Ofgem Warning to Gas Suppliers: Reduce Consumer Bills
By David Holmes on December 10, 2009
The rising cost of domestic energy bills has long been a cause of concern amongst UK consumers, watchdogs and charitable organisations. Indeed, millions of homes throughout the UK are now thought to be suffering from some form of fuel poverty, which refers to those who spend more than 10% of their household income on heating bills.
Unfortunately, fuel poverty is not merely the preserve of the near destitute – on the contrary, the term has managed to creep its way into the collective conscious of many millions of people throughout the country. As such, it was with considerable disappointment that Ofgem’s previous commentary on high energy prices was published without a clear direction for those ultimately responsible: the energy suppliers themselves.
On Monday, however, Ofgem released a warning to gas suppliers that energy prices must fall in line with the drop in wholesale gas prices by the New Year. As reported in the BBC online news service, Ofgem advised that gas suppliers must no longer “use investment as a shameful excuse to overcharge consumers”. In fact, the normally submissive regulator, whose main purpose is to ensure healthy competition exists between suppliers, has been quoted as saying it “will not shy away from proposing radical reform to protect the interests of consumers”.
Although Ofgem’s warning is anything but specific, it nonetheless marks a departure from its previous stance of ‘observe and report’, which had lacked any kind of bite that would upset energy suppliers. Nevertheless, it remains to be seen whether Ofgem has grown teeth since its last discussion on low wholesale fuel prices and disproportionately high consumers bills. In the meantime, fuel poverty is an issue that is probably going to worsen unless suppliers reduce bills. In fact, the latest figures for 2009 suggest that almost 5 million households in England alone are suffering from fuel poverty, which is why Ofgem’s interim advice to consumers is to shop around for the best deals, as this could save around £200 on the typical annual bill.