The energy companies are coming under increased pressure from the government to pass on falls in wholesale gas prices and to slash consumers’ gas and electricity bills.
Amber Rudd, the newly appointed energy and climate change secretary, has written to the ‘big six’ energy companies calling on them to lower their prices now that a pledge by Labour to impose a freeze was off the table.
Analysis by regulator Ofgem has found the energy firms are now making an average profit of £118 per dual fuel deal this year – up 32% on the previous year, while wholesale gas and electricity costs are now £80 lower than they were a year ago.
Rudd told the Daily Mail: “Labour’s price freeze was a theme for why they were unable to reduce prices before the election. Now that threat is no longer there, I intend to keep up the pressure on them to act.
“My focus is to get the best deal for consumers and the department is working hard to keep energy bills as low as possible.”
Prior to the general election, Ed Miliband promised a price freeze and new powers for Ofgem to enforce reductions.
The measure was attacked by the Conservatives, who said it provided a barrier to cuts. In January analysis by uSwitch found that customers were due a bill reduction of £140.
The suppliers did offer reductions in the spring, typically £20-£30 – well short of the fall in wholesale costs, and after the end of winter, when consumption drops.
Which? executive director, Richard Lloyd, said his group’s calculations show UK bills could have been £2.9bn lower over the previous year – £145 per household – if the wholesale costs had been passed on fairly.
“Energy firms have totally run out of excuses for not cutting our bills. It’s good that ministers are acting but we now need to see suppliers do the right thing, and fast. If they don’t play ball it will add weight to the case for the competition authority to step in and force the energy firms to make bills fair,” he said.
Last week SSE, the UK’s second biggest supplier, reported a 39% increase in profits to £456.8m for the year to the end March, meaning it made an average of £69 from the supply of household electricity and gas before tax and interest payments.
But it also revealed it had lost more than 500,000 customer accounts in the last year, despite its pledge to freeze bills until at least July 2016, citing “increasingly challenging and highly competitive market conditions”.
Energy UK, which represents the firms, rejected claims of profiteering and said: “Energy suppliers work hard to provide good service and value for money to their customers. By shopping around customers can find deals that are both cheaper than this time last year and which match individual circumstances.
“Our members will be replying to the secretary of state in due course and the industry as a whole is keen to work constructively with the new government to ensure energy security at a price everyone can afford.”
The Competition and Markets Authority is undertaking a wide-ranging probe into the energy market to see if customers are being unfairly treated by the UK’s dominant big six energy suppliers.
