Energy bills finally start to fall

Households have started to see a cut in their energy bills after utility companies pass on lower gas prices.

The sliding wholesale cost of gas is starting to filter through to household bills. This week, Scottish Power and British Gas said they would lower their prices for customers not on fixed tariffs by 4.8% and 5% respectively. This follows a 3.5% price cut by Eon last week.

Consumer groups criticised the reductions as too little too late, noting that wholesale prices have fallen by 20% in the past 12 months.

What the commentators said

As to why prices are only now coming down, said Allister Heath in The Daily Telegraph, imagine if companies cut prices by 1p every few weeks, only to have to hike them by the same amount when wholesale conditions reverse.

Our retail energy prices would be chaotic and unpredictable. Better to lock in prices in advance, ensuring at least medium-term predictability for consumers.

Now that wholesale prices look set to stay low for some time, companies are becoming more confident about passing lower costs on. Note too that wholesale prices comprise only half of overall costs.

Transport and distribution is becoming dearer, while green taxes have also risen. "Energy firms' profit margins are pretty low, as their annoyed shareholders would be the first to point out."

Yet you can't help noticing, said Alex Brummer in the Daily Mail, that there's a "lack of symmetry" here. The six major energy firms tend to pass on rising world prices quickly, yet when they fall they drag their feet.

And ask them to reveal their buying or hedging strategies, added Osborne, "and they become awfully coy". What are they hiding? Hedging at the wrong price to lock in costs before a potential Miliband election win? No wonder Ofgem, the regulator, has "packed the companies off" to the Competition and Markets Authority.

Recommended

What to watch out for in Budget 2021
Budget

What to watch out for in Budget 2021

In his 2021 Budget, Rishi Sunak will lay out his vision for post-Covid Britain – how to fix the public finances and repay all the pandemic stimulus wi…
2 Mar 2021
Where to get help taking your business online
Small business

Where to get help taking your business online

The pandemic has brought forward the transition to e-commerce, so businesses need to go digital. David Prosser explains the tools available to help ta…
2 Mar 2021
Why British business must speak up on lockdowns
UK Economy

Why British business must speak up on lockdowns

Restrictions are crushing business, but its leaders are nervous of saying anything. Time to toughen up, says Matthew Lynn.
28 Feb 2021
Stamp duty holiday extension will keep the house-price party going – for now
Property

Stamp duty holiday extension will keep the house-price party going – for now

The government is to extend to the stamp duty holiday by three months. Good for today’s buyers, says Nicole Garcia Merida, but what happens in June?
26 Feb 2021

Most Popular

A beginner’s guide to bitcoin: what is bitcoin?
Bitcoin

A beginner’s guide to bitcoin: what is bitcoin?

As a completely novel concept for many people, bitcoin can take a little effort to get to grips with. In the first of a short series on the cryptocurr…
1 Mar 2021
A beginner’s guide to bitcoin: how to buy bitcoin
Bitcoin

A beginner’s guide to bitcoin: how to buy bitcoin

For the novice, buying bitcoin can be a daunting prospect. Here, Dominic Frisby outlines the process from start to finish.
2 Mar 2021
What is “yield curve control” and why is it coming to a central bank near you?
Government bonds

What is “yield curve control” and why is it coming to a central bank near you?

Central banks around the world are determined not to let interest rates go up too quickly or by too much – a practice known as “yield curve control”. …
1 Mar 2021