Energy bills need to come down

16 October 2008

Energy companies are coming under increased pressure to slash bills inline with cheaper crude oil.

Over the past year, the big six energy firms have all increased bills twice, with some households now paying over 50% more to heat and light their homes. To see the details for each of the six main suppliers, click here.

However, since the last round of hikes in the summer, crude oil costs have fallen dramatically and currently stand just over $73 a barrel.

Consumer Focus, the new independent champion for consumers, is calling for energy suppliers to cut domestic energy prices in light of falling oil prices.

Ed Mayo, chief executive of Consumer Focus, says: "Oil prices have been falling since July, yet consumers have seen unprecedented rises in their gas and electricity costs. Consumers must now be wondering whey they are left waiting.”

Earlier this week it was revealed that inflation hit 5.2% in September, largely as a result of rising energy bills. According to, the average dual fuel bill now stands at £1,246 - up 111% over the past five years.

Mayo adds: “We have seen this week that the biggest single driver of inflation is rising energy prices. We want immediate action from energy companies to reduce their prices in line with falling oil prices. This will be good not just for consumers, but for the whole economy.”

He also calls on the regulator, Ofgem, to take action on the “artificial link” between the price of oil and gas which makes energy prices higher in the UK.

However, Garry Felgate, chief executive of the Energy Retail Association (ERA), says the fall in oil prices cannot be passed onto consumers immediately.

"As gas is bought through long- and short-term contracts on the wholesale market, there is always a time lag between when the wholesale price rises or falls and when customers' domestic bills rise or fall," he explains.

There has been concern that this "lag" is greater when prices are falling than when they are rising. However, a recent report by regulator Ofgem concluded that this was not the case.

Felgate adds that in order for energy suppliers reduce prices, the wholesale cost of gas and electricity must fall and remain low for a sustained period. With other factors putting pressure on prices - such as the availability of gas and global demand - plus the fact that wholesale rises were not fully passed onto consumers, the outlook for cuts does not look good.

Although cheaper oil does appear to have reduced the wholesale cost of gas (and less so, electricity), Joe Malinowski, founder of, says that at the current time the best people can hope for is no more price increases.

“Wholesale gas price has now fallen far enough to remove the risk of another increase in gas prices,” he explains. “However, at current wholesale prices there is still no prospect of a cut in retail gas prices and indeed, wholesale prices out to 2010 are broadly flat at these levels.”

And Malinowski adds that wholesale electricity prices have actually risen – paving the way towards a price increase of 10% in 2009.

The debate on whether it is time for energy bills to fall comes ahead of Energy Saving Week (20 - 26 October).

Scott Byrom, utilities manager at, says that until bills come down, energy efficiency should be at the forefront of people's minds.

"Any customers struggling to pay their energy bills need to be proactive and contact their energy supplier to see what options are available to keep their energy bills low,” he adds. “Likewise, energy suppliers need to ensure adequate support is readily available and help is delivered efficiently."

Five FREE energy (and money) saving tips:

* Turn your thermostat down by 1°C – this could cut your heating bills by up to 10%.

* Wash clothes at 30 degrees instead of 40.

* Keep your hot water thermostat around 60°C/140°F – your bath water will be hot enough and you could save money on energy bills.

* Defrost your freezer regularly to improve efficiency.

* Only fill kettles with enough water for your needs – it takes more energy to boil a full kettle.


Add new comment