What price cuts?

The Big Six energy firms – nPower, British Gas, E.ON, SSE, Scottish Power and EDF – have held the UK ransom over the years, with steep hikes in gas and electricity bills even as wholesale energy prices have plummeted.

 
Today (January 20), Scottish Power joined British Gas and E.ON in announcing consumer price cuts, amidst criticism that energy companies were refusing to pass on savings to consumers despite a record-breaking 20 per cent drop in wholesale prices over the past year.

 
Even though cuts in gas tariffs made a big splash in the media this week, they’re hardly anything to write home about. British Gas announced on Monday (January 19) a 5 per cent cut, E.ON announced a 3.5 per cent drop, and Scottish Power followed suit today (January 20) with a 4.8 per cent cut.

 
But considering the ballooning profits of the Big Six, who are currently embroiled in a market competition investigation, consumer savings will be negligible – you can expect to save less than a fiver every month.

 
And to add insult to injury, British Gas’ and Scottish Power’s price reductions won’t go into effect until the end of next month, when the worst winter weather is largely over.

 
So much for price cuts.

 
“Too little, too late”

 
Labour leader Ed Miliband, who has previously pledged to freeze energy bills until 2017 and force the Big Six to fairly pass on savings to its customers, called the latest price cuts “too little, too late.”

 
“It is not nearly good enough,” he said. “Wholesale prices have fallen by 20 per cent.”

 
Shadow energy and climate secretary Caroline Flint argued that the latest cuts demonstrate why Labour’s energy policies are needed.

 
“This shows that Ed Miliband was right to challenge the energy companies to cut their prices and pass on the falls in wholesale costs to consumers,” Flint said. “But given gas prices have fallen by at least 20 per cent a price cut of just 3.5 per cent looks pretty measly and means consumers still aren’t getting the full benefit of falling wholesale prices.”

 
Miliband’s comments follow a motioned tabled by Labour last week to fast-track legislation that would give the regulator Ofgem greater powers to force energy companies to fairly pass on savings to consumers when wholesale prices drop.

 
If savings were passed on to consumers in full since last summer, price comparison website TheEnergyShop.com estimated that they should have seen ÂŁ140 savings in annual bills.

 
Obscene profits

 
The Big Six contend that they aim to maintain competitive prices for their customers, with British Gas recently saying, “Our pricing is under constant review and we always aim to keep prices as low as possible for our customers.”

 
But Ofgem figures from last year reveal a different picture.

 
The energy regulator found that the Big Six companies have enjoyed ÂŁ17bn in combined earnings before interest and tax over the last five years.

 
Ofgem also estimated that energy companies’ profits per customer have soared from £8 per customer in 2009 to £48 in 2013.
And it doesn’t stop there. The regulator notes that the Big Six are on track to earn more than double this figure – ÂŁ102 per customer – over the next 12 months.

 
These enormous profit margins even in the face of plummeting wholesale prices prompted Ofgem to refer the energy companies to the Competition and Markets Authority last year as part of an 18-month investigation, which could lead to the break-up of the Big Six.

 
Hardest hit

 
As with so many of the costs borne out in a deeply divided society, it is the poorest who are being hardest hit by the rise in energy bills.

 
According to an analysis by the House of Commons library released last week, the poorest 10 per cent of households saw their electricity bills rise by 40 per cent and their gas bills rise by more than 50 per cent since 2010. On the other hand, the wealthiest ten per cent saw electricity bill increases of only 7.5 per cent and gas bill increases of 24 per cent over the same time period.

 
Commenting on the figures, Flint said, “Millions have been ripped off by the big energy firms who never seem to pass on savings to customers, but these figures show that the poorest households are paying the heaviest price for the Tories’ failure to stand up to the energy companies and ensure that the full savings from wholesale cost falls are passed on to all consumers.”

 
An EU report also found that the UK has been slammed by much higher energy bills over the past three years, while the rest of Europe has seen reductions. Of the 28 countries analysed, 13 countries experienced drops in electricity bills, whereas the UK has seen a 10 per cent rise since 2011.

 
Unite assistant general secretary Steve Turner said immediate action was needed to keep energy costs from spiralling out of control.

 
“Greedy energy giants have long put their own interests first before even considering cutting costs to help their beleaguered customers,” said Turner. “These fat cats have lined their pockets for too long. The wholesale costs of gas and electricity have fallen – pass the savings on to the customers now – it’s as simple as that.

 
“Back in the real world however, the reality is that this will never be available from private corporations protecting profits not people. It’s time to bring our energy back under public ownership.”