According to a report from Sky News, wholesale prices have fallen by 23% for the year to date, yet energy bills have remained at roughly the same level.
Energy regulator Ofgem has consequently asked the big six energy suppliers why their tariffs do not reflect this fall in prices. Suppliers have responded that there is more to energy bills than wholesale sale and that pricing reflects the long term costs of supplying homes.
The latest drop in wholesale prices is a result of Ukraine and Russia signing an agreement guaranteeing delivery to the EU. Approximately 15% of gas used in the UK is from Russia.
More transparency demanded
Energy suppliers purchase their gas and electricity from the wholesale market or from an electricity generator and then sell it on to consumers. Some suppliers’ parent companies generate energy themselves, which means some energy companies are effectively selling themselves energy. This situation has led to calls for more transparency in the sector.
Some members of the big six have begun offering cheaper energy plans, but there has not been a general decrease which reflects falling wholesale costs.
Energy UK: More to energy bills than wholesale costs
The trade association for the energy industry, Energy UK, issued the following statement: “There are good deals on the market for customers shopping around and looking to fix their payments.
“Wholesale prices are just part of the bill and, although reduced pressure on the wholesale gas market is good news in the long term, companies buy energy days, weeks, months – even years – in advance to protect customers from sudden changes in costs, and will have bought gas when prices were higher.”
Energy companies have reported that profit levels have gone down in the past quarters and added that their customer margins are fair. They have also argued that energy bills are only partially a result of wholesale prices and that the industry demands high levels of investment costs.