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A fall in gas prices is on its way, but is it enough?

energy prices

All of the ‘Big Six’ energy suppliers have now announced gas price cuts, as have a number of the smaller suppliers. They took their time, and it’s some welcome news, but do you think these price reductions are enough?

Today, EDF and British Gas became the last of the Big Six energy companies to announce they are reducing their standard gas prices. EDF will drop their price by 5% from 24 March and British Gas will drop by 5.1% from 16 March (British Gas announced a previous drop of 5% in August 2015).

Gas price reductions from the Big Six are:

  • British Gas: 5.1% cut to standard gas price from 16 March
  • Npower: 5.2% cut to standard gas prices from 28 March
  • SSE: 5.3% cut to standard gas price from 29 March
  • Scottish Power: 5.4% cut to standard gas prices from 15 March
  • EDF: 5% cut to standard gas prices from 24 March
  • Eon: 5.1% cut to standard gas prices from 1 February

Price drops are always welcome news, but we’re not convinced it’s enough.

Worried about costs

The latest stats from our Consumer Insight Tracker reveal that 63% of UK consumers are worried about energy prices. And we know that this is a sentiment that will certainly ring true with many of you.

We’ve had an overwhelming response to our Fair Energy Prices campaign. More than 355,000 of you have signed the campaign, and many of you shared with us your concerns about energy bills

We’re still in winter and no one should have to decide whether they can afford to heat their home when it gets cold. We need action sooner, not later.

Competition concerns

In 2015 our research found that household energy bills should be reduced to reflect lower wholesale energy costs. And then last month, we saw in the news that wholesale gas and electricity had fallen by nearly a third in year to a five year low.

There are many people in this country, particularly the vulnerable, who struggle to pay their energy bills in winter. While we’re pleased to finally see these price cuts from the Big Six, the similarity between the cuts announced raise some serious concerns about how competitive the energy market really is.

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So what now?

Well, this morning the Secretary of State for Energy, Amber Rudd MP, said:

‘It’s a good start but the Government expects all suppliers to pass on reductions in the costs of supplying energy to consumers.’

The Competition and Markets Authority (CMA) has been investigating the energy market for some time now. We’re expecting an announcement on its final proposals for fixing the market imminently. With the average customer score for satisfaction from their energy company being just 53%, and the fact that price cuts are not being seen across all energy suppliers, it’s vital that the CMA fix the broken market sooner, not later.

So are you pleased to hear a reduction in energy prices? Or do you think that more needs to be done?

Comments

probably not

I’m no expert on this front but what I do know is that the barrel price of oil has plummeted as has the heating oil price……..
We have expensive fuel here in comparison to England but heating oil has went from around the high 50s to just above 20ppl
I was always led to believe that LPG and NATGAS were all tied or followed the oil price…………..Certainly when the oil price rose to its dizzy highs we were told that this was the reason for the natgas and electricity prices going up by leaps and bounds
Today oil is a fraction of what it was and even though heating oil has fallen it is not as low as it was when the barrel price was a low before………..
This is a good and current topic to have started………..
Gas and electric should have fallen long since………….No doubt we’ll hear about buying in the future but there’s no chat about buying in the future when they want the price up
Then there is political workings which if had been left alone might have been better for us…………….we may be paying the price for Westminsters political decisions…………..
It’s an awful pity that democracy cannot be true democracy and we’ll get our computers out and vote on everything……………Its very doable now but we’re told that our MPs know better how to run a country…………..I would differ with that
But non of that explains why UK energy companies are charging the rates they currently are

Why do energy companies reduce their prices at the end of the winter when consumer consumption goes down? I would be more pleased if they reduced prices in the autumn before consumption increases. Maybe the CMA can explain this phenomenon when they produce their long awaited report.

Beryl,,,,,,,,,,,I think you need to look at them differently……….They are not there to serve you………You are here to serve them…………They are not service providers they are rip off merchants………..
So any thoughts about things being fair are far from reality…………..I have a friend who always told me never to use the word fair because fair does not exist……………I have came to realise that for the most part he is correct……………We pay to buy,,,,,,We pay to sell……..We pay to be born………We pay to die……………We pay and pay

Beryl – I expect the reason is that the price of fuel is higher during the heating season as demand is high. Once demand tapers off in the Spring it is possible to reduce the price. I am not trying to justify the energy companies’ actions, just to attempt to explain them.

