OFGEM warns suppliers on pricing

Industry regulator OFGEM warned energy suppliers to respond to falling wholesale costs.

Chief Executive of OFGEM Alistair Buchanan stated that he expected energy companies' prices to respond to "falling" wholesale costs. "In a strong competitive market, we would expect prices to respond to such falls," Buchanan said in a letter to the chief executives of the big six energy providers. You will be familiar with these trends and also aware of some public dissatisfaction with suppliers' response so far to wholesale price reductions."

There are six major energy providers in the UK – British owned Scottish and Southern and British Gas, and foreign owned E.On, EDF Energy, Scottish Power and Npower. Suppliers have come under increasing pressure to reduce their prices after raising bills last year by 42% on average, but only cutting them by 5% this year.

Garry Felgate, head of the Energy Retail Association (ERA), which represents the suppliers, said that companies understood that the regulator was doing its job by raising the issue, but that they were operating in the most competitive energy market in the world.

"We have seen energy prices falling for the vast majority of customers this year. Despite these falls the wholesale market still remains volatile,” he retorted. "Customers have been protected from the massive rises in wholesale prices last year, price rises that were not fully passed on at the time. This comes at a time when companies are investing billions of pounds in new generation capacity to ensure an essential, reliable and safe energy supply to their customers."

In essence, the suppliers seem to be saying that they are doing all they can. In today's world the only way to protect yourself from sky high energy prices is therefore to regularly check your prices and to switch to the best deal. With typical energy bills around £1,250 a year, households can achieve annual savings of up to £378 - so compare gas and electricity suppliers now, and switch to the best deal!