gas and SSE reply
British Gas have replied to Mr Nolan’s letter to say that it buys its gas well in advance, so “movements in wholesale prices, up or down, do not feed through immediately to retail prices”. It also cited increased transport, distribution, environmental and metering costs and said its trading statement from last month actually revealed downgraded profit expectations.
SSE said that it had announced a gas and electricity price freeze in March, which will last until at least January 2016, which is the "longest price freeze the competitive energy market has ever seen". It pledged to keep "a close eye on all the costs," and would lower prices if possible.
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