In my childhood I remember my father buying his coal supply in the Summer months and filling the bunkers at greatly reduced prices so the principle is not new.

John,
in 2013 the wholesale cost of gas on the UK spot market stayed pretty static – between £0.64 and £0.68 pence per therm.

Then, in 2014 the priced dropped steadily throughout the firsth half of the year to a low point of about £0.37pence per therm in mid-summer, rising again in the last half of 2014 to £0.55pence.

Strangely, it’s been on a steady decline since then to about £0.32 pence per therm – right through the second half of 2015 as we approached winter.

I can only put this down to over-production and lower demand. In the UK we don’t have a massive storage capacity for gas – unlike Germany.

John I understand where you are coming from and where demand exceeds supply your hypothesis may apply. On the other hand, if the energy companies passed on the lower wholesale prices as and when they occurred irrespective of the season, when there is no visible shortage of supplies, consumers should then reap some of the rewards from this reduction, unless of course keeping prices high when demand is high is a way of ensuring adequate supplies to last until the Spring.

The truth is, and leaving aside added govt levies and green revenues for a minute which Malcolm has alluded
to, energy companies are exploiting consumers by deliberately keeping their prices high while consumption remains high, simply by selling more energy to them at unmerited and unfair prices, taking advantage of consumers dependency upon them to keep warm during the winter months to survive. Making hay while the sun shines springs to mind, except in this case, perhaps more appropriately in this country, when the sun doesn’t shine.

Your analogy regarding your father replenishing the family coal supplies during the summer months when prices are lower makes good sense and I recall my father doing the same as we had a large cellar in which to store supplies which would then last all through the winter months. In this case however, the difference being consumers are at the mercy of the energy companies to do likewise but they don’t expect retail prices to remain high when wholesale prices remain cheaper all year round.

The added green and VAT revenues and standard charges are a separate issue which the CMA need to thrash out with the government so that some semblance of justice and morality is restored back into a very broken and unfair energy market.

I am with you on all of that, Beryl. A further point is that if the energy companies behaved as you suggest there would be an incentive for them to invest in increasing the UK’s gas storage capacity [the deficiency cited by Mike above as contributing to our volatile prices]. Big old-fashioned gas-holders blighting every town are not the answer – vast volumes of liquefied natural gas can be stored very economically and unobtrusively in its highly-condensed liquid state. Since many electricity generating stations now use gas as the primary fuel this would also help moderate electricity prices. Electricity itself cannot be stored economically but the means to create it can be and I should like to see (a) more pumped hydro systems to provide ‘surge’ power, and (b) wave power developments to add to the baseload provision [wind and solar are too unpredictable to rely on but they are still worthwhile despite their ‘technical’ inefficiency – wind more so because it’s always blowing somewhere around our coasts and having turbines in all the best places will ensure continuity of supply for a growing proportion of the regular demand and allow more expensive forms of generation to be saved for peak demand].

DeeKay. Bearing in mind wholesale prices have been reduced for some considerable time I am inclined to agree with you.

My avatar has disappeared. Maybe she has taken off in search of a cheaper energy deal 🙂

She has returned 🙂

Welcome back!!!!!

This comment was removed at the request of the user

Is that because SP was banned from doorstep selling [because of poor customer service] and now thinks it has earned the right to reintroduce it? I didn’t think there was a blanket ban on all doorstep selling by energy companies – just those who have committed misdemeanours that have attracted regulatory sanctions.

This comment was removed at the request of the user

Yes I was aware that SSE were also banned. I hope Ofgem resists their demands for reinstatement of doorstep selling, or even goes further and outlaws it altogether for all firms. The very reason that the energy suppliers want it is good enough reason to prohibit it – they must think it is an easier and more productive selling channel than any other. Their problem is that fewer people watch TV in real time so they shoot past the commercials and people have learnt how to block or ‘not see’ adverts on line.

