Which? research analysing movements in energy prices has revealed bills could have been slashed further and sooner than the recent round of cuts, costing consumers a massive £2.9bn over the past year.
Using real market data, Which? analysed the costs to suppliers of buying wholesale energy since 2013 and compared this against what consumers have paid for wholesale costs through energy bills in the same period.
The research found the failure of retail prices to align with wholesale costs has cost consumers £2.9bn over the past year, an equivalent of £145 per household on standard energy tariffs.
The findings suggest standard variable energy tariffs have not kept in line with wholesale prices over the past two years. In particular:
- Which? could see no justification for the increases to gas and electricity prices in late 2013, based on wholesale costs, which for gas prices alone is estimated to have cost consumers £421m a year.
- The recent cuts in Big Six standard gas tariffs of up to 5.1% should have been greater – in the region of 8.8% to 10.3% – if they were to align with wholesale energy costs. This is equivalent to a decrease of between £777m and £907m per annum to households on standard gas tariffs.
- Suppliers could reduce electricity prices by up to 10% – a saving of at least £1.6bn a year to consumers on electricity standard tariffs.
The analysis has been submitted as fresh evidence to the ongoing Competition and Markets Authority’s investigation into the energy market, and to the Treasury for its more recently announced inquiry.
Executive director Richard Lloyd said: “Our analysis places a massive question mark over how suppliers have been setting prices over the past two years. They now need to explain to their customers why bills don’t fall further in response to dropping wholesale prices. Energy bills are consistently the top consumer concern, so it’s about time people got a fair deal.
“While the competition inquiry should establish beyond doubt whether or not the price people are paying today is right, consumers will now look to politicians of every party to set out how they’ll deliver fair and affordable energy prices in the future.”