Profit margins higher than estimated

The Energy Advice Line has welcomed calls by Ofgem for consumers to switch energy suppliers now in order to save up to £250 a year on their gas and electricity bills.

The call followed confirmation by the regulator that energy companies were failing to fully pass on the fall in wholesale gas prices they had enjoyed in the past year.

Quizzed by MPs this week about why suppliers had failed to deliver bigger price cuts to consumers, Ofgem chiefs agreed this was a “cause for concern”.

But they said they were focusing on encouraging consumers to change suppliers to make savings, adding, “generally it is a good time to switch”.

Julian Morgan, managing director of the price comparison, switching and advice service for energy consumers, said Ofgem’s advice was sound even when retail energy prices were falling.

“Most of the Big Six suppliers have now announced reduced charges for household gas after prices they pay in the wholesale market have fallen,” Mr Morgan said.

“However, this does not mean that consumers can sit back and assume they will enjoy dramatically lower bills. Sadly, this won’t be the case.

“Ofgem itself has raised concerns about why the size of the cuts being passed on are so small, and has pointed out that the best way for households and businesses to make the most of falling gas prices is to shop around, find the best deals and switch accordingly.”

The committee of MPs this week heard that Ofgem forecasts that customers' average dual-fuel bills will now drop by £21 to £1,305 in the year ahead.

At the same time, the profit margin per customer of a typical large supplier will rise to £114, £9 more than Ofgem estimated last November.

Energy companies have argued that the wholesale price of gas only makes up about half of a domestic energy bill and that they therefore cannot pass on the entire fall in the price they pay for energy.

But Mr Morgan expressed disappointment that the regulator and energy companies were still unable to agree on the basics of costs, prices and profits in the energy market after years of discussion.

“Suppliers and the regulator are still bickering about how profit margins are calculated, which is very disappointing and of no help to consumers at all,” Mr Morgan said.

“What ordinary energy bill payers need is a transparent and competitive energy market so that they can make fully informed choices."

The Energy Advice Line is one of the UK's leading price comparison and switching services for business and domestic energy customers. It is also an advocate for energy market reform and has campaigned for a better deal for energy users, including calling for a ban on cold calling and changes to regulations to make it easier for all consumers to switch suppliers.

The service is completely independent and free. Consumers can quickly and simply search the market for the best available energy deals from an extensive panel of small and large energy suppliers. The service also offers a free advice line for business energy customers.

For further information visit www.energyadviceline.org.uk

Dual fuel bill costs remain high

Business electricity users and householders were facing difficult decisions about their energy contracts, with wholesale prices dipping and some suppliers offering longer than usual fixed-rate deals, according to the Energy Advice Line.

Julian Morgan, managing director of the price comparison, switching and advice service for energy users, said lower wholesale energy prices and increased competition were creating opportunities for customers to lock in good deals.

But he said the trade-off for consumers who opted for longer-term price protection was potentially missing out on cheaper prices if energy costs continued to fall.

“Consumers are facing some difficult choices at the moment and they need to take expert advice,” Mr Morgan said.

“Some of the deals we are seeing are very attractive due to a dip in the price suppliers are paying for gas and electricity, and some of the benefits of a more competitive energy market starting to flow through.

“Consumers will be tempted by these deals, as well as the opportunity to lock them in for up to four years, which is longer than usual.

“But the flip side is that if energy prices fall further, which some experts predict that they will, consumers on fixed deals will miss out on those savings.

“Consumers need to consider the value they place on knowing their energy tariff will not increase over the medium-to long-term.”

The average dual fuel bill now stands at £1,265 a year, significantly more than the cheapest tariffs currently available over one, two, three and four-year fixed deals.

But some experts say that cheap energy deals now on offer do not reflect current falls in wholesale prices, which could possibly drive down prices even further in the coming months.

“At the end of the day it’s impossible to predict the future of energy prices, so householders and business energy users need to consider their priorities carefully,” Mr Morgan said.

“For many people, the piece of mind of knowing that their energy tariffs will not skyrocket over the next few years is well worth the premium they pay for  fixed-term deal, and the fact that they won’t benefit if prices fall.

“Other consumers will be happy for their tariffs to ‘float’ in line with what is happening in the market, because they stand a chance of making savings if and when prices fall.”

Mr Morgan said that although current market conditions presented consumers with a dilemma, the worst thing they could do was put their head in the sand when it came to energy supplies.

“It can seem tricky to make the right decision, but impartial and independent services like ours can help,” Mr Morgan said.

“We can guide householders and business owners through the benefits and disadvantages of fixed-term deals so that they can make the best decision for their budget and circumstances.

“The worst thing anyone can do is to do nothing.”

The Energy Advice Line is the UK’s leading impartial comparison, switching and advice service for businesses and householders.  It actively campaigns for reform of the UK’s energy market to boost competition, get consumers a better deal from suppliers and lower energy prices.

The Energy Advice Line’s price comparison and switching service is free and completely impartial. 

Consumers can obtain energy quotes with a few computer strokes based on a diverse panel of energy suppliers including the major players and smaller independent utility companies.

For further information visit Energy Advice Line