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Falling Energy Costs, Rising Energy Prices

By David Holmes on September 24, 2009

Gas & Electricity - Average Householders OverchargedOn the back of a deep recession, from which the British economy is only just beginning to emerge, it is unfortunate that times are unlikely to improve for many domestic energy consumers. In fact, there are indications that energy prices are likely to rise over the winter and, if there is one term that has punctuated the plight of millions more than any other during the recent global downturn, it is ‘fuel poverty’.

Unfortunately, fuel poverty, which essentially describes the condition of being unable to afford adequate energy supplies, is a problem that already affects the most financially vulnerable in the community.

Therefore, it is with considerable dismay that Britain’s leading six energy firms, which comprises British Gas, EDF Energy, E.ON, RWE, Scottish Power and Scottish and Southern Energy, have rejected calls to reduce domestic energy bills. Whilst this is unsurprising in itself, the failure to lower prices must be framed in the context of falling wholesale energy costs. Indeed, Ofgem, which called for lower domestic bills but is only responsible for regulating the competitiveness of the energy market, has already conceded that the leading six energy firms are set to increase their profits if the lower wholesale prices are sustained. As there is no indication that wholesale prices will increase in the near future, the energy companies’ failure to pass on these savings to customers is objectionable to say the least.

Furthermore, with the news that domestic bills are likely to increase over the winter, this discrepancy is set to widen further. To put the matter in perspective, despite the energy companies’ claims that other costs are pushing up prices, they will receive an average annual gross profit per consumer of around £170, which compares to £110 over the past three years.