By Stephen Jones
Energy providers enjoyed a huge growth in profits in recent months, as household energy bills failed to fall in line with tumbling wholesale prices.
That’s according to research from energy watchdog Ofgem, which noted that the average net margin for a typical gas and electricity customer hit £105 this month – 40 per cent higher than that seen in November last year. This, in the context of the coldest winter in 30 years, was blamed upon a lack of liquidity and competition in the energy markets.
Despite marking a drastic increase, this is, in fact, a smaller rise than had originally been forecast for the period – largely thanks to British Gas’ seven per cent average reduction in gas prices, which passed on average savings of £55 per customer (See: The makings of an energy price war).
Confused by the rising prices? We are
While Ofgem announced they will be placing pressure on the firms to provide better value, consumers have every right to be confused by the noises coming out of the industry. On the one hand, the regulator warns that prices are likely to rise in the long term to fund necessary changes to infrastructure; while on the other it claim firms should be passing on cuts in the cost of fuel to customers.
Gareth Kloet, head of utilities at Confused.com, says that the regulator must be more lucid if it is to really protect the interests of bill payers.
“Ofgem have raised pressure on suppliers to cut their prices, but, with regulations as they stand, they are not currently obliged to do so,” he said. “Ofgem need to be clear - do they want suppliers to cut retail prices for the masses now or invest in the development we are told is needed for the future?”
Alongside the worrying headlines, there has at least been some respite for customers. Ofwat, the water regulator announced today (23 February) that average water prices are likely to remain broadly stable over the next five years. Indeed, that water companies will be making a record investment of £22 billion over the same period begs one major question – why can’t gas and electricity firms do the same?
Take control
Kloet warned that, in the absence of stronger regulation on suppliers, “customers cannot rely on their current provider cutting their standard price”.
For now, he said, the best thing beleaguered bill payers can do is cut their existing bills as far as possible by opting for online tariffs and direct debit payments – the least costly method of payment available.
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