You may have seen recently in the news Age UK have received a total of £6m a year from E.ON to promote a more expensive tariff to pensioners. See
the guardian.com – Age UK and E.ON Suspend Controversial Tariff for Pensioners – .Rebecca Smithers – 9 February 2016.

How much lower can they possibly go?

I think a number of Age UK’s commercial tie-ups are open to question; their funeral plans are not the best available by any means. I think they have compromised themselves and E.On have possibly taken advantage.

Agree John.
I’ve just moved my mother-in-law from Age UK house insurance to SwiftCover’s alternative offering. Saved her about £60 per year.

There should be a direct and automatic link between energy wholesale and retail prices.

There can’t be because the cost of the raw material makes up only 42% of the selling price – distribution costs, billing and customer service plus government levies are not susceptible to wholesale price reductions. Only the VAT element will go down as prices fall. If the government levies were disconnected from the prices and absorbed in general taxation energy price would not look so bad, although I suspect there are big economies still to be made in transmission and distribution.

The Standing Charge covers most of the Transmission and Transco costs. So, when the wholesale price drops so should the fuel element – perhaps not to the same degree but more than the paltry 5-6% recently thrown at us by the suppliers.

Yes, on reflection it’s possible there could be factorised tracking of the wholesale price by the retail price. Ofgem could work it out and lay it down.

At the moment, because standing charges where applicable are not standardised, it is not at all clear to what extent the distribution and other supply and overhead costs are covered by the standing charge and I expect this varies across the market. Again, Ofgem could determine a uniform standing charge to cover the distribution and admin elements. This would also promote efficiency and productivity, deter waste and improve competition.

I have changed to Utility Warehouse after having had my bills rise constantly.
UW have been really good, understanding and helped me understand tge market better.
They have offered me the best tariff on the market.
The big six need to take a page out of their book, not only in prices but in customer services too!

It’s the same old same old. It’s not just about the energy suppliers. Globally ALL large corporates have the balance of power and it has gone to their heads and wallets! There is corruption and dodgy dealing everywhere you look and so many politicians are in the pockets of the fat cat brigade, there seems now way out. There is however. It’s called people power! These corporate giants rely entirely on the like of us to generate their obscene amounts of wealth. Without consumer spending they are nothing. People need to say enough is enough and get together in order to combat this what amount so, criminal activity and duplicity. Standing up against the energy giants is a massive step in the right direction and if enough of us rise up against the injustice of it all, it will change. Politicians are often very greedy, but most of them also realise that they need the backing of the people in order to keep their seats in power, so they can be swayed into doing more. Legislative change is often negative rather than positive, but forcing the hand of the politicians and raising the threat of it, can often be enough to force change. Complacency and apathy are the enemies of positive change, so if you care, feel passionate or aggrieved, or cannot manage without the necessary changes being affected, do your bit now by making your voice heard!

Better stil, move to a different supplier.

Mick, I like your optimism about voicing your opinion but it will not work. Check the market, find the lowest supplier and move to it. If, a week later there’s a better offer move again.

Jane Stewart Adams says:
12 February 2016

Well said, Mick! People Power does work, and we need to keep up the pressure wherever we can.

Mick Courcier, I agree with you on the complacency and apathy being the enemies of positive change also that if enough people stand up for their rights, the powers that be will have to take notice and affect the changes that are needed in order to keep their seats in government!
This government should be run by the wishes of the people not by the wishes of the politicians, if they dont like it they can get out and be replaced by those who care about the wishes of the people!

Our energy infrastructure should belong to the people not global corporations. It should never have been sold off in the misguided belief that this would lead to lower prices and more investment on the cheap. Our energy infrastructure is on the point of collapse because successive governments have chosen to ignore it’s demise and none have developed a cogent improvement policy! Chasing the “grail” of renewables at huge cost to the consumer is not going to improve the situation.

I have changed over to ovo energy and have just received a email informing me about a increase in my supply . The exuse was although energy prices are lower the cost of delivering it as increased . Ovo had the lowest prices , now I’m not so sure and will be looking to change again in the near future

Check out GB Energy.

Oh, forgot to say; if you are notified of an increase by your supplier you ARE able to move WITHOUT any penalties being inflicted upon you. There’s a time limit though so check with your currenr supplier. During the move they CANNOT apply those increased costs providing you do actually move to an alternate supplier, again, within certain time constraints.

