Thursday 19 October 2017

Charlie Weston: Energy firms have questions to answer on pitiful price cuts

The rise in network and supply costs has led to suspicions that energy companies are deliberately bumping up some of their costs to avoid deeper cuts in the price of electricity and gas for householders (Stock picture)
The rise in network and supply costs has led to suspicions that energy companies are deliberately bumping up some of their costs to avoid deeper cuts in the price of electricity and gas for householders (Stock picture)
Charlie Weston

Charlie Weston

Have we been taken for mugs by electricity and gas suppliers? The question is prompted by last week's announcement by the energy regulator that it is to conduct a review to see why energy prices have not fallen by more than the pitiful reductions we have seen lately.

Household energy costs have remained stubbornly high in the face of a plunge in the cost of inputs for energy producers, such as the prices of a barrel of oil and wholesale gas.

The suspicion is that electricity and gas suppliers are manipulating their cost bases to justify keeping consumer prices high.

The Commission for Energy Regulation said wholesale energy costs had fallen sharply in the past three years. Despite this, price falls for householders have been much more modest.

At the same time, the energy companies claim their supply costs and the money needed to maintain their networks have shot up.

The rise in network and supply costs has led to suspicions that energy companies are deliberately bumping up some of their costs to avoid deeper cuts in the price of electricity and gas for householders.

Details in a report produced by the regulator show that wholesale electricity costs fell by a cumulative 39pc between 2013 and 2016.

This was due to lower costs for wholesale gas and falls in the cost of a barrel of oil.

But consumers saw prices fall by just 3pc. Those availing of a discount saw prices drop by 4pc.

At the same time, electricity supply costs shot up by 46pc, raising fears that energy suppliers may be inflating their costs to avoid passing on larger price reductions to consumers.

The regulator's report states: "While wholesale energy costs have been decreasing on average from 2013, network costs (both transmission and distribution) have generally increased."

Now it may well be that energy suppliers had to hugely ramp up what they were spending on marketing as the energy market was fully opened up to competition, something that pushed up supply costs.

That may be a factor, but it cannot be denied that energy companies have been downright stingy when it comes to price cuts for householders, raising suspicions of super profits being made in this market.

The pity of this is that it comes just as wholesale gas and oil prices are starting to rise. And watch as energy suppliers react to that with price hikes for households - despite heavily restricting price drops up to now.

All this means it is high time the regulator put it up to energy companies. It is the least consumers deserve.

Charlie Weston tweets at @CWeston_Indo

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