Energy watchdog Ofgem has accused the ‘big six’ UK domestic power providers of overcharging customers by not cutting prices, following a significant drop in wholesale energy prices, it was reported on Friday.
Wholesale energy costs are said to represent almost half of a typical domestic energy bill in the UK. The big six energy providers include EDF, E.on, Npower, Scottish Power, British Gas and SEE.
Oil and gas wholesale prices have reportedly dropped by around a third in the last 12 to 18 months, but most of the big six British energy companies have not responded by cutting retail prices. According to Ofgem, nearly 75% of consumers are still on standard variable tariffs that have not visibly altered since the beginning of 2015. However, British Gas dropped its tariff by 5% when wholesale costs fell last summer.
The combined cost of energy on the wholesale market has fallen to GBP35.54 per megawatt hour, a drop of 30% compared to the GBP50 per megawatt hour charged at the end of 2014. It is also a decrease of GBP1, or 2.7%, when compared to the end of 2015. These wholesale price reductions are said to mean that domestic gas and electricity and bills could be cut by around GBP300 for many consumers.
Chief executive of Ofgem, Dermot Nolan, stated to the BBC that domestic gas and electricity prices should be cheaper “for the vast majority of people”.
He said “We really should be seeing bigger retail cuts than we have seen so far” and added that energy firms were charging these customers as much as they could get because they were “not facing strong enough competitive challenges”.
Nolan also advised energy customers to switch their accounts in order to get better deals.