Yes a reduction is crucial. I looked at my gas bill yesterday and noticed that the breakdown of the bill gave British Gas’ gas costs given is averaged over a 2 year period from 2010, and based on Feb 2013 figures overall – in other words bill is not at all based on what they are paying now or last year for wholesale gas , which is substantially less than in 2010-12. Consumers are therefore being misled.

I agree with Paul Hibberd – there should be an automatic link between wholesale prices and prices charged to consumer. A necessity should not be subject to the kind of profit chasing that energy companies indulge in, so more needs to be done to fix the energy market. Re-nationalisation of energy would be good but is unlikely to happen, so perhaps these companies and all providing crucial services should be not-for-profit companies, rather than leeching on the public.

How much should our unit gas price have dropped? According to energybrokers.uk, the wholesale price of gas to the UK has, in relative terms been as follows (I’ve roughly averaged out the particular year’s ups and downs):
2011 – 60; 2012 – 60; 2013 – 68; 2014 – 50; 2015 – 40.
The drop is not the same as crude oil.

Taking the last couple of years, the fall from 2013 to 2015 is 41%, and last year 2014-2015 20%. Since in a dual fuel bill raw energy is about 42% of the total let’s assume this also applies to gas on its own. The cost of the gas in our bill should be 17% less than 2 years ago, and 8.4% less than last year, by my reckoning (without considering what forward buying might do to influence this).

I am not an expert in this, and someone may find other figures that give a different picture, or I may be wrong in my assumptions. But it seems to me we need to see information like this to be able to decide whether or not the energy companies are playing fair. I checked my gas tariffs and am paying 15% less than 2 years ago and 12% less than last year.

Perhaps Which? could come up with a monthly unit price indicator that reflects changes in costs so we can judge where we are? Just like they do for interest rates.

Malcolm

If all the gas prices move together, then your figures are reasonable.

But if the “headline figures” quoted are only spot market prices and the utilities actually “forward buy” most of their gas on fixed price contracts, I think your figures might over estimate any realistic potential short term price reductions.

Steve Goodfellow says:
12 February 2016

I am chronically sick. I cannot afford to pay back my gas debt via prepay meter, so don’t use it. If the repayments were lower, i would use it. Npower halted my elec fuel direct scheme, and took over a year to reinstate it, whilst i accrued a large debt, so now have a huge fuel direct payment to meet. I heat water for washing by electricity, keep one room warm by elec heater in winter. Black mould thrives in bathroom & bedroom, which i almost keep at bay with mould killer.
Energy firms are bleeding our health., whilst shareholders & companies prosper. I would like to see utilities nationalised.

I am not sure how nationalisation would help your situation, Steve – unless you think your debts could be written off and future taxpayer subsidies would be introduced. Never in the history of nationalised gas and electricity supply did the tariffs go down and there was virtually no flexibility. I am no fan of the present energy companies, as my many previous posts will confirm, but they wipe the floor with the old gas and electricity boards that allowed the aged gas works and power stations to become more and more inefficient.

Steve,
gas is cheaper then electric on a “per therm or per killoWatt hour basis”.

I run the hot tap to get the gas boiler to provide hot water to put in the electric kettle, then put the kettle on. This is less expensive than putting cold water in the kettle then heating it for a cuppa.

To be fair, my wife thinks I’m an anal b***ard. But I am correct.

Anything is cheaper than electric per kwh………….
One needs to watch though how many things one heats to get a pint of hot water

Agree DeeKay. Fill your kettle with hot water from your gas boiler. Approx. comparison is about 4p for gas per kWh and 12p for electric per kWh. (rough values there mind).

In some houses that would leave half a gallon or more of hot water sitting in the pipework after putting two cupfuls in the kettle.

Not in my house John. She’s always running the tap. But I take your point if the kitchen is some distance from the boiler. However, most gas boiler have a small reservoir of water ready for that immediate “demand”.

My mother told me not to drink water from the hot tap. When I was older I recognised the risk of chemical and microbiological contamination. It is not unknown to find dead birds in the header tank used in a traditional hot water system. Maybe with modern combo-boilers the risks are eliminated but I would want to check.

