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UK households pay three times the cost of wholesale gas

By Katie Anderson on September 1, 2014

Wondering what your energy supplier pays for wholesale gas? Probably about three times less than what they charge you, it’s been revealed. 

UK households are having to pay up to three times more for  wholesale gas compared to what it’s costing energy firms. The news is made even more shocking considering the fact that the cost of wholesale gas has fallen by 50% in six months. And yet our energy bills have not been cut. It’s clear that we’re paying more than we should.

Wholesale prices are currently the lowest they’ve been for four years. A single unit of heat energy – known as a therm – has fallen from 72p in December to less than 42p a therm. Just to put it into perspective, one therm of gas will power a domestic boiler at full output for about two hours. So how do those figures stack up in terms of what we pay?  Depending on the tariff, customers of British Gas can expect to pay between £1.35 and £1.50 while the likes of E.ON, npower, SSE, Scottish Power and EDF charge customers between £1.21 and £1.37 a therm. Quite a mark up, isn’t it?

Hardly a day goes by without one of the Big Six making the news, and the fact that energy firms are failing to pass on savings to energy customers probably won’t come as a big shock. Factor in their massive annual profits it’s little wonder energy customers have such little faith in energy providers.

Commenting on the figures, Richard Lloyd, executive director at Which? said most consumers aren’t confident that what they are paying for their energy is a fair price. He added:

“With energy costs the top consumer concern, the competition authority must leave no stone unturned in its investigation of the market and must establish the truth behind our energy prices.

The Competition and Markets Authority is in the process of carrying out an inquiry into energy supplies and prices. They will report their findings at the end of the year.

However wholesale costs are just one element of their costs for providing supplies and advanced bulkbuying, say energy suppliers, meaning a drop in price wouldn’t be passed on immediately.  Commenting on the news, British Gas spokesman Tim Cowen said they have other costs that are rising, including regulated transport and distribution costs.

With winter fast approaching, and the likelihood of another price increase in our gas and electricity bills looming, now is the time to start looking at ways to tackle high energy prices. Shop around for a cheaper tariff, and consider the smaller suppliers. Although the Big Six continue to dominate the energy market, more and more people are switching to smaller companies like Ovo Energy, Utility Warehouse and Good Energy.

If you’ve got an old G rated inefficient boiler, it might be worth looking at installing a new A rated boiler replacement. Fitting a modern energy saving boiler could save you as much as £310 a year. Depending on your circumstances you should check to see whether you can get a grant for insulation or a new central heating boiler.

Of course you could go one better and generate your own energy; it’s the best way to fight rising energy costs because you won’t be so dependent on expensive fossil fuels. Join the 500,000 plus UK households who already generate their own electricity through solar PV panels.