Energy regulator Ofgem has revealed that the profit margin energy companies are now making by selling gas to households has risen to 10%. This margin has gone up from 9% in May 2014 and from 5% at this point last year.
Gas is the largest part of the average dual fuel bill and according to Ofgem the main reason behind the growth in margins is the drop in energy wholesale costs.
Average home worth double to energy suppliers
As a result of falling wholesale prices, energy companies are expected to increase their annual average profit per home on a dual fuel tariff from £44 last year, to £96.
Since December 2013, wholesale gas prices (which make up half of a typical energy bill) have dropped by about a third and are at their lowest since 2010.
These figures are in stark contrast with the energy price rises implemented by each of the big six last winter. At the time of the price increases, most energy suppliers said increasing wholesale costs were part of the reason they were going to charge customers more.
Costs falling = lower energy bills?
With wholesale costs at their lowest since 2010, the pressure on energy suppliers to drop their prices accordingly is likely to mount.
Speaking to The Times about the issue, Director of Consumer Policy at uSwitch Ann Robinson said: “Wholesale prices have been going down. This shows that energy companies should be cutting prices. Against this backdrop it’s not enough for companies to freeze prices.”
The Labour party also spoke out about the need for energy companies to decrease prices and stated that should it win the election it would not only freeze prices for 20 months, but also force suppliers to cut prices when wholesale costs fall.
Some suppliers are cutting prices
Not all suppliers have refused to cut their prices. Independent supplier First Utility is currently top of the energy best buy tables and has cut prices several times since the beginning of the year.
At present the small supplier’s iSave Fixed August 2015 tariff is the cheapest the market has seen in two years.