There are still tanks in roof spaces with no lids although why this should be the case is beyond me……………30 years ago my old plumber friend warned me to always have a lid………Contaminated water should not be in the house end of as such…………..
Today’s header tanks all have a lid available
However Wave you are correct and somewhat of a buff on micro tiny thingys so you are correct to be wary
Combi boilers are sealed and use water straight from the mains or pump/whatever………..Their temperature is such that micro whatsits should be dead or disabled…………..
Same can be said of any sealed system that has some method of maintaining high enough water temp 24/7
We have both open and closed systems……….All have a small element near the top of the cylinder which is never switched off and even operates form standby generator power………..That keeps the top 25% of the cylinder hot,,,not just warm but hot……….
I still prefer copper to any other material for water……….Some will say that the insides become oxidised but I’ve been having a look and I see no coating on the inside of the cylinders or our pipes………….I just see copper
Problem will be that some water does not do well with heating in the boiler or water heater…………..Some water heaters have magnesium anodes and a few of these will give off an odour according to the water………..Its not harmful but its kinda Rambo territory to drink……………
Not all water is the same………..
There is also the problem or not according to what you believe that some fast boilers use aluminium and aluminium oxide is not particularly good for ones well being……………Certainly I’d not use aluminium anything for food or water………Aluminium is not as likely to react as is magnesium but one should be able to taste the metallic if there is metal oxide in the water………..A bit like the taste of grinding metal with a grinder…………..
The magnesium anode is meant to react…..That is how it stops the boiler corroding…….If your water and the magnesium anode are giving of a strong odour and its too much for some folk to bear most boilers/heaters have aluminium versions available…………
My Dads cabin has a 2kw water heater that is on 24/7 and I could not drink from it……….I didnt say it would kill me just that I could not drink from it…………..
Many hot water systems to day will not have problems but humans are pretty well equipped to sniff out potential problems
Most of the stink is gas caused by various reactions and if one takes a jug,,,,,fills it with the offending water and lets it rest the gas should disappear…………..As should the smell……………….Most likely hydrogen…………….If the odour does not disappear you may have a water problem
Milky or cloudy water is millions of tiny bubbles of gas beit air or other……..Again leave it in a jug and if it disappears its just bubbles…………Bubbles are not often added to water but water reacts to pressure and temperature and bubbles can and do form.

Legionnaires is a dangerous bug that Wave is interested in but is very unlikely from a modern system……

Thanks DK. Contamination resulting from electrolytic corrosion is one of the factors that concerns me about water from boilers. I assumed that boilers with aluminium heat exchanges would have magnesium anodes but did not know.

Dads water heater is steel…………If I run hot water first thing in the morning it would cope you…………but fill a glass and its gone in minutes
I wouldn’t be so concerned about the residue………..
As best I can see if you change the anode as one should you have the opportunity to flush the heater/boiler and I’d guess buy the amount of sludge most of the reaction is still in there………….The oxides will be heavier than water and the hot water comes off the top as usual and there is unlikely to be enough flow to lift the bottom drags up
Combi’s could be different as they are fast heat fast flow……….I dont know about them
Magnesium protects near everything but we have trace amounts of iron which is an aggravation I think……….Certainly the iron was an aggravation or component in our filters…………….On spring well 20 odd feet water we needed carbon/charcoal filters but on the 100s of feet bore those same filters had to go
I’ll assume the alloy boilers have magnesium anodes because I see them online
I have a lot of stuff that would normally be hot dipped galv but wasnt and I went on the hunt for the cheapest mag anodes I could get…………..Its bad enough paying for ton of stuff to be hot dipped but after its been used in a hurry its an even bigger problem to dismantle,,,shot blast and then dip…………..Anodes were a pretty good answer and in fact they have done very well in their use here
Big boiler water heater anodes were the cheapest so I bought those
I also use them in stainless loadbank/dump loads where the once upgrade to stainless had an adverse effect on the elements used which were common oven coiled elements…………No problems in the mild steel cases but then the casing fell apart……….but the stainless is much more proud than the half hearted element stainless………..Plus they are out in the weather as such which is far from what a submersed element in a stainless cylinder would have to put up with……

