Something isn’t quite right. In 2015, the Big Six energy giants – British Gas, SSE, Npower, EDF, Eon and Scottish Power – announced record profits due to various windfalls; their profits in 2014 topped £2.5 billion and fuel prices are at an all time low. So why are customers not seeing the benefits of slashed fuel prices? Why are the energy firms not passing on savings, when 2015 saw wholesale gas prices at an 11-year low, with electricity prices down by 30%? Profits were £3 billion by the end of 2015.
The fact is energy giants have refused to budge on bills, and there are increasingly louder calls for a cap on bills. The average standard tariff bill for a UK homeowner now stands at £1,200. Ten years ago, the figure was closer to £472.
Yet wholesale fuel prices to suppliers are lower than ever, due to a price war in the oil markets. But suppliers continue to reap the rewards, whilst exploiting customer loyalty by charging higher costs to those who stick with one energy company.
According to one energy helpline, every household could have had a £172 reduction in their fuel bill if wholesale price cuts had been passed on – consisting of 23% off gas bills and 10% off electricity bills. The only supplier to have passed on savings is British Gas, who instigated a 5% fuel price cut in August 2015.
The giants are in fierce competition with each other over shareholders, rather than customers, which means their eyes are always on the profit margin, not getting the best deal for consumers, who are something of a captive market.
Energy firms will point to the fact that consumers are free to move their account to a cheaper tariff, but this disadvantaged those who are not Internet savvy – the elderly, and those who may not have the Internet. The low waged always pay more for their energy, if they don’t use Direct Debit bill payments.
These inequalities are even more reason for energy companies to take the initiative and pass on savings to customers. With Ofgem revealing that energy firms’ average profits have soared up by 32% in a year (£120 per household) questions are being raised by politicians anxious to protect their constituents. The excuse that cuts are soaked up by distribution costs and taxes has few convinced. Maybe 2016 will see a shift in attitude. Until then, the Big Six look on course to get bigger still.
The best the consumer can do is to shop around. People are still unaware of just how much money they can save by switching, although switching figures do seem to be improving in the last year. Reward British Gas for passing on savings, or opt for a smaller energy supplier, like so many consumers did in 2015. Only by voting with their feet will UK energy consumers force the big six energy suppliers to show them more consideration.