Electricity suppliers 'failing to pass on price cuts'
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Your support makes all the difference.Electricity suppliers are failing to pass on huge reductions in wholesale prices to their domestic customers, research published yesterday by the energy regulator Ofgem reveals.
In the past four years, wholesale prices have fallen by 40 per cent and yet domestic bills, even for households which have taken Ofgem's advice and switched supplier, have only come down by 8 per cent – equivalent to £21 off the average bill.
The situation is even worse for domestic consumers who have stayed with their local supplier – prices for these customers have dropped by just 3.5 per cent.
Wholesale prices account for half the typical domestic electricity bill. Had the reduction in wholesale prices over the past four years been passed on in full, then the reduction in domestic bills should have been 20 per cent or £51 for the average household paying the standard tariff.
After the introduction of new electricity trading arrangements (Neta) in March last year wholesale prices have fallen by 20 per cent and yet domestic bills have come down by just 1 to 2 per cent.
Ofgem said that average domestic bills had not come down in line with the reduction in wholesale prices because supply companies had chosen to use the savings to tempt customers of other suppliers to switch. Ofgem also said that new environmental obligations had added between 1.5 and 2 per cent to bills.
However, consumer groups pointed out that even among customers who had switched supplier, the fall in prices was still less than half the amount that would have been expected.
Ann Robinson, chairwoman of Energywatch, said: "This report has done little to alleviate our fears that consumers are being ripped off."
Ms Robinson called for an urgent investigation into why domestic price reductions had been so modest and whether supply companies were abusing their dominant market position by charging existing customers so much more. She also said Ofgem should investigate the significant increase in retail margins of electricity suppliers.
Callum McCarthy, the chief executive of Ofgem, maintained that Neta was working well and that domestic customers could get between 15 and 25 per cent off their bills if they changed supplier. "The message is 'Switch to save'", Mr McCarthy said.
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