Yes wave,,,,metals matter…………..Better with copper………Been around forever without a problem

I’ll just add that our pressure system with copper tank has no problems at all……..Never smells………I’ve tried a taste even after several days and there is not a hint of gas……………….I haven’t tried coffee yet as we are not moved in but I’d think the water will be okay……
I had a choice with that cylinder……….Stainless were ten a penny off the shelf but I needed one solar/finned type coil and element ports at various heights and I like the good old 2 1/4 thread as there are all sorts to fit it………
Stainless bespoke was not only expensive actually getting a price was an uphill battle…………..I also became wary because stainless gets brittle and stainless needs particular grades of elements which again would have been bespoke
I went to a nearby copper cylinder manufacturer and had made exactly what I wanted………It was actually cheaper than any bespoke stainless cylinder and the weight of the thing is very impressive……………I cant lift it………..I can lift a 208L steel barrel no problem but this thing,,,no way!! so its much heavier than any stainless cylinder………….

john white says:
12 February 2016

What about everyone stuck on yearly deals on gas/electric ? They wont see any reduction will they ?

I believe most energy companies offer existing customers, including those on longer-term tariffs, the option of switching to their new lower tariffs without penalty.

Depends if the “longer term tariff” is a fixed tariff – but in essence, yes. You may have to pay an exit fee if you are on a Fixed Term Tariff.

You will also (in most cases) need to make the running. Few companies offer knowledge of alternate tariffs that are better than the one you are on at the moment.

Do not sign-up to a Fixed Tariff at this time.

Fuel prices are heading downwards for at least 6 months. Iran is boosting oil production and undercutting Saudi on price.

If you think you are paying high prices for Gas, think of us that have to use LPG with no energy regulator and prices that are nothing short of extortionate. In fact in the last 10 years we have never had a price decrease only price increases.

Not True. I’ve been buying LPG for my car for the past 10 years. It started at 36p a litre 10 years ago (inclusive of the v.a.t. at the rate applicable then) and is now 45p a litre inclusive of v.a.t. at 20%.
LPG for heating costs the same (45p) but with only 5% v.a.t. now but presumably cost more when the price of oil peakes about 18 months ago.

LPG autogas has product price plus road duty plus vat
Heating LPG should be cheaper but often not by much but it should be cheaper and to me is cheaper……….I think around 38ppl at present………Heating oil on the other hand is on the low 20s
LPG has never been cheap……….LPG has a much lower calorific value than the liquid oils
I’ve had propane for over 30 years……….only on occasion do we use lpg against oil………..
It is a great all around fuel though so much so it can more or less do power anything……..stores for years…………not easily stolen
I actually like it but it is not cheap

DeeKay,
It’s cheaper than petrol for car use.

My last two cars have been LPG converted. I pay £0.45 a litre inclusive of vat and duty at the moment (in Bolton). 10 years ago I paid about £0.36 a litre.

Not long ago I was paying £0.60 plus and it hurt. For cars, LPG is about half the cost of petrol. This includes v.a.t. at 20%. For home heating I believe the v.a.t. is 5% so cost should be about £0.39275 per litre

You are correct that LPG has a lower calorific value then petrol – about 10% lower.

It also produces less CO2 – so HMRC will reduce your road fund tax accordingly if you as k them nicely.

As I said I’ve had it for over 30 years………..Theres not much II dont know what to do with it and not much machinery around it I dont know about
I like it but generally not as a heating fuel………….Too dear

Frank Vernon says:
12 February 2016

Absolutely disgraceful. The government is responsible for putting an environment tax on energy. All in the sake of supporting renewable energy sources, wind farms etc. However government has cut subsidies to those renewable energy projects and to residential properties installing photo cells. It hasn’t however reduced the environment tax on energy. A stealth tax by any name.

Frank,
the reduction in subsidies (feed-in tariff) to residential properties with photo-voltaic arrays (pv arrays) results mainly from the reduction in installation costs os same.

Four and a half years ago I spent £9,400 installing a 2.5kw system and did so only because I was assured of a reasonable return on my investment. Now, the same kind of system would cost half that price so it’s only reasonable that the subsidy should also be halved.