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Ofgem calls on the Big Six to explain their prices

High price for energy and gasoline in a news article headline

In the last year wholesale gas prices have fallen by 38%, and wholesale electricity prices have fallen by 23%. Yet, average dual fuel bills have risen by 7%. The regulator Ofgem has asked for an explanation.

Dermot Nolan, the new chief executive of Ofgem, has written to the Big Six to say he expects suppliers to pass on savings in wholesale costs to customers as soon as possible. If this doesn’t happen, Mr Nolan warns that ‘it could be seen as further evidence that competition is not working for consumers as well as it should be’.

The letter then calls on suppliers to explain to customers how the changes in wholesale prices impact their pricing policies.

Suppliers must rebuild trust

It’s about time the Big Six justified why falling wholesale prices have not had any impact on your bills. With most consumers believing that suppliers put profits before customers, the Big Six have a huge job to do to rebuild trust.

We want to see suppliers behaving fairly and passing lower costs on to their customers. This is why we have been campaigning to Fix the Big Six – big changes are needed and it’s time for the industry to respond.

We’ll be keeping a close eye on the companies’ responses over the coming days and will continue to challenge them on prices as part of our Fix the Big Six campaign.

What do you think about Ofgem’s letter? Has your supplier informed you about falling wholesale prices? How have they done that? If they don’t, will you be looking to save by switching energy providers?

Comments
Member

I’m with SSE/Ebico as some of you may already know & our prices went down in March of this year. Only by 3.5%. With little energy I use I was very happy wit this. Still a long way off the drop of wholesale prices, but like I say, I’m happy.

Trust on the other hand…. I do not trust Ebico or SSE at all as a company. But my account manger, a really nice women called Rosemary, I do have full trust in her to-do what is right for me.

Member

If a letter is all Ofgem can manage, it just highlights how pathetic they are.

And when energy companies blame the fact that they’ve pre bought their gas and leccy at higher prices so can’t benefit from the drop, then I hope ofgem will call we a complete sacking of their buyers, as they never get it right,

Is it not possible for energy companies to buy in now at the cheaper price and store it ?

I did email Ofgem suggesting they regularly publish the wholesale prices along with each energy companies lowest tariff to try and shame the energy companies into lowing prices, but all I got back was a reply stating they don’t set prices. Arghhhh . It was odd that I got the reply to that email the day before they wrote the letter.

I think ofgem should be equally worried about the lack of trust that it is producing and not just the lack of trust in energy companies,

Member

Hi william,

We will meet OFGEM in the next week or two, so we will ask them what action they are planning to take on the back of the letter and we are keeping an eye on the company responses to see what they say.

On the issue of pricing and hedging strategies, we are calling for more transparency in the market. Transparency allows scrutiny and more confidence in what’s happening. It would also help to restore customer trust.

Kate

Member

Hi Kate,

Next time you talk to ofgem would you like to ask them why, if wholesale energy prices are the lowest for 4 years, did they allow energy companies to put up prices last November / December.

Have ofgem only just noticed how cheap the wholesale price of gas and electricity is compared to the last few years?

And what are ofgem doing about increasing the trust and faith that people have in them. I don’t know about others but my faith/trust in ofgem is lower than the energy companies. Maybe an idea for a poll?

William

Member
puremedic says:
18 June 2014

I totally agree with you, Kate!

‘Jim’

Member

I assume that those who continue to defend the energy companies are shareholders or hold other investments that will benefit from the success of these companies.

Failure to respond to falling wholesale prices, confusing pricing and allowing many customers to build up large credit balances when they pay by direct debit are just some of the issues that demonstrate that governments past and present have a lot to answer for by allowing the public to be exploited. Energy is vital to everyone, so consumers should be treated fairly.

Member

As long as you can get away with selling to your own suppliers at whatever price you choose this will continue. It seems extraordinary to me that the Big 6 all claim to make the same amount of profit i.e. between 4 & 5%. If there was competition in the market profits would vary as they do in other marketplaces. Ofgem and the CMA need to investigate their hedging practices as this will no doubt have some bearing on their reasons to justify price increases. If they get it wrong the consumer pays and it is another win win situation for the Energy Companies and their shareholders.
T
High time they were broken up into separate smaller companies, nothing much will change until they are.

Member

People could be forgiven for feeling that Ofgem doesn’t expend enough energy when it comes to addressing the major power co’s. Gas is the big issue because it is the biggest charge in most households’ energy budgets, and because, unlike electricity, it can be stored to even out the ups and downs of wholesale price movements. The failure across the industry to follow wholesale prices downwards certainly needs detailed investigation.

It is surprising that the returns on gas and electricity supply are not drawing new entrants to the production side of the market with additional electricity generation and gas storage capacity. It looks like we have to hope for a windy Winter with plenty of sunshine to get us through the next heating season in order to take the pressure off the power stations.

I can’t remember whether our supplier [Eeyore or something like that] has informed us about falling wholesale prices; they send us so much trivial drivel in e-mails and other bilge it’s difficult to take them seriously at times. In answer to the question in the preamble, “if they don’t, will you be looking to save by switching energy providers?”, I am tempted to say “what’s the point?”. There are only two more major providers left on my “worth considering” list, the remainder having ruled themselves out by previous misbehaviour! In any case, energy is such a major and vital part of life I feel we should not be having to go through the switching process every few months – the fragmentation of tariff structures has made that a nightmare [deliberately, of course]. Frequent switching adds cost to the industry and I want to be at ease with energy provision, not forever at its mercy.

Member

Ofgem are a complete and utter waste of space. Far from helping the consumer they pander to the wishes of the big six with only a token gesture seeing fair play is rolled out.
They have even told OVO not to pay 3% interest on credit balances. How stupid is that?
Time we had a proper regulator to ensure a fair deal all around. Better still an independent regulator with teeth overseeing a renationalised energy supply industry.

Member
D Smith says:
13 June 2014

Why can’t we have a small nationalised energy company that doesn’t aim to make a profit (or any profits go back to the consumer) and see how that fares against the big 6. Could be called UK Gas and Elecrticity.

Member

They could even cheat by buying up just one company on the the open market. Anyone can do it if you have enough money. Just make sure its own generation arm of course.

Member
martin akery says:
13 June 2014

When wholesale prices of gas and electricity rise they are quickly followed by rising prices for consumers and given the blame. There is no excuse then for not reducing consumer prices when wholesale prices fall. If they buy at a fixed price they should have the knowledge and experience to get the best deal – I hope they have secured a good deal now while prices are low so I shall be expecting a reduction in my bill soon.
Unless Ofgem can do more and get some real action it should be replaced with something more positive with more powers…and not give huge payouts to its current management, who do not appear to be making any difference.

Member
Margaret says:
13 June 2014

Are Ofgem, the Big Six or indeed any of the politicians at all concerned about what the ordinary ‘man’ in the street thinks? I think not. Could this be because they all ‘sing from the same hymn sheet as the saying goes and not for the best of motives. Am I a cynic or just a realist? I await being surprised but won’t hold my breath.